Our Shire Our Future Resourcing Strategy 2013/14 2022/23

Our Shire Our Future Resourcing Strategy 2013/14 – 2022/23

Sutherland Shire Council 4-20 Eton Street, Sutherland NSW Australia Locked Bag 17, Sutherland 1499 Tel: 9710 0333 Fax: 9710 0265 Email: [email protected] Web: www.sutherlandshire.nsw.gov.au © Sutherland Shire Council 2012

mailto:[email protected]

http://www.sutherlandshire.nsw.gov.au/

TABLE OF CONTENTS

1. Background ......................................................................................................... 1

1.1 Introduction .................................................................................................................... 1 1.2 Sutherland Shire ............................................................................................................ 2 1.3 Vision and values ........................................................................................................... 4 1.4 Council’s commitment .................................................................................................... 4 1.5 Council’s Responsibilities and Services ........................................................................ 5 1.6 Council’s Integrated Planning and Reporting framework .............................................. 6

2. Asset Management Strategy .............................................................................. 8

2.1 Introduction .................................................................................................................... 8 2.2 Purpose .......................................................................................................................... 8 2.3 Asset Management Planning in Local Government ...................................................... 9 2.4 Council’s Asset Portfolio ..............................................................................................10 2.5 Assessment of Current Asset Management Capability ...............................................29 2.6 Asset Management Capability Improvement Plan .......................................................35 2.7 Conclusion ...................................................................................................................40

3. Workforce Strategy .......................................................................................... 46

3.1 Background ..................................................................................................................46 3.2 Challenges ...................................................................................................................46 3.3 Workforce Overview .....................................................................................................48 3.4 Responses ...................................................................................................................50

4. Long Term Financial Plan ................................................................................ 61

4.1 Introduction ..................................................................................................................61 4.2 Forecasts and Assumptions in the LTFP .....................................................................66 4.3 Financial Risk Assessment, Strategies and Sensitivity Analysis .................................95 4.4 Financial Performance Monitoring ...............................................................................99 4.5 Financial 10 Year Projections, Strategies and Outcomes .........................................102

Background Workforce Planning

Long Term Financial Plan Page 1

Asset Management

1. Background

1.1 Introduction

This Resourcing Strategy has been prepared in accordance with the requirements of the

Local Government Amendment (Planning and Reporting) Act 2009. The Strategy describes

how council will deliver on its responsibilities for achieving the community’s future

aspirations and priorities as articulated in the Community Strategic Plan Our Shire Our

Future 2030.

Realising the Shire’s desired future requires that sufficient time, dollars, physical assets and

people are available to execute the necessary programs and actions. Responding to this,

and aligned with integrated planning and reporting reforms, a ten year Resourcing Strategy

has been developed that consists of three key components:

1) Asset Management Strategy provides a framework for the sustainable management of

current and future council assets so that appropriate services are effectively delivered

to the community now and in the future. It considers information about council’s

assets, asset management processes and practices, and presents a plan to improve

council’s asset provision and management capability.

2) Workforce Management Strategy describes current and historical patterns and trends

in council’s workforce, and the actions necessary to achieve the organisation’s

workforce planning and human resource management objectives.

3) Long Term Financial Plan outlines the modelling used to forecast the council’s financial

future for the coming ten years and presents the strategic aims, financial objectives,

financial indicators and strategies the council has adopted to achieve continued

financial sustainability.

Together these three strategies support both the long term community goals and council’s

4 year Delivery Program and Annual Operational Plan.



Asset Management

1.2 Sutherland Shire

1.2.1 Area Profile Sutherland Shire covers 370km2 with about half the area taken up by the Royal National

Park and bushland. The geographic features include beaches, wetlands, bays, rivers and

Hawkesbury sandstone tablelands dissected by deep river valleys and gorges covered in

vegetation.

The population is approximately 212,000, making Sutherland Shire Council the second

largest local government area, in terms of population, in NSW.

The Sutherland Shire’s population is declining in every age group between the ages of 5 -

49 years, however, each age group over 50 years is experiencing population increases.

Only 16.6% of the Shire’s population was born overseas, compared with Sydney (31.8%).

Whilst the urban area is predominantly residential, Sutherland Shire is home to a small but

highly significant commercial and industrial presence. This includes Australia’s sole nuclear

reactor, Australia’s largest oil refinery, Sydney’s desalination plant, a regional waste facility

and a major regional shopping centre.

Socio-economically Sutherland Shire ranks highly with low unemployment at about 3%.

Council plays an important role in economic development and promotion of the tourist

attractions and facilities in the Shire.

The Sutherland Shire community is articulate, involved and places high expectations on

council and the services, programs and infrastructure it delivers. The community expects

council to take a stand against proposals which do not meet high environmental and social

standards that the community has set for this area.



Asset Management

1.2.2 Desired Future The following depicts the community’s aspirations for the ideal future of the Sutherland Shire. A place where all people can live, work and enjoy their life locally. Translating the Shire vision and desired outcomes into reality will be facilitated by responsible leadership at a government and organisational level. Responsible leadership is characterised by accountable and transparent decision making for all our existing residents and those of future generations. Active citizenship by our residents is also critical to facilitating our desired future. We need our residents to be informed of, interested in and involved in local decision making.



Asset Management

1.3 Vision and values

1.3.1 The Shire Vision Sutherland Shire, in Sydney’s south, shaped by bays, rivers, beaches and national parks:

A connected and safe community that respects people and nature, enjoying active lives in a strong local economy.

1.3.2 Council’s Vision To provide community leadership translating the Shire vision to improve lifestyles and community wellbeing, and the natural environment.

1.3.3 Council’s Values Understanding Council’s values helps Councillors and staff to know what is expected of them as Council representatives working on behalf of the community. As individuals and as an organisation, Council will:

act with honesty, integrity, responsibility and transparency

prioritise customer service and community satisfaction

demonstrate leadership and ingenuity

make decisions based on reliable research and information

value staff and encourage teamwork and foster pride in our workplace

have respect for culture, community and the environment.

1.4 Council’s commitment

1.4.1 To the community Community satisfaction The highest priority is given to satisfying the needs and expectations of our community. Management by fact Our analysis of problems, decisions, performance measurements and other actions is based on fact and sound judgment. Continuous improvement Individually, in teams and as an organisation, Council is committed to ongoing improvement. Ethics We will promote sound, legal and honourable practice in the conduct of Council business. 1.4.2 To Council staff Council staff will respect each other as individuals, encourage teamwork, and provide a safe and caring workplace, with equal opportunities for promotion and development to foster a sense of pride in the workplace. The steps taken to implement Council’s commitments to the community and Council staff, and to measure its performance, are detailed in the ‘Governance’ section of this Delivery Plan.



Asset Management

1.5 Council’s Responsibilities and Services

Council responds to both the community’s long term vision and short term needs. It achieves this through planning for and delivering an extensive range of services, facilities and infrastructure which support community life and the ongoing sustainability of the Sutherland Shire. Below is a snapshot of the type and range of Council services and facilities that the community uses every day.



Asset Management

1.6 Council’s Integrated Planning and Reporting framework

The diagram below outlines the relationship between council’s major planning and reporting tools. In our activities we aim to respond to the Community Strategic Plan for the Sutherland Shire and address local needs and issues as they arise.

The State of the Shire (SOS) incorporating the State of the Environment (SOE) report informs our

formal review of the implementation of ‘Our Shire Our Future’. Regular Community Satisfaction

Surveys and Neighbourhood Interaction and Participation Surveys assist in monitoring council’s

performance.

Background Workforce

Strategy Long Term

Financial Plan Page 7 Asset

Management

ASSET MANAGEMENT

STRATEGY


Strategy Long Term


Management

2. Asset Management Strategy

2.1 Introduction

Sutherland Shire Council is responsible for a very large and broad asset portfolio which totals $1.5 billion of noncurrent assets. Our assets are acquired, held and maintained for the purpose of delivering services to the community. The services required by and for the Shire community are considerable, and the provision of these is often dependent on this portfolio. Council’s asset base includes traditional asset infrastructure such as roads, footpaths, buildings and drainage as well as assets which are unique to coastal councils such as seawalls, tidal baths, lifeguard towers, wharves and jetties. Council has an ethical and legal obligation to effectively plan for, account for and manage the public assets for which it is responsible. In order to do so, we have taken a long term strategic approach to asset management. The successful delivery of our assets will enable the current and long term aspirations of the Shire community to be met.

2.2 Purpose

Council has an adopted Asset Management Policy which articulates our commitment to sound asset management and integrated, responsive and financially sustainable asset provision. It provides a clear direction for asset management by defining the key principles that underpin it. This Strategy is the first step in translating that Policy into organisational practice. Its purpose is to establish the structure for further detailed planning and improvements in organisational knowledge management, systems, processes and structures which will support long term asset management well into the future. It incorporates:

an overview of all the assets under Council’s control

the community’s expectations of asset provision and maintenance

an assessment of our current asset management planning practices

a plan for improving council’s asset management maturity to a level both the community and council are satisfied with

Through the development and implementation of this Strategy Council aims to:

provide a specified level of service for assets and establish evaluation measures

adopt a lifecycle approach to developing cost effective strategies for managing assets in the long term that meet the specified level of service

determine future demand and manage the appropriate investment levels

apply risk management including identification, assessment and appropriate control of risks, for the asset itself, organisation and community


Strategy Long Term


Management

strengthen the linkages to our long term financial plan which identifies expenditure across all lifecycle stages (eg. creation/acquisition, operational, maintenance, disposal).

This Strategy will be supported by four comprehensive Asset Management Plans (AMPs) for our key asset categories. Together they will inform and be informed by our Long Term Financial Plan and Workforce Strategy to deliver the infrastructure, programs, services and facilities detailed in our Delivery Program and aspired to in the Community Strategic Plan. 2.3 Asset Management Planning in Local Government 2.3.1 Strategic Issues at National Level After considering the financial sustainability of local government in 2007 the Local Government and Planning Ministers’ Council (LGPMC) endorsed nationally consistent frameworks to be applied by each State or Territory relating to:

assessing local government financial sustainability;

asset planning and management; and

financial planning and reporting. In May 2009 the LGPMC agreed to enhance the nationally consistent frameworks on local government asset and financial management frameworks to assist councils improve their asset and financial management and planning. The following elements of a national framework were identified and agreed to by each State and Territory to facilitate an improvement in asset management performance by local governments in their jurisdiction:

Development of an asset management policy

Strategy and planning

Governance and management arrangements

Defining levels of service

Data and systems

Skills and processes

Evaluation. 2.3.2 Asset Management in New South Wales In New South Wales (NSW) several processes have led to change in the way local councils regard and manage their assets on behalf of local communities. The 2005 Local Government and Shires Associations of NSW Independent Inquiry into the Financial Sustainability of NSW Local Government concluded that the biggest and most urgent problem was around local government infrastructure, not being maintained or renewed to satisfactory standards. Financial limitations and the limited application of asset management practices were considered the problem. Building asset management capacity across the industry was seen as the key to addressing the infrastructure problem. The inquiry’s report served to act as a

http://www.lgpmcouncil.gov.au/publications/files/LG_Financial_Sustainability_Framework1.pdf




Strategy Long Term


Management

significant catalyst to focus attention on asset management practices within NSW local government. The amendment to the Local Government Act with the introduction of the Integrated Planning and Reporting Regulation (2009) has also had implications for asset management. This has required all councils in New South Wales to connect their long and short term planning with their community’s needs and aspirations. Asset Management as part of a long term Resourcing Strategy is critical to this. 2.4 Council’s Asset Portfolio 2.4.1 Current Assets Council’s current asset portfolio is vast and enables the provision of a range of necessary and desired services which support our residents, businesses and visitors to Live, Work in and Enjoy the Sutherland Shire. The delivery of these services to the local community is the paramount consideration. Infrastructure provision, condition and service levels are dependent on local community needs and expectations. Council currently has five main Asset Categories comprised of a range of asset classes:

1. Buildings 2. Drainage 3. Open Space 4. Organisational Support and 5. Transport Infrastructure.

Buildings

Based on total number of buildings (515)

Underground/ multi storey

carparks 0%

Tennis Courts

6% Surf Clubs

1% Rural Fire Service/SES

4%

Regional arts/ Entertainment

1%

Public toilets & sporting amenities

16%

Other 11%

Libraries 1%

Leisure & Indoor Centres

4%

Community/ Sporting

25%

Community halls & centres

9%

Commercial & retail

3%

Child Care 8%

Admin, depots & support

11%


Strategy Long Term


Management

Most of our buildings are heavily utilised and support a broad range of community activities. Council also provides direct services from our childcare centres, surf clubs, regional arts and cultural venues. Our leisure centres are used to provide Council operated leisure and fitness businesses. Transport Infrastructure

The chart above excludes bridges and carparks. Collectively this infrastructure delivers transport options which enable people to get around within the Shire. It supports all areas of community life.

Open Space

The chart above excludes waterways and supporting assets such as boat ramps, wharves and jetties. Our open space is as much about providing leisure and recreation opportunities as enhancing the quality of life for current and future generations. Details on our Drainage and Organisational support categories are contained in our ‘Overview of our Assets’ table on page 14.

Kerb and Gutter

63%

Pathways 3%

Road Pavement

34%

Bushland 55%

Playgrounds 1%

Parks 28%

Sporting Fields 16%


Strategy Long Term


Management

Asset Replacement Costs Our assets infrastructure has a total replacement value of $1.5 billion dollars.

The chart above excludes replacement values for bushlands, parks, and sporting fields. The table on the following page provides a detailed snapshot of council’s current asset stock. Asset data “sum of class” has been sourced predominately from our existing AM systems, primarily CONFIRM and the Pavement Management System. Current condition is presented as an average across the asset class and has been provided from several inspection and assessment processes conducted by our Property and Engineering Divisions. Replacement values have been calculated from Council’s 2011/12 Insurance figures. Current service levels have been formed from broad strategic community consultation and budgetary constraints. The following simple condition rating has been applied across all asset classes.

Level Condition Description

1 Excellent No work required (normal maintenance)

2 Good Only minor maintenance work required

3 Average Maintenance work required

4 Poor Renewal required

5 Very poor Urgent renewal/upgrading required.

Buildings 32%

Drainage 21%

Open Space 2%

Organisational

Support 3%

Transport

Infrastructure 42%


Strategy Long Term


Management

The table also indicates which long term Community Goal (Live, Work or Enjoy) each asset class supports and which Corporate Strategy it is part of. The Strategies are: S1: Provide effective and integrated infrastructure S2: Deliver integrated transport options S3: Conserve natural resources S4: Protect our environment S5: Strengthen our community S6: Respect and value all heritage and culture ACRL: Active Citizenship and Responsible Leadership, which facilitate our

community goals


Strategy Long Term


Management

Overview of our assets

Category Class Sum of Class (no/hectares/km etc)

Average Current Condition

Replacement Value

Current Service Level Corporate Strategy

Community Goal

Buildings

Administration, Depots and service support buildings

57 3 $32.1 M

Provision of functional, safe and suitable buildings to support Council in providing office, depot and other support services.

S1, S3 Civic Life

Children services 41 2 $31.5 M

Provision of purpose built child care services for children aged birth to 14 years old which meet the needs of children and families as well as the legislative requirements that govern the child care sector.

S1, S5 Live, Work

Commercial and retail

16 3 $12.9 M 1

Provide attractive ,safe and tenantable buildings which maximise the rental return

S1 Work

Community / sporting organisation facilities

131 3 $72.2 M

To facilitate sporting and community organisations provision of services to the community in accordance with adopted policies

S1, S5 Enjoy

Community halls and centres

45 3 $43.1 M

Provision of safe, well maintained and accessible community facilities which accommodate delivery of targeted services as well as facilities available for hire by members of the community and small businesses for recreational and social purposes.

S1, S5 Live, Enjoy


Strategy Long Term


Management



Replacement Value


Community Goal

Leisure and indoor recreation Centres

19 3 $31.2 M

Provision of multi-functional fitness/leisure healthy activities through a uniformed approach to service delivery and investment in facility infrastructure which meets community expectations and market trends.

S1, S5 Enjoy

Buildings

Libraries 2 4 3 $3.5 M

Provision of balanced collections, services and facilities that meet and reflect the needs and interests of both current and potential customers in the community

S1, S5 Live,

Work, Enjoy

Other purposes 55 3 $25.1 M Provision of facilities meeting current and future community needs

S1 Live,

Work, Enjoy

Public toilets and sporting amenities

84 3 $11.4 M Provision of well presented, clean facilities in suitable locations

S1 Live Enjoy

Regional arts/entertainment Centres

2 3 $20.4 M

Provision of attractive and versatile facilities encouraging arts and culture with areas for civic and private functions

S6 Enjoy

Rural Fire Service/ SES facilities

22 3 $13.3 M

Provision of safe and suitable facilities which meets the needs of volunteers and the respective organisations

S1, S5 Live

Surf Life Saving Clubs 3 5 3 $23.0 M Support the clubs’ provision S1, S5 Enjoy


Strategy Long Term


Management



Replacement Value


Community Goal

of life saving services

Tennis Courts 33 3 $2.2 M

Provision or facilitation of tennis related infrastructure to a standard suitable for the local community.

S1, S5 Enjoy

Underground/multistorey car parks

1 2 $13.2 M 1

Provision of safe , secure and accessible parking

S1, S2 Live,

Work, Enjoy

Drainage

Stormwater 651 km 2 $212.0 M

Drainage system generally controls discharge from 20% AEP storms with 1% AEP storms at low points.

S1 Live,

Work, Enjoy

Waste water reuse system

1 system 1 $4.4 M Provision of non potable water supply to suitable customers.

S3 Enjoy

Open Space

Bushland 640.6 Ha 3 Indeterminate

Manage bushland areas through Bushcare groups, seed collection, noxious weed and pest management and propagation of plants at our nursery.

S4 Enjoy

Playgrounds 177

6.6 Ha 2 $11.7 M

Playgrounds inspected quarterly and maintained compliant with relevant Australian standards

S1 Enjoy

Open Space Parks 818

324.8 Ha 2 Indeterminate

Parks maintained in good condition by a combination of routine maintenance and reactive maintenance in response to Customer Requests

S5,S1 Enjoy


Strategy Long Term


Management



Replacement Value


Community Goal

Sporting Fields 119

193.9 Ha 2 Indeterminate

Sporting fields maintained in good condition by a combination of routine maintenance and reactive maintenance in response to Customer Requests

S1,S3 Enjoy

Waterways and Assets

Length of beach: 13.3km

Boat ramps:18

Wharves & Jetties: 15

Tidal Pools & Baths: 9

2

Beaches - Indeterminate

Boat Ramps, Tidal Pools & Baths, Wharves & Jetties - $12M

Timely response to beach erosion events.

Beaches clean and accessible at all times.

Waterway structures safe and accessible.

Reactive maintenance in response to customer requests.

S4, S1 Enjoy

Organisational Support

Light Vehicles 249 2 $7. 8 M To replace assets at the end of their useful life.

S1 Civic Life

Heavy Vehicle and Plant

268 2 $22. 2 M To replace assets at the end of their useful life.

S1 Live,

Work, Enjoy

Mobile (Books) 510,825 items 2 $5.4 M

Provision of balanced collections, services and facilities that meet and reflect the needs and interests of both current and potential customers in the community.

S5 Enjoy

Transport Infrastructure

Bridges 34 2 $11.5 M

Provide for the safe movement of pedestrian, cycle and motorised traffic over watercourses, roads and

S1,S2 Live,

Work, Enjoy


Strategy Long Term


Management



Replacement Value


Community Goal

rail cuttings.

Car parks 24.4 ha

3

$19.3 M

Provision of safe, easily accessed parking in close proximity to heavily frequented facilities.

S2 Live,

Work, Enjoy


Kerb and Gutter 1455.2 km 2 $112.0 M

Control of surface runoff and definition of road carriageways to ensure public safety.

S1, S5 Live

Pathways (Pedestrian/cycleways)

67 km 2 $12.4 M

Facilitate pedestrian and cycle access to schools, shopping centres, train stations and bus stops and to provide a facility for recreational cycling and walking.

S1, S2, S5

Live, Work, Enjoy

Road Pavement Length: 803.8 km

Area: 2 $277.4 M

Provision of sealed road network, well maintained, fully accessible network and fit for purpose

S1, S2 Live,

Work, Enjoy

1 Does not include Cronulla Central. Significant building asest are within stratum and strata lots where the core building replacement / maintenance is already planned as part of an external building management committee. The sites include Kirkby House, Sutherland Library, 29-31 Waratah Street Kirrawee, and Stapleton Avenue community offices.

2. Excludes Cronulla library within Cronulla Central 3. Includes Woronora River Life Saving Club


Strategy Long Term


Management

2.4.2 Assets critical to Council’s Operations Some assets are considered critical to the ongoing operation of Council’s core services. If they are removed our services to the community would be severely impacted or impossible to deliver. We have defined these assets to be:

Council’s Administration Building in Eton Street Sutherland, which is the ‘nerve centre’ of our activities

Council depots at Bath and Ethell Roads, Kirrawee which support our operations

Sutherland Shire library, where our Information and Technology back up occurs and

Our domestic waste fleet, which could not be replaced within an appropriate time to meet resident’s domestic waste removal requirements and expectations.

Council has assessed the risks associated with the partial or total loss of these assets and has adopted a disaster management plan as part of our Business Continuity Plan. 2.4.3 Lifecycle assessment As part of the development of this Strategy we have undertaken comprehensive life cycle assessments for roads and drainage. We are currently in the process of undertaking similar assessments for our buildings. Lifecycle costing is defined as a process to determine the sum of all expenses associated with an asset class including acquisition, installation, operation, maintenance, refurbishment, discarding and disposal costs. During the implementation of our Asset Capability Improvement Plan (detailed in Section 6) we will complete whole of life cycle costings for our Open Space and Organisational Support Asset Categories. 2.4.3.1 Remaining Life Drainage Council has detailed attribute information regarding its stormwater asset inventory. This includes asset build dates, life expectancy based on engineering standards and local environmental conditions, valuations and replacement costs. Council also has some condition data based on closed circuit television (CCTV) and visual inspections of its network. This stormwater data is stored centrally in its Corporate Asset Management System, Confirm. Council has a detailed and spatially accurate location of all its stormwater assets stored in its Geographical Information System (GIS). Council also has information regarding asset capacity and service performance, mainly hydraulic information based on the many catchment studies carried out across the Shire. Council's Stormwater Drainage facilities and services are generally provided to meet industry design and safety standards where these are available. From a safety and “fit for purpose” perspective it is considered that Council’s Stormwater Drainage assets are meeting appropriate performance requirements.


Strategy Long Term


Management

For the purpose of gaining an initial understanding of the renewal and financial requirements for Stormwater Drainage assets, remaining useful life has been estimated directly from the assets age against expected life as outlined in the following table. At this stage future renewal expenditure requirements have been forecast based on existing condition and remaining useful life information and an assessment of “backlog” works required to bring Stormwater Drainage assets up to appropriate standard. This future renewal expenditure and any gap analysis will be further explored in the Stormwater Asset Management Plan.


Council has detailed attribute information regarding its transport asset infrastructure. This includes asset build dates, life expectancy based on engineering standards and local environmental conditions, valuations and replacement costs. Council also has detailed condition data based on regular scheduled inspections of its network. This transport infrastructure data is stored centrally in Councils Pavement Management System (PMS). Additionally Council has a detailed and spatially accurate location of all its Transport Infrastructure assets stored in its Geographic Information System (GIS) and accessible to all staff. The PMS provides detailed condition and deterioration modelling, asset capacity and service performance, and combined regular inspections provide a rigorous platform to program future works and transport infrastructure budgets. The following graphs for the useful remaining life of Road Pavement, Kerb and Guttering and Footpaths has been extracted from the data within the PMS.

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20

40

60

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120

Stormwater Drainage Remaining Life

Useful Life Consumed Expected Remaining Life


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Council uses a variety of road pavement types in order to optimise benefits to the road users and minimise costs to council. The graph shows that the old style sprayed seals are more than halfway through their useful lives and will be progressively replaced with asphaltic concrete.

Much of council's kerbing and guttering is relatively new and still has a substantial useful life. Brick kerbing is now only used to replace existing brick kerb in historically significant areas.

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20

40

60

80

100

120

Road Pavement Remaining Life

Avg % Useful life used Expected Remaining Life %

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20

40

60

80

100

120

INTEGRAL OR STRIP K&G ROLL TOP KERB BRICK KERB

Kerb Remaining Life



Strategy Long Term


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There has been a surge in footpath construction in recent years and much of the footpath network is in good condition. Bitumen footpaths are no longer constructed and are gradually being replaced with concrete paths.

2.4.3.2 Road Pavement Network Lifecycle costings The road pavement network is Council’s most valuable asset. Staff regularly inspect and monitor our pavement and associated streetscape assets .The data collected is held in Council’s PMS which then processes the data to inform our works programs and budget process. Based on our lifecycle assessment Council has allocated an additional $2m in 2012/13 and is aware that additional like funds are required in order to preserve the integrity of our road network. The data collected for pavements includes rating the extent and severity of defects such as roughness, cracking and potholing. The figure below shows the break up of pavement condition in 2010/11.

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20

40

60

80

100

120

CONCRETE FOOTPATH BITUMEN FOOTPATH BRICK / PAVER FOOTPATH

Footpath Remaining Life



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Although this analysis reflects an overall condition of “good” it is known that pavements do not deteriorate in a linear manner. The majority of lightly trafficked local roads managed by Council are sealed with a thin layer of asphaltic concrete and mainly fail as a result of the breakdown of the surface treatment; the main predictor for bitumen oxidation is the age of the pavement. The current average age of road pavement surfacing in Sutherland Shire is 21 years, while the average age of the base layers is over 30 years. The following figure shows the current seal age of the pavement network.

Distribution of Pavement Condition

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13

30

54

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10

20

30

40

50

60

POOR FAIR GOOD VERY GOOD

Condition Rating

Len

gth

(%

of

netw

ork

)

Pavement Seal Age

20

36

44

0

5

10

15

20

25

30

35

40

45

50

1 -10 Years 11 - 20 Years > 20 Years

Age Group

% o

f R

oad

Net

wo

rk


Strategy Long Term


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A computer analysis was undertaken using our PMS to determine the maintenance needs and budgeting requirements for the road pavements over the next ten years. Two different funding scenarios were modelled:

Scenario 1. Network performance if the annual pavement maintenance budgets are continued at their current level ($3.8 million annual expenditure)

Scenario 2. Future condition of the network if the budget for road pavements was increased to $5.8 million per annum (CPI adjusted).

The following figure plots the relationship between maintenance budget and its effect on future network condition. Under Scenario 1 (current funding) the average road network condition will continue to slide into an overall “poor” condition within the next decade. Scenario 2 will arrest the slide and keep the overall pavement condition in the “good” classification.

2.4.4 Community satisfaction with assets Council’s on-going community engagement program maintains an informed basis for the prioritisation and programming of asset provision and maintenance. The following three major engagement programs provided the principal community inputs for this asset strategy:

1. Council’s Community Satisfaction Survey (2011) 2. Household Survey for the Proposed Infrastructure Levy (2009) 3. Community Engagement for Community Strategy Plan Review (2011)

Funding Scenarios

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2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Co

nd

itio

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nd

ex

$3.8M Expenditure

$5.8M Expenditure


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The table below provides a time based comparison across the three most recent community satisfaction surveys of both importance and satisfaction ratings for Council’s key asset classes. Scores are reported using a 1 (low) to 10 (high) scale.

COUNCIL FACILITY / SERVICE 2011 2009 2007

Imp Sat Imp Sat Imp Sat Local Roads Condition 8.6 6.7 8.5 6.5 9.0 6.5 Local Bushland Maintenance 8.6 7.1 8.7 6.6 8.7 6.8 Local Traffic Management 8.5 6.0 8.3 5.9 8.7 6.4 Public Toilets Condition 8.5 5.6 9.0 5.5 8.4 5.5 Parks and Gardens Condition 8.5 7.5 8.7 7.3 8.7 7.2 Footpath Condition 8.2 6.2 8.3 5.9 8.6 5.9

Local Sporting Fields Condition 7.9 6.8 8.3 6.9 8.2 7.0 Footpath Provision 7.8 6.3 8.0 5.8 8.7 6.0 Cycleway Length & Coverage 4.7 5.0 5.3 4.6 6.8 5.5

These broader asset priorities and ratings were given greater depth and resolution through a 2009 community engagement program associated with Council’s proposal for the introduction of an infrastructure levy. Involving a total of 2,741 residents the program assessed support for 14 component program areas of an overall infrastructure development proposal. The analysis below shows that trends from highest to lowest levels of support are consistent, with the exception of cycleways, which showed some polarisation of support.

Program Area Priority

Rank Level of Support (percent) Total

% None Slight Moderate Strong Unrated

Rural Fire Service 1 19.3 7.8 13.9 29.6 29.4 100

Roads 2 20.3 8.4 15.5 27.2 28.6 100

Drainage 3 21.7 11.2 17.2 19.2 30.7 100

Public Toilets 4 24.8 12.2 15.2 19.1 28.7 100

Beachside Protection 5 25.8 12.5 16.1 15.3 30.3 100

Playgrounds 6 27.9 17.0 15.6 9.1 30.4 100

Reserves (passive) 7 27.8 17.1 14.8 9.4 30.8 100

Wharves & Jetties 8 28.8 15.6 15.4 10.1 30.2 100

Surf Clubs / Beach Buildings 9 28.9 14.9 15.4 10.5 30.3 100

Sports Fields 10 29.2 15.4 15.5 9.6 30.2 100

Community Buildings 11 30.1 16.9 14.2 7.9 30.9 100

Cycleways 12 35.0 14.1 9.1 12.1 29.8 100

Entertainment Centre 13 37.9 15.3 10.6 6.6 29.6 100

Croyden St Carpark 14 40.9 11.4 9.2 10.1 28.4 100

A third level of information about the community’s expectations and priorities infrastructure was obtained from the 2011 engagement program undertaken to


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inform Council’s integrated planning and reporting framework and in particular the Community Strategic Plan. Effective Critical Infrastructure was rated as both the second highest Overall priority and was the second most frequently rated First Priority item. Specific infrastructure aspects identified included:

Improved quality of both local and major roads which are able to meet traffic capacity

Safe and/or off road bicycle paths across the Shire and bike storage stations at work and at rail stations

Quality footpaths across the Shire, particularly for older people

Provision of bus shelters and seating, particularly for older people

Additional sporting fields are critical for our youth and their healthy and active lifestyle.

More parking at railway station areas

Wide cycle ways for parents with kids

Shared pedestrian footpath/cycle ways to get from local shopping centres

Upgrade or replacement of Sutherland Entertainment Centre and other arts facilities.

Provision of infrastructure (roads, parking, and transport services) was critical

The lack of appropriate infrastructure to support increased density and

population and its impact on the existing infrastructure such as roads.

Protecting trees/vegetation throughout development

Infrastructure to meet demographic changes.

Keep infrastructure well maintained.

Public toilets that are accessible for older people.

Encourage use of community parks

Provision of infrastructure and facilities

Foreshore pedestrian and bike riding opportunities

Walking facilities in suburbia and the bush

Playing fields and ovals and equal access

Bush tracks and green open areas

Play spaces for children in parks

Maintenance of parks, ovals and beaches and ease of access to all

More sport interactive parks like bike tracks and along the tracks exercise

equipment

Council will continue to explore the community’s importance and satisfaction levels with our assets. In order to better match community expectations with the type of asset and levels of services provided further and quite specific dialogue with the community needs to occur in the future. This consultation has been incorporated into our Capability Improvement Plan.


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2.4.5 Local asset management issues Sutherland Shire is no longer a growth area and generally the life cycle stage of its assets reflects this. Our future challenge will be to maintain services with little opportunity for real growth in revenue. The relative affluence of the Shire population mean that there is few major financial assistance programs available from other levels of Government to assist council. A significant number of council’s assets, particularly its buildings are 30 years or more in age and reaching a point of capital reinvestment to maximise longevity Sutherland Shire prides itself with a high participation rate in sports and these sporting facilities need to be supported at the same time the demand for facilities continue to increase. Local asset category issues include: Buildings -

large number of standalone sporting facilities on playing fields

exposure to marine corrosion

some significant assets are reaching capital reinvestment stage

need to resolve asset management responsibilities with community/ sporting occupants of buildings

Drainage –

with a small number of exceptions, Council's drainage structures are in good condition and will not require a major expenditure for many years

due to the presence of improvements above drainage pipelines in an urban environment, pipe replacement is seldom a viable option for renewal

modern technology such as lining will be employed as pipelines reach the end of their service life.

Open Space –

until recently, open space in Sutherland Shire has generally not been intensely developed

Council has recently developed major feature parks such as the Como Pleasure Grounds, Centenary Reserve, Miranda and Oak Park, Cronulla

feature parks are recent constructions and will require little structural maintenance for some time to come.

Transport Infrastructure -

many of the road pavements in the western area of the Shire are reaching the end of the service life and will need to be replaced within two years

most cycleways are recent constructions and will provide many years of service without a major demand for funds

Council maintains it footpaths in good condition however they are subject to uplift by tree roots and localised repair will continue to demand the expenditure of maintenance funds


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Council has a fifteen year commercial contract for the provision and maintenance of all bus shelters (some with advertising) in the Shire at no cost to Council, so no expenditure will be required for maintenance.

2.4.6 Financing our Assets The ongoing provision of asset infrastructure of a type, condition and service level which is acceptable to the existing and future Sutherland Shire communities is critical to ensuring appropriate services to our people.

Council’s 2011/12 to 2020/21 Capital Works budget indicates the level of funding allocated for the specific maintenance and upgrading of existing infrastructure and the creation of new assets to promote community, business and visitor activity.

2.4.7 Additional funding needs As Council completes its asset management plans, an accurate cost for maintaining the assets will become apparent. It is expected that a funding shortfall will be identified, in common with other councils and levels of government, and decisions will be made to prioritise expenditure from available resources, Council’s property investment fund has been a valuable supplement to general rate revenue for many years and for financial year 2011/12 provided approximately additional funding equivalent to 5% of general rate revenue In 2012 Council does not support raising additional revenue via rate increases, increased user fees or introduction of new user pays levies. In the absence of new revenue sources Council will need to pursue operational efficiencies and review services and service levels in consultation with the local community.

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2.5 Assessment of Current Asset Management Capability

To determine the current asset management performance at a broad, strategic level and identify areas for improving Council’s asset management capability, Council undertook an assessment by means of a gap analysis. The Institute of Public Works Engineering Australia’s (IPWEA) provides a tool for undertaking this analysis, as part of its NAMS.PLUS program. IPWEA’s ‘sustainability’ approach is essentially based on three key elements: 1. Stewardship – the role of elected members 2. Asset Planning – managing existing as well as new 3. Financial Planning – an essential part of business. For each of these, a series of capabilities are assessed in relation to the present capacity, the desired capacity and the importance of that capability. The latter criteria are significant as they allow councils the flexibility to pursue a standard that may be less than ‘best practice’ because it may not be relevant; the cost to achieve best practice is prohibitive or there is no benefit to be gained from best practice compared to current practice. The results of our gap analysis follow. 2.5.1 Stewardship

This Strategy was not complete at the time of the analysis.

It has progressed to a competency level.

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Key points relating to Council’s ‘stewardship’ capability:

Council is meeting its desired capability in having an AM Policy, referring asset management issues to its Audit Committee when necessary, and reporting on its financial sustainability

Council’s approach to having systems for managing asset related risks either as part of a corporate risk management system or within an Asset Management Plan is mixed, depending on the asset category

Council’s Asset Management Working Group ensures there is a reasonable cross functional approach to asset systems management, however, there is no dedicated asset management business unit

Accountabilities and responsibilities are not defined in all managers’ job descriptions.

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Key points relating to Council’s ‘asset planning’ capability:

Asset identification and recording is done at the component level for both roads and drainage, with some further work required in buildings and parks

While asset data is current and there is a documented work process for asset register maintenance, there are gaps around document procedures for recognising and capitalising new and donated assets, as well as reviewing useful lives of assets

Responsibility for maintaining the asset register lies with several staff members, and updates are sometimes delayed due to pressures on time and resources

Asset condition data exists for roads, with data for the remaining asset categories incomplete. The aim is to have a rolling program of assessment – not an annual one

Risks are assessed and treatments identified that are linked to capital and maintenance programs for all asset categories, except for buildings, which will be completed in the next 12 months

Knowledge of the life cycle costs of services using each asset varies – ranging from high for roads to minimal for parks

Future demands and impacts on service delivery relating to roads and drainage is fairly well known; and is in development for buildings

No asset management plans exist for any asset category but plans for Buildings, Drainage, Open Space and Transport Infrastructure will be developed within 6 months.

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Key points relating to Council’s ‘financial planning’ capability:

Council has had a 10 year Long Term Financial Plan for some years’ which has been revised to conform to IP&R requirements.

There needs to be clear and direct linkages in the LTFP to a number of asset management activities, such as life cycle cost considerations, provision for new assets including their operating and maintenance costs, asset renewals and treatment of capital expenditure

Gap Analysis Summary

Background

Workforce Strategy

Long Term Financial Plan

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Gap 0 2 1.4 2.5 0 0.5 1.8 0.6 1.2 1.8 1 2.6 2.5 0.5 0 1.5 Importance Weighting 5 5 3.4 4 5 3.5 3.7 3.4 3.4 3.2 3.4 4 3.5 3.5 4 4.5

Weighted Gap 0 10 4.8 10 0 1.8 6.7 2 4.1 5.8 3.4 10.4 8.8 1.8 0 6.8 Priority For Improvement 12 2 7 2 12 11 5 10 8 6 9 1 3 11 12 4


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2.5.4 Priority Areas for Improving Asset Management Capabilities The following table presents a summary of the gap analysis across the three capability areas. From the gap analysis scores, a priority for improvement is determined by calculating the gap between the desired and present capacity, with a weighting applied based on the importance of the particular capacity being assessed.

Priority Practice Area

1 Asset Management Plans

2 AM Accountability & Responsibility

3 Life Cycle Costs & Investment Decisions

4 Long Term Financial Plan

5 Asset Data Maintenance

6 Service Levels & Delivery Costs

7 Risk Management Process

8 Risk Management

9 Future Demand Impacts

10 Asset Condition Data

11 Asset Identification & Recording

12 Revaluation Process

13 Reporting Asset Consumption

14 AM Strategy

15 Sustainability Reporting

16 AM Policy

Excluding this Strategy, the gap analysis indicates that council’s priorities should focus on:

completion of asset management plans

identification and definition of responsibilities and accountabilities across council positions

incorporating life cycle and investment expenditure into council’s Long Term Financial Plan, and broader decision-making.


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2.5.4.1 Asset Management Plans Council will be currently developing its formal asset management plans for the core categories of:

buildings

drainage

open space

transport infrastructure An Asset Management Plan is not proposed to be developed for organisational support at this stage. Council has a significant asset portfolio, and whilst the intention is to have asset management plans in place for all asset categories, this will be achieved through a gradual and phased approach due to resource and financial constraints. In order to keep Asset Management Plans current and relevant, it is proposed that they will be updated annually to reflect both financial/budgetary changes as well as any changes in service levels. A full review of the plans will be undertaken every 4 years.

2.5.4.2 Asset Management Accountability and Responsibility Across council, there are a range of asset management responsibilities as well as a range of asset classes. As outlined earlier in responsibility for asset management, at both a strategic and technical level, is spread across the organisation. There is a recognition that in order to improve the strategic capabilities of the organisation, a dedicated Strategic Asset Management Unit may be one option of achieving this. This, however, would not be considered until the new Division is operational. 2.5.4.3 Life Cycle Costs and Investment Decisions Life cycle assessments are inconsistent and unavailable across all categories and classes. There is a high level of sophistication associated with costing our road pavement network supported by data and routine monitoring practices. Some initial work has been undertaken in the assessment of buildings, however, there is considerable work to do to achieve the desired analysis and understanding.

2.6 Asset Management Capability Improvement Plan

It is clear from the gap analysis we have undertaken that council has room for improvement in its asset management. The Asset Improvement Capability Plan aims to bridge the gaps identified in this Strategy and move Council to more advanced asset management. The following table identifies the actions council will take to do so. Actions are prioritised according to their urgency with immediate attention given to legislative compliance and safety concerns. The priority rating used is: 1. Immediate and within 3 months 2. 3-6 months and informing the development of AMPs 3. 6-12 months 4. Ongoing


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A five heading approach has been applied for areas of improvement:

Corporate Review

Process Improvement

Information System Improvements

Organisational People Issues

Commercial Tactics We believe substantial benefits will be obtained from our corporate approach which will then feed into categories and classes of assets. The development of core Asset Management plans (AMPs) together with our commitment to measurable continuous improvement are the necessary tools for successful asset management which will take us into the future. Council’s AMPs will be a “first cut “ approach and provide information to the Executive and Council to enable a more rapid transition to the desired advanced asset management practice in the future. These plans will build on the current approach and over time, be based on more complete and more accurate asset data, and relate to specific service levels that directly reflect community expectations. Our AMPs will include:

lifecycle costing approach

use of current information and condition assessment

identification of critical assets

determination of current service levels

determining improvement strategies as measured against the current baseline position

prioritising new capital works on simple cost benefit analysis (business case)

long term financial planning for assets and

establishing measurable financial and service level performance indicators. Coordination of actions in this Plan¸ the Asset Management Working Group (AMWG) and reporting on progress at 3 monthly intervals to Councils’ Executive will be the responsibility of the Strategic Planning Unit.

Background

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Asset Management

Asset Management Capability Improvement Plan

CORPORATE REVIEW

Action Priority Completion

Date Responsible Officer Resource Requirements

Statement of executive and Council commitment (similar to WHS) 1 Nov 2012 Executive Report to Directors

Specification of executive and Council reporting requirement 1 Nov 2012 Executive Report to Directors

Define the roles and responsibilities between Asset Management and project delivery 1 Nov 2012 AMWG/ Executive Forum, Report to

Directors

Recognise and confirm the roles of asset manager and occupier 1 Nov 2012 AMWG/ Executive Forum, Report to

Directors

Allocate all assets to Asset managers 1 Nov 2012 AMWG/ Executive Forum, Report to

Directors

Determine and implement community engagement model to review Customer Service levels 3 Aug 2013 SPU/ Executive Scope and cost TBD

Prepare first cut Asset Management Plans 2 Feb 2013 Asset Managers Scope and cost TBD

Integrate existing Asset Management policies plans and strategies not under IPR framework 2 Feb 2013 Asset Managers Forum, Report to

Directors

Determine frequency Asset Management of review 1 Nov 2012 Executive Report to Directors

Finalise format of Asset Management Plans 1 Nov 2012 AMWG/Executive Report to Directors

PROCESS IMPROVEMENT


Date Responsible

Officer Resource Requirements

Determine which services are critical to the community in collaboration with the community. 3 Aug 2013 SPU/ Executive Scope and cost TBD

Review service levels for services. 3 Aug 2013 SPU/AMWG Report to Directors

Standardise business case assessment for capital expenditure. 2 Feb 2013 AMWG Report to Directors

Review Long Term Financial Plan with benefit of Asset Management Plans 3 Aug 2013 AMWG/ Manager Finance

Report to Directors

Align Finance and Asset Management Systems. 3 Aug 2013 AMWG/ Manager Finance

Report to Directors

Identify energy and water efficiency issues and develop appropriate strategies. 3 Aug 2013 AMWG/ Manager Energy

Report to Directors

Background

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INFORMATION SYSTEM IMPROVEMENTS



Create Asset Management System user group 3 Aug 2013 AMWG Within existing resource allocations

Examine enhanced use of EView for Asset Management 3 Aug 2013 Manager LIU Within existing resource allocations

Prepare a tool for weighting the benefit of expenditure in improving the condition of the asset 3 Aug 2013 Manager LIU Within existing resource allocations

Develop a standard business case template 3 Aug 2013 AMWG Report to Directors

Consider upgrading mobile functionality in the light of new developments in the Confirm software 3 Aug 2013 AMWG Scope and cost TBD

Review mobile functionality and consider upgrading systems/technology in light of new developments in the Confirm software

3 Aug 2013 AMWG Scope and cost TBD

Develop a consistent Condition Rating system across all asset classes 3 Aug 2013 AMWG Scope and cost TBD

Ensure system data classification meets requirements for all legislative and business reporting requirements

3 Aug 2013 AMWG Within existing resource allocations

ORGANISATIONAL PEOPLE ISSUES



Migrate remaining existing asset data into corporate asset management system 3 Aug 2013 AMWG Within existing resource

allocations

Collect asset condition data for outstanding asset classes 3 Aug 2013 AMWG Scope and cost TBD

Improve asset information accessibility to staff via EView and SSR reporting 3 Aug 2013 Manager LIU Within existing resource allocations

Complete and maintain Asset Class Register 3, 4 Aug 2013, Ongoing

AMWG Within existing resource allocations

Define corporate roles and responsibilities for maintenance of asset data 2 Feb 2013 AMWG/ Asset Managers

Forum, Report to Directors

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ORGANISATIONAL PEOPLE ISSUES



Integrate functions between Asset Management and Projects Delivery Division 1 Nov 2012 AMWG/ Executive


Develop strategies and training to connect program and project management including formalising consultation with users

3 Aug 2013 Corporate Development


Develop and provide training for Councillors, Executive and asset managers 3 Aug 2013 Corporate Development


Create asset managers and occupiers working group 2 Feb 2013 AMWG Forum, Report to

Directors

COMMERCIAL TACTICS



Determining core, discretionary and commercial services and the corresponding operating parameters

3 Aug 2013 AMWG/ Executive


Resolving maintenance responsibilities of parties outside of council 3 Aug 2013 Mgr Property & Building Assets/ Executive

Report to Directors and Council

Optimise revenue opportunities from available assets 3 Aug 2013 Mgr Property & Building Assets/ Executive

Report to Directors and Council

Formalise and standardise contractor management procedures 3 Aug 2013 AMWG / Legal Services


Determine asset based indirect financial assistance to outside organisations 3 Aug 2013 Mgr Property & Building Assets / Mgr Finance



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2.7 Conclusion

This Strategy is based on Council’s existing Asset Management Policy and establishes the

structure for improvements to support our ongoing asset management planning and

practice. It has considered:

a detailed overview of all the assets under Council’s control

the community’s expectations of asset provision and maintenance

an assessment of our current asset management planning practices and

identification of organisational deficiencies.

The Asset Management Capability Improvement Plan contained in Section 6 articulates the

action Council will take to improve our asset management capacity. We will do so through

improvements in organisational knowledge, systems, processes and structures. This

Strategy will soon be supported by four comprehensive Asset Management Plans (AMPs) for

our key asset categories:

Buildings

Drainage

Open Space


Together they will inform and be informed by Council’s Long Term Financial Plan and

Workforce Strategy to deliver the infrastructure, programs, services and facilities detailed in

our Delivery Program and aspired to in the Community Strategic Plan.


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Appendix A Asset Management Policy 1. PURPOSE The purpose of this Asset Management Policy is to articulate Council's commitment to the principles of sound asset management. It establishes a clear direction and framework to ensure that asset management is undertaken in a structured, coordinated, cost effective and financially sustainable manner across the whole organisation. 2. SCOPE This policy applies to all physical assets (excluding personnel) owned or controlled by Council. 3. GOALS AND OBJECTIVES The goals and objectives of this policy are to establish a framework which will:

Ensure that Council’s services and infrastructure are provided in a sustainable manner, with the appropriate levels of service to residents, visitors and the environment.

Safeguard Council assets, including physical assets and employees, by implementing appropriate Asset Management strategies and appropriate financial treatment of those assets.

Create an environment where Council employees play an integral part in the overall management of Council assets by creating and sustaining Asset Management awareness throughout Council.

Meet or surpass legislative requirements for Asset Management.

Ensure resources and operational capabilities are identified and responsibility for asset management is allocated.

Demonstrate transparent and responsible Asset Management processes that align with demonstrated best practice.

4. POLICY

4.1 Background 4.1.1 Council is committed to implementing a systematic asset management

methodology in order to implement appropriate asset management best practices across all areas of Council. This includes ensuring that assets are planned, created, operated, maintained, renewed and disposed of in accordance with Council’s priorities of service delivery.

4.1.2 Council owns, uses and or controls approximately $1.5 billion of “non-current” assets (eg roads, buildings, reserves) to support its core business of delivery of service to the community.

4.1.3 Asset management directly supports the Council endorsed community strategic plan, "Our Shire Our Future” by detailing the asset resources that are required to be managed in a way that meets the community’s main priorities and aspirations, as set out in the community strategic plan.

4.1.4 Asset management practices impact directly on the core business of Council and appropriate asset management is required to achieve our strategic service delivery objectives.


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4.1.5 A strategic approach to asset management will ensure that the Council delivers the highest appropriate level of service through its assets. This will provide positive impact on:

Members of the public and staff;

Council’s financial position;

The ability of Council to deliver the expected level of service and infrastructure;

The political environment in which Council operates; and

The legal obligations of Council.

4.2 Principles 4.2.1 A strategic and systematic approach to asset management, that embraces

industry standards and best practice, will be employed throughout Council. 4.2.2 Council’s assets will be managed using a “life cycle” approach and all future

life cycle costs will be calculated and considered in all decisions relating to new services and assets as well as upgrading of existing services and assets.

4.2.3 Council’s assets will be utilised to their optimum potential, to maximise usage and economic performance, based on performance targets relating to the particular classes of assets set out in the Asset Management Strategy.

4.2.4 All relative legislative requirements together with environmental, social, economic and governance standards are to be taken into account in asset management.

4.2.5 Council’s assets will be regularly maintained to the Asset Management Plan, based on the Asset Management Strategy, to ensure that they continue to function as built for the duration of their life and minimise Council’s exposure to risk in regard to asset failures.

4.2.6 An inspection regime and consistent condition rating will be used to ensure agreed service levels, intervention methods and renewal priorities can be determined across all asset classes.

4.2.7 Funding for all asset purchases, maintenance, rehabilitation and replacement shall be guided by Council’s Asset Management Plans and included in the Integrated Planning & Reporting framework consisting of the annual Operational Plan, the 4 Year Delivery Program and 10 year Long Term Financial Plan.

4.2.8 Asset renewal plans will be prioritised and implement progressively based on the level of service required and the effectiveness of the current assets to provide that level of service.

4.2.9 Systematic and cyclic renewal reviews will be applied to all asset classes and are to ensure that the assets are managed, valued and depreciated in accordance with appropriate best practice and applicable Australian Standards.

4.2.10 Future service levels provided by infrastructure assets will be determined in consultation with the community.

4.2.11 All assets must be assigned to an asset manager who will be responsible for managing the assets in accordance with this Policy, Asset Management Strategy and Asset Management Plan/s.


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4.2.12 That in all asset management documents the hierarchy of asset management recognise the different roles of asset owner, asset manager and asset user/occupier.

5. RESPONSIBILITIES

5.1 Councillors Councillors, as the custodians of community assets, are responsible for adopting the policy and ensuring that sufficient resources are made available for asset management activities.

5.2 General Manager

The General Manager has overall responsibility for developing an Asset Management strategy, plans and procedures and reporting on the status and effectiveness of Asset Management within Council.

5.3 The Asset Management Steering Committee (AMSC)

The AMSC reports to the General Manager.

Implement and continuously review the corporate Asset Management Policy and Strategy subject to allocated resources.

Provide strategic direction and leadership for asset management over the next 25 years.

To ensure that accurate and reliable information is presented to Council for decision making.

Ensure the needs and obligations of the Council are being fulfilled on behalf of the community.

Foster and support the multidisciplinary, cross-functional Asset Management Working Group.

5.4 The Asset Management Working Group (AMWG)

The AMWG reports to the AMSC.

Develop an asset management Strategy for asset management and resource requirements that reflect a corporate approach to asset management utilising Councils corporate systems.

Encourage continuous improvement, innovation and cost effective methods to improve asset management practices.

Facilitate the development of asset management plans.

Present accurate information relating to infrastructure assets (lifecycle costs, risks, etc) to support Council’s decision making processes.

5.5 Asset Owners

Acts as the authorised representative of the council to acquire, dispose, lease, license or hire assets in accordance with applicable council resolutions and delegations.

5.6 Asset Managers

To develop, implement and review asset management plans at the business unit level in accordance with this Policy and the Asset Management Strategy.


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To report on the performance of assets under their responsibility.

To manage occupational health and safety and public liability risks associated with the assets assigned to the Manager.

To act as an interface with asset occupiers.

5.7 Asset Users/ Occupiers

To use or occupy council assets under agreement with the asset owner, or where applicable, the asset manager in accordance with adopted council policies relating to the use or occupation of the class of asset or type of transaction.

6. ASSET MANAGEMENT FRAMEWORK The framework for implementing Asset Management within Sutherland Shire Council in accordance with the principles outlined in this policy is illustrated below:

7. REVIEW This policy shall be reviewed every year and in conjunction with Council’s Community Strategic Plan.

Background Workforce Strategy


Asset Management

WORKFORCE STRATEGY



Asset Management

3. Workforce Strategy

3.1 Background

Council is, and has been for many years, the largest employer in Sutherland Shire. Over three-quarters of the organisation’s employees are Shire residents. The last 3 decades have demanded that the organisation responded to significant community and operational changes including a 24% population increase (170,000 to 212,000 persons) and a 320% increase in operating budget ($59m to $250m). From a workforce perspective, these challenges have been met through a modest 7.25% change in employee numbers (1034FTE to 1109FTE). The need for competitive service delivery and an increasing diversity of community demands have required council’s workforce mix to change from a traditional structure of a “day labour” organisation with high numbers of administrative, regulatory, and “blue collar/outdoor” staff. Significant structural shifts, including both increases and decreases, have been:

From 85 staff in 1993 Waste Services currently has 9 staff for putrescible waste collection and total of 35 staff for domestic, green waste and recycling, underpinned by the introduction of the rapid rail collection service

A reduction in Information Technology staff numbers through council’s move in the 1980s away from developing and supporting its own software to outsourcing its software requirements.

A growth in Children’s Services from one long day childcare centre and 12 staff in 1989 to the current situation of 11 centres and 352 staff.

A shift in Recreation and Leisure away from traditional Olympic pools and towards a range of leisure and recreation has seen Council move from 21 staff employed at Caringbah, Sutherland & Engadine Olympic pools in 1993 to 331 staff in 2012 employed across a variety of centres.

Increased employment associated with more recently introduced services and support resulting from council’s involvement in environmental, bush care, economic development and tourism related activities.

This development and evolution of the necessary responses have resulted in council creating a comprehensive platform of policies (Appendix B) that support its workforce. Market testing has been with council for a number of years and some recent changes, facilitated by natural attrition, have seen the outsourcing of some traditional areas eg. Footpaths reduced from 14 to 4 employees, Parks Maintenance from 103 employees (in 2006) to 94 employees (in 2012). Whilst council has undergone significant reform it has minimised redundancies preferring instead to retain and retrain staff where it can.

3.2 Challenges

One of the big issues facing local government is maintaining financial sustainability. This is becoming increasingly difficult as the community and government expects more from local government and ratepayers want a good return on their rate dollar. Councils have also had to cope with continuing cost increases, eg. energy, cost shifting from other levels of



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government and hand in hand with decreasing financial support from state and federal governments. Many councils in NSW are not financially sustainable into the future. There is also concern that the role of councils in its important regulatory responsibility, planning and determining development applications is in need of an overhaul. Governments see the need for local government to operate efficiently and see councils as an important contributor to stimulating investment and creating jobs in this State. There are a number of initiatives which will impact on future staffing requirements and support for staff in Local Government, including:

Destination 2036 Action Plan includes and sets a number of initiatives and key actions under the headings:

- Efficient and Effective Service Delivery - Quality Governance - Financial Sustainability - Appropriate Structures - Strong Relationships

The Independent Local Government Review Panel is examining options for government, structural arrangements and voluntary boundary changes for local government.

Review of the Local Government Act

A review of the planning legislation is underway.

Council’s workforce must be able to respond to the changing operating environment and the economic pressures under which it operates. For many parts of the organisation community needs will be met and services will be provided in similar ways. The main influences on the way the workforce will be structured and how Council will meet its people resourcing requirements are:

the ageing work force, particularly in the senior ranks, and the resultant loss of knowledge and experience

the proposed State planning system will lead to a change in the skills mix with fewer staff in development assessment, but more staff in planning and certification services.

the need to be competitive in service provision and if day labour is unable to provide a competitive and effective service those services will be outsourced where appropriate.

As part of workplace change there will be times where positions are declared surplus to organisational needs and as such the incumbent in the position is to be redeployed elsewhere within the organisation. Council wants to ensure that staff have jobs and as such redeployment is always the first option. Council will use its best endeavours to ensure successful redeployment, with redundancy only being discussed as a very last option. In all cases the General Manager would have to approve the redundancy payment.



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3.3 Workforce Overview

The following overview is derived from a series of information sources including Council’s employee record system, the 2011 Staff Survey, interviews with Directors and identified managers, and a variety of reports detailing workplace initiatives undertaken by the organisation since 2005. In 2011 council’s workforce stood at 1836 total positions. Positions have been chosen as the reference base rather than employee numbers to better reflect the organisation’s labour demand. The distribution of positions shows distinct differences across the organisation’s five directorates, with the main features including:

Community & Recreation (C&R) accounts for almost half the total positions (869) in SSC, due largely to substantial body of casual employees who are mainly female.

Engineering accounts for one quarter of the total SSC positions (492) and contrasts with the C&R directorate due to its large proportion of permanent male employees.

Executive and Property each have fewer than 100 positions, and collectively account for less than 10% of the total workforce.

Corporate (197 positions) and Environmental Services (134 positions) account for the remaining 18% of the total workforce.

Environmental Services and Property have an almost equal gender spilt in their workforces, with over 80% of Environmental Services positions being full time, compared with 50% full time positions in Property.

Corporate and Executive each have a 60%female/40%male (approximate) division among their employees, with over 70% of Corporate Services positions being full time, compared with slightly less than 50% full time positions in Executive.

Comparison of council’s 2011 workforce profile with the organisational profile from 5 years earlier (2006) shows that for both total numbers and general composition, our workforce structure remained relatively constant over that period.

878

564

206 137 89 46

869

492

197 134 91 53

0

200

400

600

800

1000

C&R ENG COR ESD EXE PRO

Nu

mb

er

of

Po

sit

ion

s

1920 positions in 2006: 1836 positions in 2011

2006

2011



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In net terms our workforce reduced by four percent over the five years from 2006 to 2011, with most directorates showing only marginal shifts in their total number of positions. The main change occurred in Engineering directorate, with a twelve percent reduction in position numbers. The Corporate Services directorate showed a five percent reduction in numbers, although as it comes off a smaller total employment base when compared with Engineering and C&R, the absolute numbers of positions reduced were smaller (9 positions overall) The overall age and gender composition of our workforce also remained relatively stable over the 5 years between 2006 and 2011 exhibiting:

slightly higher proportion of females (55%) than males (45%)

a slight increase in the proportion of employees aged 65+ (1.3% in 2006 up to 3.4% in 2011)

a decrease in the proportion of under 25’s (15.% in 2006 down to 12% in 2011)

an overall ageing of the workforce with an increase in the proportion of employees aged 45 and over, among both males (up 3.7%) and females (up 10.2%).

While females constitute a higher proportion of positions within the SSC labour force, their employment status is quite different to that of males.

Males hold more than twice the number of full time positions compared with females, while females hold three times as many casual positions when compared with males. Females hold the dominant proportion of part-time positions within the organisation. Over 40 percent of our workforce has been employed at Council for less than five years. The proportion of females in this under five year group is considerably higher than that for males. For all other periods of employment the proportion of males and females in each group is relatively similar, although the proportion of males outweighs females in the long term employment categories.

8.5%

2.8%

33.3%

23.7%

13.9%

17.7%

40% 20% 0% 20% 40%

Casual

Part time

Full time

2011 - Total Number of Positions = 1836

FEMALES (55.3%) MALES (44.7%)



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Specifically, four key aspects for attention were identified within the broader context:

Retention

Attraction

Development

Transition and form the basis of this Workforce Strategy profiled and detailed below.

3.4 Responses

3.4.1 Retention For the last decade SSC staff turnover has been relatively low (less than 15%). After experiencing a dip in 2008/2009 (likely due to the GFC) turnover has steadily trended back toward the 10% mark.

Interviews with Directors and Managers generally indicated that the current workforce size is “about right” for the organisation’s facility and service delivery program highlighting a need to ensure that staff turnover remains at the low levels seen in recent years. The 2011 SSC Staff Survey revealed the following time to exit profile for various age groups:

Year in which this age group will reach…

Age in 2011 50% exit 75% exit

Under 20 2026 na

20 to 24 2016 2026

25 - 29 2016 2020

30 - 34 2018 2027

35 - 39 2019 2027

40 - 44 2023 2030

45 - 49 2024 2028

50 - 54 2021 2026

55 - 59 2017 2020

60 - 64 2015 2018

65+ 2013 2014

0%

2%

4%

6%

8%

10%

12%

14%

16%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Annual Staff Turnover Trends



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In addition to identifying the (expected) higher levels of exits among the over 55’s during the next 5 to 8 years this profile also reveals higher levels of exits among the under 40’s during the same period. A particular vulnerability is found among the 25 to 29 year age group. This is reinforced by the identification throughout the organisation of a particular difficulty in retaining mid-career staff, especially those suitable to move into management positions. While employees’ satisfaction overall with council as a place to work received a score of 7.5 (out of 10), a series of issues have been identified for the maintenance and enhancement of the organisation as a desirable place to remain an employee, including:

Difficulties in being able to compete with remuneration levels offered outside the organisation, especially those in the commercial sector.

The need to identify and promote other “non-dollar” points of difference that Council has to offer as a workplace.

One of the key incentives – identified by both management and employees – is the opportunity to live and work locally rather than needing to commute outside the area for work. However, employees have identified that this does not fully compensate for less than competitive wages.

Council’s capacity to extend flexible and family friendly working arrangements to employees was also identified as a desirable feature of the organisation. However limitations do exist to this both in terms of equity in access to such arrangements across the organisation, and a view by managers that flexible arrangements were posing increasing difficulties on the organisation’s ability to maintain continuity in customer service requirements.

Access to workplace progression was seen identified as one of the top 5 areas of concern among employees in the 2011 staff satisfaction survey. Limitations to the organisation’s ability to offer clear and timely career track progression are acknowledged, making the cultivation of a working environment that provides ongoing challenges and development opportunities a key issue.

Recognition that those areas of Council with a high component of casual employees operate in an environment of high staff turnover, an need to balance the flexibility of an on-demand pool of labour with the inherent loss of skilled and reliable employees to other more stable employment opportunities.

3.4.2 Attraction Two critical factors were identified as having a major impact on the organisation’s workforce, namely: 1) The impending exit of a significant proportion of the workforce over the next 5 to 10

years, the over 50’s group retires, and



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2) The uncertainty produced for a number of Directorates – particularly Community & Recreation, Environmental Services, and Corporate Services – by a changing legislative environment. These changes were regarded as being relatively unpredictable in the medium to longer term, making planning for their associated requirements difficult, and resulting in reactive responses.

While the introduction and revision of systems and technologies was seen a partial solution to the resulting workforce shortfalls resulting from the combination of these two factors, there will still remain a need for the organisation to attract additional employee resources from outside. In some instances it will be possible to meet these demands by moving to contract arrangements; a significant proportion of the 12 percent reduction in Engineering’s workforce between 2006 and 2011 resulted from a shift from day labour to contract arrangements. It was regarded that this trend would continue when appropriate opportunities occurred. Meeting the balance of the employee shortfall will require Council to proactively promote itself within both the local government sector and the wider labour market. Specific areas for investigation include:

The identification of attracting appropriately skilled personnel at a reasonable cost as a major challenge for Council.

The 2011 staff survey indicated that 60 percent of staff would be either very or extremely likely to recommend Council as a place to work, however it also identified Council’s negative image as an area of concern among employees.

While it is anticipated that factors that attract employees to Council would be similar to those that serve to retain existing employees, this is an area that warrants further exploration.

3.4.3 Development While the current workforce size was generally felt to be appropriate, some areas of the organisation identified a need for adjustment of the existing skills profile. In Engineering this adjustment was seen to be occurring within the pool of graduates emerging from tertiary institutions, although the issue of attracting new graduates to Council remains a challenge in general. By way of contrast, Environmental Services employs a model of in-house development of its staff, with a structured program aimed at skills transfer from more experienced staff members to newer members of the division. Council presently maintains an extensive range of specific workplace skills training programs that are promoted and managed via the organisation’s intranet system. These training programs are largely vocational in nature.



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Historically Council’s broader development programs have focussed on the needs of three broad age groups:

Under 35’s (In-house forums, Livewire etc)

35 to 45’s (The Mid-career or “Middies”)

Over 50’s (Sage Co. program).

Current offerings for personal and professional development are less age-related in their scope, however, and include programs such as Springboard, POD, Toastmasters and the Local Government Managers’ Association challenge (LGMA). These programs are also promoted and managed via the organisation’s intranet system. Because of their delivery structure, these programs have a limitation in the number of potential participants in any one year. This limitation needs to be examined in terms of potential equity and access issues. A key issue identified throughout the organisation was the difficulty in identifying, training and retaining experienced mid-career personnel willing to move into management roles. In contrast the 2011 staff survey identified the lack of access to workplace progression as one of the top five concerns among staff. This apparent mismatch in opinions identifies an area for further investigation. The annual performance review process includes an evaluation of training and development needs of the individual. This is a source of information which could be further utilised to design and deliver skills and training programs to reflect the wider needs of the organisation’s workforce. 3.4.4 Transition With the exception of the Community & Recreation Directorate which has a notably younger workforce associated with its high proportion of casual employees, all remaining Council directorates have at least one quarter of their employees aged 55 and over.

Directorate % employees aged 55 and over

Corporate Services 30%

Environmental Services 26%

Executive 23%

Property 26%

Engineering 30%

(62% aged 45 and over)

Taking these profiles in conjunction with workforce leaving intentions from the 2011 Staff Survey

Year in which this age group will reach…

Age in 2011 50% exit 75% exit

50 - 54 2021 2026

55 - 59 2017 2020

60 - 64 2015 2018

65+ 2013 2014



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reveals significant issues for Council to manage during the next five years, including:

Absolute loss of a significant proportion of the workforce occurring in a short time period

Potential need to expand flexible working arrangements to extend the exit time horizon

Specific loss of highly experienced employees and their embodied corporate knowledge

Loss of specific skill sets, particularly in the Engineering Directorate, which pose the question of replacing these skills sets in-house versus outsourcing these task requirements

Significant attrition of the organisation’s senior management over the next decade.

Council’s ageing workforce and the resulting loss of experience and expertise over the coming years will have major ramifications for all levels of our workforce. There will be a change in the most senior management of Sutherland Shire Council over the next five years – the General Manager, five out of six directors, and a number of managers, are over 60 years of age – and informal succession planning is occurring. While we have worked with Sage Co to define and address options for this group, including staged retirement and knowledge capture initiatives, ongoing action is required in conjunction with the Attraction and Development aspects of this Workforce Strategy. Council is very aware of the profiles of its senior staff and has given informal consideration to the way in which the organisation’s structure may change with the retirements which will occur over the coming years. We have already undertaken the following succession planning initiatives:

Establishing a Projects Delivery Division

Providing staff training and development opportunities, including an emerging leaders program

Endeavouring to place its staff in a position to be competitive when senior staff and mangers positions become available

Assessing risks associated with early or unexpected departures of senior staff and managers

Information capture from all employees exiting the organisation, regardless of age or time with Council, is also important, providing valuable feedback to inform and guide Council’s employment environment. As well as employees transiting of out of the organisation, another area of consideration is managing the redeployment of older employees engaged in heavy physical tasks into areas more suited to their age and physical capacity. The following tables summarise strategies for each of the four key aspects, identifying:

Workforce Issues that need to be addressed

broad Responses to be initiated

outcome Indicators for the responses, and



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the Corporate Strategy from the Strategic Plan that is primarily* responded to, where

o S1 = Provide effective & integrated infrastructure o S2 = Deliver integrated transport options o S3 = Conserve natural resources o S4 = Protect our environment o S5 = Strengthen our community o S6 = Respect and value all heritage and culture o RLAC = Responsible Leadership and Active Citizenship.

* Note: This Workforce Strategy obviously supports all of council’s corporate strategies. Those shown in the summary tables indicated the main strategies that the initiatives support.



Asset Management

Strategy Issues Responses Indicators Corporate Strategy

R e t e n t i o n

Currently lower staff turnover levels trending upward toward 15% historical average Exposure to significant staff exits by the Under 40’s, and especially the 25 to 29 year age group Potential exit of 50% of the over 55’s by 2017 Remuneration levels less attractive than those offered by commercial sector Lack of access to workplace progression identified as a key concern by employees Some Council operations (especially Community & Recreation) require a high component of casual employees

Target workforce initiatives toward specific job satisfaction issues identified in 2011 Staff Survey Continue to develop and promote EEO principles and practices Develop options for staged exit and post retirement “alumni” arrangements Identify, develop and promote non-monetary benefits of working at Council Devise and promote alternative professional & personal development opportunities

Staff turnover of 12% or less Lower than projected rates of exit among key age groups Employee “prospectus” developed and promoted widely Expansion and development of current programs on offer

S1

S2

S5

RLAC



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A t t r a c t i o n

Identification and attraction of appropriately skilled personnel Awareness within the wider job seeker community of employment opportunities and advantages offered by Council Uncertainties associated with the changing legislative environment and consequent additional workforce demands Balancing retention of workforce capability within Council with opportunities for external resourcing / contracting

Raise image of Council in general, and specifically as an employer of choice Evaluate targeting effectiveness of current practices for job advertising Identify, develop and promote non-monetary benefits of working at Council, including EEO practices Maintain watching brief of potential requirements and assess both technological and employment based responses Assess options including alternative internal employment arrangements, recurrent short-term contracts, and external resourcing

Ratings from Community Satisfaction and Staff Surveys Job advertising contacts tracked Employee “prospectus” developed and promoted widely Options and alternatives assessed

S1

S2

S4

S5

RLAC



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D e v e l o p m e n t

Adjustment of existing skill profiles to meet emerging needs, especially in Engineering and Environmental Services Shortage of mid-career personnel interested in management roles Extending the reach and relevance of current staff development initiatives

On-going evaluation of current skills base through performance review and staff survey processes Extend opportunities for higher grade experience to all employees including part-timers Devise and promote leadership specific development programs Expansion of the capacity of current programs to increase participant numbers

Skill base assessed and talent pool established Number of employees accessing alternative experience opportunities Participation levels in programs, including proportion of first time participants

S1

S2

S4

S5

RLAC


T r a n s i t i o n

Retirement of 5 of the 6 members of the Senior Management Team by 2017 Potential exit of 50% of the over 55’s by 2017. Loss of embodied knowledge Information capture from all exiting employees Ageing employees who can no longer meet the physical or technical requirements of their current position

Develop options for staged retirement / exit Shadowing & skills transfer programs developed Exit interview data integrated Audit of employees to evaluate the need, extent and opportunities for redeployment

Reduced exit rate of employees Knowledge capture programs initiated Audit undertaken and action plan developed

S5

RLAC



Asset Management

Appendix B: Workforce Related Policies

Computer Resource Usage Employee’s responsibilities when using computers, including disciplinary action. Read in conjunction with the Workplace Surveillance Policy

Workplace Surveillance (Overt Surveillance)

Counselling and Disciplinary Action

Policy reflecting council’s commitment to improve poor performance & conduct by using staff counselling and a performance management review process.

Fair Workplace Policy & Resolution Procedures

The Fair Workplace Policy provides standards of acceptable behaviour and demonstrates how Council supports and promotes a Fair Workplace culture (Series of Fact Sheets developed for Workplace Bullying, Workplace Discrimination, Workplace Harassment, Sexual Harassment, Behaving with Dignity and Respect, Conflict in the Workplace

EEO Management Plan

Flexitime Flexitime and Time in Lieu Policies

Job Rotation and Job Swap Policy and Procedures

This Policy is part of a range of initiatives introduced by Council to provide development opportunities for employees to enrich their work environment and to retain valuable employees who see Council as their preferred employer.

Legal Assistance to Councillors and Staff Legal assistance to councillors and staff.

Occupational Health and Safety Council's commitment to Occupational Health and Safety & related policy.

Parking Permits for Staff With Temporary or Permanent Infirmity

Approving parking permits for staff members with infirmity.

Recruitment Ensure professional recruitment strategies with effective measures to secure valued employees by Council.

Sick Leave Management Management of sick leave

Study Assistance Council’s support for staff developing skills and competencies,

Training Council’s on-going commitment in developing staff to become more efficient and effective

Study Assistance Study assistance for full-time and part-time employees

Telecommuting and Procedures Provide flexibility in work options for employees and employers.



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LONG TERM FINANCIAL PLAN



Page 61 Asset

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4. Long Term Financial Plan

4.1 Introduction

4.1.1 Overview

Council has been adopting Long Term Financial Plans (LTFP) since 2006. Initially the Plan

spanned 4 to 5 year forecasts and since 2009 it was expanded to cover a 10 year period. The

LTFP has been a successful decision-making tool to assist Council in planning for future

operating and capital budgets. It has allowed council to identify opportunities and threats in

relation to future financial resource levels and funding sources.

This LTFP is a key component of the council’s Resourcing Strategy. The other components of

the Resourcing Strategy are the Workforce Strategy and Asset Management Strategy. All

three components of the Resourcing Strategy are responding to council’s Community

Strategic Plan and through our Delivery Plan and Annual Operational Plan and Budget.

This Plan will be reviewed at least annually as part of the Annual Operational Plan and

Budget each year. The LTFP will project estimates on an annual basis covering the next 10

years into the future. Each newly elected Council will also review the LTFP in accordance

with the 4 Year Delivery Plan and the other Plans required under Integrated Planning and

Reporting.

4.1.2 Purpose of Long Term Financial Plan (LTFP)

The LTFP has always been an important decision-making tool for this Council to ensure

current and future financial sustainability of our service and asset delivery to the

community. It assists in planning and identifying opportunities and threats in relation to

available and future predicted financial resources and funding options. It allows Council to

consider future funding and financial policies and/or strategies to address desired service

levels and asset replacement and maintenance required for the future.

The LTFP places us in a better position to make informed and important financial decisions

over a longer timeframe that addresses the direction aspired to by the community in the

Community Strategic Plan. It allows Council to at least maintain existing service delivery

levels to the community or review those levels based on financial outcomes. It also allows

for review of asset renewal, replacement and maintenance levels based on available funding

sources for the future. The asset review would be consistent with Asset Management

Strategies and Plans.

Based on adopted modelling and scenarios it also allows Council to move towards balanced

annual budgets and ensure a strong financial and cash position for the future.



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The first year of each LTFP mirrors the annual budget for that current year and this flow on

effect streamlines the annual budget process.

4.1.3 Preparation of the Plan

The LTFP is based on modelling financial information linked to key economic and service

level assumptions. Assumptions extend to applying annual CPI, annual wage indexation, rate

pegging limits, financial policies, financial strategies to name a few, and also extending to

one-off impacts or on-going impacts such as legislative imposts such as the carbon tax. The

LTFP is informed by and informs the Asset Management Strategy.

The development of our Asset Management Plans will provide the base data which will be reflected in the Rolling Capital Works Program as individual projects and works in priority order by asset class and also recommend levels of service for ongoing operations and maintenance over the ten year period, with that information informing the Long Term Financial Plan. This LTFP is based on known and currently planned levels of service and capital programs; it

will be reviewed annually in order to ensure a linkage between our Asset Plans and financial

strategies.

The LTFP is prepared leading up to the annual budget cycle each financial year. The LTFP,

depending on circumstances and issues, has on occasions been presented to Council prior to

firming up the annual budget (Delivery Program and Operational Plan) and on other

occasions may coincide with the consideration of the annual budget (Delivery Program and

Operational Plan). The LTFP, Delivery Program, Operational Plan and the Annual Budget

generally is adopted for public exhibition at the same time. The public exhibition timing is

usually April each year with final Council adoption being around May.

4.1.4 Financial Sustainability

A council is financially sustainable if it has the ability to financially meet future planned

service delivery levels and also meet required levels of planned spending on asset renewals

and replacements. The “best practice” achievement of financial sustainability is one where

excessive debt levels or on-going special rate increases are not compromised.

The above position is difficult to achieve in NSW local government due to the large backlog

of asset renewal required, cost shifting and ever increasing demands for increased service

levels by the community with no corresponding growth in revenue sources. Councils must

adopt financial strategies to position themselves better to meet community and asset

demands.



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We have undergone a number of assessments over the years measuring our financial

sustainability. In 2005 council engaged a financial consultant, Mr Carl Millington, to review

council’s financial capacity and sustainability into the future. The Millington Report stated

council was in a good financial position, however many challenges faced us in the future

which could deplete our financial capacity to survive. To meet these challenges the Report

recommended council develop an on-going LTFP. Since 2005 Council has produced a LTFP,

initially 4 to 5 years projections changing to a 10 year forecast period in 2009.

In addition, in 2008 an independent audit of Council’s performance under the Local

Government Reform Program – “Promoting Better Practice” found that “Council has strong

and clear leadership that is well positioned to strategically address the future needs for

Sutherland Shire”. One indicator of this finding was the fact that council adopted a LTFP and

was financially responsible in using this information.

The external auditor, PricewaterhouseCoopers, reported in their 2010-11 audit of council’s

financial position that “Council is considered to be in a sound and stable financial position.

Most indicators are better than accepted industry benchmarks.”

One reason we have been able to achieve this financial position is by developing financial

strategies and policies as a result of decision making through the LTFP.

Strategies and policies developed to continue financial sustainability include:

1. Development of a Future Works Reserve, where all efficiencies and savings from

budget reviews and year end budget results are transferred to a cash reserve to

support future budgets. This was implemented in 2005 and to date has generated

over $35 million to assist with future years budgets through the LTFP.

2. Every year since 2007 an allocation of $500,000 has been built into each year of the

LTFP recognising efficiencies to be recognised throughout the organisation. This has

been achieved every year.

3. Conservative loan borrowing levels to meet capital programs, debt service ratios have

in the norm been under 4% for a decade or more.

4. A special 4% rate variation in 2010/11 for a three year period to cover infrastructure

capital renewals and replacement.

5. Maintain a Property Investment Fund that generates around $4 million income to

council each year.

6. Maintain an Employees Leave Entitlements Reserve at a minimum 10% of Leave

Liability to meet unforeseen leave payments.

7. Maintain a comprehensive Section 94 Register that earmarks committed funds for

future project use.

8. Keeping working funds of $1.5 million uncommitted in each budget year as a “buffer”

for unforeseen financial impacts. This is reduced to $1 million from 2012/13 budget

year onwards.



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The savings and efficiencies made over many years have enabled Council:

- to expand its role in economic development, environment, the arts and tourism

- to address issues such as anti social behaviour, vandalism and graffiti

- offset cost shifting from other levels of government

- meet cost increases, especially utility charges, when rate caps did not cover these

increases

- continue a large capital program - improve service levels in parks maintenance and tree management - move to online business and dealings with our community.

This has been achieved in an era where this Council, unlike many others:

- does not charge for car parking and is the only metropolitan beachside area not to do so

- does not charge for the use of playing fields - requires that its child care centres are self funding - is one of only 18 councils in the metropolitan area which provides a voluntary

pensioner rebate; in fact the subsidy of $105 per annum is in addition to the mandatory subsidy of $250 (of which the government meets only 55%)

Continuous improvement with periodic refocus (eg competition policy), has been applied as part of management’s objectives in improving productivity and eliminating poor work practices and culture. Reviews are ongoing, for example whenever a vacancy occurs a formal justification is required before a replacement is made. These reviews will bring ongoing savings and improvements.

4.1.5 Financial Structure of the Plan and Annual Budget

The financial structure of the LTFP and annual budget is based on modelling financial

information for key economic and service level assumptions. Assumptions extend to

applying annual CPI, annual wage indexation, rate pegging limits, financial policies, financial

strategies to name a few, and also extending to one-off impacts or on-going impacts such as

legislative imposts such as the carbon tax.

Council has developed a sophisticated financial model based on many spreadsheets that

consolidate and manipulate key information into various formats as outlined as follows:

- an annual budget document by responsibility Unit and Directorate,

- an annual budget document by strategic direction as identified in the Community

Strategic Plan and Delivery Plan,



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- a LTFP up to 10 years projections based on applied economic and service level

assumptions, including one-off impacts where known,

- the LTFP documents allow presentation in budget available funds format, operating

statement, balance sheet and cash flow statement format,

- an infrastructure/ capital program identified with funding sources for the 10 year

forecast period in line with current asset management systems.

The Model Plan can have different scenarios and sensitivity criteria and assumptions applied

to view different outcomes for Council to consider financial viability and sustainability for

the future. Financial policies and strategies can be determined by considering different

scenarios.

Council usually decides on the desired service delivery levels and then projections are

carried out on revenue and expenditure estimates to meet those service levels. The residual

surplus funds, that is after expenditure is deducted from revenue, is regarded by Council as

“Discretionary Funds Available”. The Discretionary Funds Available is the general revenue

component available to meet infrastructure/ capital expenditure. Asset renewal,

replacement and maintenance levels are then applied on a priority basis from the existing

Asset Management information. Any additional funding sources for Asset Programs and

Projects are then identified and applied with the Discretionary Funds Available to

acknowledge whether funds can meet the desired Asset spending or not. If funding is short

Council then decides on remedial options such as identifying further funding sources,

reductions in either or both service delivery levels and/or asset programs and projects.

Once council adopts the suite of documents the adopted financial budget allocations are

then applied in Council’s core corporate Technology One financial system. Through the core

corporate system budgets are monitored and reported through the Budget Review process.

Council conducts quarterly budget reviews as prescribed by legislation and in addition will

usually conduct a further 3 reviews in November, February and May each year. The extra

reviews are not always required, however they have been conducted more times than not.

4.1.6 Link to Corporate Strategies

Council ‘s activities work towards achieving the community’s 2030 vision and desired

outcomes for the Shire. We do so through the implementation of 6 primary strategies and

civic life activities. The chart below shows the allocated expenditure of Council’s funds

across these 6 corporate strategies and activities in the 2012/13 Operational Plan budget.



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Expenditure 2012/13

4.2 Forecasts and Assumptions in the LTFP

4.2.1 Revenue and Funding Sources

4.2.1.1 Annual Rates

Base Level Income – Estimated 2012/13 Gross Rates and Extra Charges Income is $103.396

million, with Mandatory Government Pensioner Rebates being $3.391 million and Council

Voluntary Pensioner Rebates $1.415 million. Net rates income (including interest charges) is

therefore around $98.590 million which is around 49.2% of total operating revenues.

Rating Structure

Council’s rating policy is structured on an ad-valorem – minimum rate basis. Each year council reviews its rating strategy and structure. The minimum rate method applies throughout the Shire on a ceiling land valuation, and any property above this minimum is then rated on a Straight Ad Valorem method.

Council Ad Valorem rating is calculated as a rate-in-the-dollar on each property land

valuation. Land valuations change every three years when the NSW Valuer General issues

new valuations. It is important to understand that any change in rating structure or land

valuations does not equate to additional rate income, it merely redistributes the rating

burden across the rating categories and properties as total rating income is pegged to a

percentage allowable increase.

30%

10%

2% 1%

31%

2%

24%

Provide Effective & Integrated Infrastructure

Deliver Integrated Transport Options

Conserve Natural Resources

Protect Our Environment

Strengthen Our Community

Respect & Value all Heritage & Culture

Civic Life



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Rating Categories

Council has three ordinary rate categories – the three categories are Residential, Business – Ordinary and Business – Kurnell Industrial. Council also has a Special Rate for Cronulla CBD, however this rate is specific for that purpose and is not available for general service levels.

Rate Pegging and Special Variation Increases

The 2012/13 rates will increase in line with the rate pegging limit of 3.6% set by the Independent Pricing & Regulatory Tribunal (IPART). The full 3.6% will be applied to each rating category.

For the 2010/11 rating year Council was successful in applying for a special rate variation of 4% to apply for a period of 3 years. This variation was to fund critical infrastructure projects and was commonly referred to as an Infrastructure Levy. The Levy was applied in the first year above the rate pegged limit and was to be held for 3 years and reduced in the 2013/14 rating year.

The Levy was applied for only two of the three year period, Council has now adopted to abandon (remove) the Levy in the 2012/13 year. The capital projects originally proposed for the final year of the Infrastructure Levy will still proceed but will be funded now from Internal Funds from Council’s Property Fund. The Property Fund will be repaid the funds on a loan basis over a ten year period.

Pensioner Rate Rebates

Pensioners will receive two rebates according to their eligibility status.

• The mandatory rebate under Section 575 of the Local Government Act will be to a maximum of $250 per assessment, calculated as one half of the combined rates plus domestic waste charge - whichever is the lesser amount.

The maximum of $250 is determined by the state government and has remained unchanged at that level since 1989. The government subsidises councils with 55% of mandatory rebates granted.

• The voluntary rebate as per council policy, under Section 582 of the Local Government Act, to a maximum of $105 per assessment.

Eligibility conditions are:

(1) The ratepayer must firstly be eligible for a mandatory rebate.

(2) The ratepayer must have been a ratepayer in the Shire for the last three years.

(3) In calculating the maximum voluntary rebate, the ratepayer should be left paying an amount at least equivalent to the domestic waste charge.

As outlined, rebates are calculated on the combined levy of rates plus domestic waste charge.



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RATING INCOME– ADOPTED ASSUMPTIONS FOR LTFP

CRITERIA ADOPTED ASSUMPTIONS

Ad Valorem Rating structure To remain and applies to all forecasted years

Rate Pegging To remain and pegged limit of 3% to remain stable and applied to each year forecasted

Special Rate Variation (SRV)Increase None, no commitment to apply for a SRV for any year forecasted

Pensioner Rate Rebates Both mandatory and voluntary rebates to remain for all years forecasted

Rating Growth Minor growth has been applied for future years allowing for potential residential and strata development

4.2.1.2 Domestic Waste Management Charges

Base level Income – Domestic Waste Management Charges (including interest charges) for

2012/13 are estimated at $25.235 million which is around 12.6% of total operating revenue.

Domestic Waste Services

Domestic waste covers the services of weekly collection of putrescible waste, fortnightly

collection of greenwaste and recyclable materials, and a twice yearly clean-up service.

Under the provisions of the Local Government Act 1993, council is required to match its

domestic waste charges with the reasonable cost of the service - in other words, there must

be no subsidising of the charges from rates or other revenue. Under the Local Government

Act 1993, it is mandatory to levy a Domestic Waste Management Charge (Section 496).

Domestic Waste Management Reserve

Council retains a Domestic Waste Reserve of $3 million as a buffer to draw against in the

event of adverse movements rise and fall provisions in waste disposal contracts, impacts of

renewal / renegotiation of major waste contracts, increases in operating costs exceeding

initial budget projections (fuel and tyres). Though it is not firm policy, Council has

traditionally attempted to maintain the Reserve around the $3 million mark. Due to the

large impacts on the 2011/12 budget this level has had to be dropped down to $2 million.

Domestic Waste Management Service Charges

The present domestic waste charge is structured in two major levels, "Regular" and

"Shared" services, with the addition of a "Service Availability" charge (which mostly relates

to vacant land). It is mandatory under the Local Government Act for councils to levy a

charge on vacant land and this has been set at a token level. The "Shared" service basically

applies to any situation where a property owner shares a 240L bin for putrescible garbage

and recycling. "Shared" services exist only in home units and some villa/townhouse



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developments. A "Regular" service charge currently applies to all other domestic waste

services. They are mostly 120L bin services for putrescible waste and apply to some villa

and townhouse developments and all single dwelling households.

The "Shared" charge prior to 2011 had historically been set at approximately two thirds

(2/3) of the rate of the "Regular" service. Originally the "Shared" service was for a 120L

waste removal service per week, while a "Regular" service was for a 240L waste removal

service per week. There were no recycling or greenwaste services provided at that time.

This meant at the time the discount principle was struck, the "Shared" service was for a

lesser amount of waste service each week.

While the principle of the "Shared" service remains today, this service is now provided at

the same standard as the "Regular" service, with both receiving a 120L putrescible waste

removal service per week and weekly collections of 240L recycling or greenwaste (alternate

weeks for "Regular" service).

Alternative charging structures were presented to Council and, after consideration, Council

adopted that the charge should be more evenly spread across the Shire. The proposal is to

gradually phase in, over a four (4) year period, charges that would result in the “Shared” and

“Regular” Service Charge being the same charge by 2014/15.

Specifically this means the "Shared" service did rise from 2/3 (or 8/12) to 9/12 in the

2011/12 financial year, to 10/12 in the 2012/13 financial year, and is proposed to rise to

11/12 (2013/14 financial year) and finally 12/12 (2014/15 financial year), making it equal to

the rate charged for the "Regular" service.

The transitional shift in charges between “Regular” and “Shared” does not generate any

additional income, it merely re-distributes the charge between these two types of service.

Cost Impacts on Domestic Waste Costs in the 2012/13 year for waste disposal will increase mainly due to: - the carbon tax which will apply from 1st July 2012 is anticipated to cost Council

$1.1m - the increase in waste levies payable to the State Government will increase by 10.4%

($573k) over the 2011/12 disposal cost level and a further $327k in expected gate fee increases.

Overall the service cost will increase by $2.9m or 12.9% as follows;

Increase in Disposal Fees, including State charges and carbon tax $2m – 8.8% Increase in Council’s costs $.9m – 4.1% Overall increase in cost of service 12.9% Council report FIN155-12 outlined the impact of Carbon Pricing on landfill facilities. It is

estimated that carbon pricing accounts for a $1.1 million additional cost for 2012/13,



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$998,500 of this relating to disposal fees. Disposal fees are expected to increase by $2

million over 2011/12, as the Section 88 Waste Levy has also increased.

Based on full annual cost recovery, the DWM charges adopted by Council are:-

No.

Services

Adopted 2011/12

Adopted 2012/13

Adopted Annual

Increase

Adopted Increase

Regular Service 60,389 $293.20 $321.40 $28.20 9.62%

Shared Service 20,274 $219.90 $267.80 $47.90 21.78%

Regular Additional Service

364 $234.40 $264.60 $30.20 12.88%

Vacant Land Service Availability

453 $57.75 $65.20 $7.45 12.90%

Improved Service Availability

1,346 $119.00 $134.35 $15.35 12.90%

The above charges are based on the Shared Service Charge rising to 10/12th of the Regular

Service charge as outlined earlier. It is also based on full annual cost recovery with no

financial assistance from the Domestic Waste Management Reserve.

The total estimated expenditure for domestic waste services is $25,615,932, with the

balance funded from recycling income and diesel fuel rebates.

Review of Clean-Up Collection Service

On 5/3/12, Council considered report SAF116-12 “Review of Twice Yearly Domestic Waste

Clean-Up Collection Service” and adopted the following resolutions:-

1. That the report titled "Review of Twice Yearly Domestic Waste Clean - Up

Collection Service" be received and noted.

2. That a trial, for a 12 month period, of a twice yearly On Call Clean-up collection

service be commenced.

3. That a further report be provided to Council detailing the outcomes and

community response to the trial.

This results in the current bi-annual clean-up service moving to a 12 month trial for a twice

yearly On Call Clean-up Collection Service. The introduction of this on-call service will be

gradually phased in across the Shire once an implementation plan is adopted by Council.



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DOMESTIC WASTE - ADOPTED ASSUMPTIONS FOR LTFP


That the Regular Service Charge and Shared Service Charge be gradually phased in to become the same Charge

This is incorporated in the LTFP to be 2014/15 from that date the Charges are the same. This is a shift between types of services and does not relate to generating additional income.

The carbon tax impact, increased Section 88 Levy and tip gate fee increases of 12% increase be recognised.

This impact has been built into the 2012/13 year and carried forward as an on-going impact in future forecasted years.

DWM Reserve level at around $2 million.

This reduced level down from $3 million to $2 million has been maintained throughout the LTFP. There has been no direction to increase the Reserve level.

Clean – Up trial to a demand service rather than scheduled service.

Same service levels have been applied throughout the LTFP, there has been no variance to existing levels as it is difficult to predict without the necessary trialling.

Cost and Revenue Growth Both have been increased by 3% per annum each year forecasted, after allowing for specific items recognised above.

4.2.1.3 Stormwater Management Levy

Base level Income – Stormwater Management Service Charge is estimated as $2.02 million

in 2012/13 which is around 1.0% of total operating revenue or more relevant around 4.6%

of capital expenditure.

Stormwater Levy Legislation In 2006 the NSW State Government passed legislation known as the Local Government Amendment (Stormwater) Bill 2005, which allows councils to make and levy an annual charge for the provision of stormwater management services for each parcel of rateable land for which the service is available. The amendments have effectively introduced Section 496A into the NSW Local Government Act, providing councils with the authority to make and levy this annual charge. The Local Government (General) Amendment Stormwater Regulation was issued on 13 April 2006. Clause 125AA of the Local Government (General) Regulation 2005 states that the maximum charge that may be levied on rateable land is $25 for land categorised as residential and $25 per 350 square metres (or part thereof) for land categorised as business. Under the guidelines strata properties are capped at a maximum of 50% of the residential charge adopted.

The charge is levied as an annual charge (similar to domestic waste) and will be shown on the rate notice as a separate charge to the rates. The charge is applicable only to rateable land rated as a residential or business category. Vacant land and non-rateable parcels of land are exempt from the charge.



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Levy Conditions

The charge can only be for new and additional works above the value of drainage and stormwater works regularly funded from general revenue previously. The average funding level from general revenue over the past few years is $1,006,200 p.a. This level must be maintained in the adopted budget across various allocations such as general maintenance, specific studies and other construction works.

Value of Levy Charges

In the three years since inception in 2006/07 Council raised $1.77m each year from the charge to fund the specific program adopted by Council. These programs were based on a $22 levy on residential households. In 2009/10 the charge was raised to $25 and that generated a program of $1.95m. It was adopted in this budget that the same charge apply and a $2.0 million program be funded from the Stormwater levy. This program level is based on $25 to be raised on residential households.

The value of works to be funded from the Stormwater Charge is $2.0m in 2012/13.

Stormwater Levy Charges

The legislation allows council to have some discretion with the charge especially where certain categories of ratepayers are at a disadvantage in relation to the charge. Council is proposing to assist eligible pensioners with this charge by only charging 50% of the standard charge that would be applicable.

Adopted Charge Category 2012/13

Residential house $25.00

Residential house – pensioner (50% discount) $12.50

Residential strata unit $12.50

Residential strata unit – pensioner (50% discount) $ 6.25

Recreational facilities $25.00

Commercial land Same for both years – pro rata charge of $25 for each 350 sq.m. of land area thereof, with a minimum $25 charge.

Industrial land Same for both years – pro rata charge of $25 for each 350 sq.m. of land area thereof, with a minimum $25 charge and a maximum capping of $20,000 applies for each rateable property.



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STORMWATER MANAGEMENT CHARGE - ADOPTED ASSUMPTIONS FOR LTFP


Stormwater Management Charges No change to the current charges for any year forecasted in the LTFP.

Stormwater funding raised per annum is $2 million.

This figure has not been increased by growth or CPI as the Charges have been forecasted to remain the same. Therefore $ 2million is a constant income figure applied to every year of the LTFP.

4.2.1.4 Fees, Charges & Other Income

Base Level Income – Fees, Charges and other income (less Property Fund Income shown elsewhere) is estimated for 2012/13 at around $40.328 million which is around 20.1% of total operating revenues.

User Fees, Charges and Other Income

User Fees and Charges are reviewed by Council every year with the annual operating Plan and Budget. There are two category of fees:

- Regulatory, which are generally set by State Government legislation and council has no control over the level set, and

- Discretionary, which council has the capacity to determine.

It is assumed these fees and charges will continue to be provided on the same pricing basis and have been increased by 3.6 % for 2012/13 and then a general 3% per annum increase for each year of the LTFP. These fees and charges include Leisure Centre activities, community facilities use, restoration charges to name a few.

Other Income extends to property rentals, insurance and legal recovery, penalty fines, asset sales to name a few. Council’s primary asset sales relate to plant and vehicle disposals and property sales. There are no operational property sales expected in 2012/13 that relates to the Property Fund. Plant and vehicle asset disposals of an estimated $1.0m have been identified as part of the capital support program. FEES, CHARGES AND OTHER INCOME - ADOPTED ASSUMPTIONS FOR LTFP


Regulatory Fees and Charges Increased by 3.6% for 2012/13

Increased by 3.0 % per annum each year from 2013/14 onwards.

Discretionary Fees and Charges. Increased by 3.6% for 2012/13


Other Income Increased by 3.6% for 2012/13



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Asset Sales

Only Asset sales provided is plant and vehicle disposals at $1 million for each year of the LTFP

4.2.1.5 Grants

4.2.1.5.1 Operating Grants

Base Level Income – Operating Grants are estimated in 2012/13 at around $11.239 million which is around 5.6% of total operating revenues. Financial Assistance Grants

These are Federal “untied” grants distributed through the various state local government grants commissions. There are two components to this grant – the Roads component which is based on road types and lengths within the local government area, and the General Purpose component which is distributed according to a methodology taking into account Revenue Raising Capacity and Expenditure Disabilities. Our recent presentation to the State Grants Commission highlighted how this Council, and a number of metropolitan councils, are disadvantaged by the current method of distributing the Federal Financial Assistance Grants. This council receives $20 per capita compared with: Blacktown $52 Wollongong $69 Lake Macquarie $65 Newcastle $73 Wyong $62 In 1987/88 Council received $4.4 million under FAGs; decreasing for the next 10 years to a low of $2.8 million in 1997/98. The Grant has now reached $4.418 million, i.e. 24 years after the previous peak meaning a cumulative loss against CPI of $85 million. Since 1996/97, Sutherland Shire Council has been on the per capita minimum level, which has meant that the previous decline has stopped and we now receive small annual increases more or less in line with the percentage increase overall for the state. This increase has been based on CPI for next year. It should be noted that the per capita share of the financial assistance grant represents 30% of total available funds distributed by the NSW Grants Commission, the other 70% being distributed under the perceived disability methodology.



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The budgeted estimates are in line with the standard parameters applied throughout the budget:- 2011/12 2012/13 Increase General Purpose Component $4,432,240 $4,591,801 3.6% Roads Component $1,870,907 $1,938,260 3.6% Specific Purpose Operating Grants The total value of specific purpose operating grants from year to year has been projected on a stable maintained basis. Grant levels are predicted to be similar and have been increased by CPI growth. Major operating grants in the Plan for 2012/13 include:- Children’s Services Operating (Other than Fee Relief) $ 791,304 Library Subsidy $ 410,000 Pensioner Rate Subsidy $1,865,000 Street Lighting Subsidy $ 354,251 OPERATING GRANTS - ADOPTED ASSUMPTIONS FOR LTFP


Financial Assistance Grant Increased by 3.6% for 2012/13


Specific Purpose Grants Increased by 3.6% for 2012/13

Increased by 3.0 % per annum each year from 2013/14 onwards

4.2.1.5.2 Capital Grants

Base Level Income – Capital Grants are estimated in 2012/13 at around $3.652 million which is around 1.8% of total operating revenues and more relevant 8.3% of capital expenditure. The total value of specific capital grants from year to year varies significantly, depending upon the level of capital works undertaken or specific projects anticipated. Grant movements are generally compensated by expenditure movements.

For the 2012/13 budget year capital grant funding for infrastructure projects totals $3.652

million.

Listed below are the major capital grants that have been included in the proposed capital and infrastructure for 2012/13, some still subject to approval of the funding (not confirmed at this stage), include:-



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Roads Construction (Roads to Recovery and Regional Roads Program) – including Captain Cook Drive - grant secured $2,062,000 Traffic Management Works $ 550,000 Grays Point Bushfire station extension $ 300,000 Menai Bushfire Station planning and construction $ 150,000 Cycleways – Bicycle Network Plan $ 150,000 Bate Bay – Cronulla Lighting Upgrades $ 100,000 Community Buildings $ 180,000 Oval irrigation Systems $ 100,000 The 2012/13 year is inflated due to the major Captain Cook Drive road widening project and the grants received for that project from the Roads to Recovery and Regional Roads Program. From 2013/14 the LTFP provides for only around $350,000 each year for these road grants. Bushfire Station grants and equipment have $800,000 allocated in the 2013/14 year , $500,000 in 2014/15 and a further grant of $150,000 for Illawong BF Station refurbishment in 2018/19. Cycleway grants have been kept at $150,000 per year for the life of the projected LTFP. Also a specific grant for $100,000 has been allocated for wharves and jetties program – Tom Ugly Wharf in 2014/15. WASIP grant funding has been continued for 2013/14 and 2014/15 at $310,000 each year. After that date no further WASIP funding has been provided as there is no further commitment given for the grant funding to continue. CAPITAL GRANTS - ADOPTED ASSUMPTIONS FOR LTFP


Road Construction Grants – Roads to Recovery & Regional Roads

2012/13 $2.062 million (all for Captain Cook Drive)

2013/14 allocated $1.134 million

2014/15 a provision of $325,000 has been allocated for RTA Road Maintenance Program

From 2014/15 onwards around $351,000 gradually increasing each year to $371,000 in 2021/22 for Regional Roads Program

Roads to Recovery grants from 2014/15 to 2017/18 has been allowed at $1.0 million each year.

From 2018/19 onwards no provision is provided for Roads to Recovery Program.

WASIP Grant Funding From 2012/13 to 2014/15 funding has been provided at $310,000 per year

From 2015/16 onwards no further



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funding provided as no grant commitment

Traffic Management Program From 2012/13 onwards every year $550,000 has been provided in the LTFP

Bushfire Stations and Equipment 2012/13 $480,000 funding

2013/14 $800,000 funding

2014/15 $500,000 funding

2018/19 $150,000 funding

Every other year of LTFP no funding provided

Cycleway Grants From 2012/13 onwards $150,000 is provided each year of LTFP

Wharves and Jetties A specific allocation of $100,000 is provided in 2014/15 for Tom Ugly Wharf

4.2.1.6 Contributions (including Section 94)

4.2.1.6.1 Operating Contributions Operating Contributions are of a minor nature in Council’s revenue base. They usually

consist of community organisations reimbursing council for minor works carried out on their

behalf at council facilities. They usually extend to sporting groups, council halls and other

recreational facilities.

OPERATING CONTRIBUTIONS - ADOPTED ASSUMPTIONS FOR LTFP


Operating Contributions Increased by 3.6% for 2012/13


4.2.1.6.2 Capital Contributions

Base Level Income – Total capital contributions are estimated in 2012/13 at $8.0 million

which is around 4.0% of total operating revenues or more relevant 18.1% of capital

expenditure. (Note: The Operating Statement recognises capital income upon receipt and

not utilisation.)

Capital contributions are mostly land dedications, contributions from external parties or

eligible works recouped from Section 94 Developer Contributions.

Land dedications can vary in quantity and dollar value year to year, however Section 94

Contributions for works are proactively planned and managed by council. Section 94

Contributions are levied on a development consent to assist in funding future infrastructure

needs within that development area. Council imposes the levy under an adopted

Contribution Plan.



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As at 30 June 2011 Section 94 Contributions held as externally restricted cash was $34.932

million. The contributions are managed in a register by each Contribution Plan and are

earmarked as planned commitments for future works and property acquisitions. Estimates

are also recognised for future cash inflows from future developments.

Suitable capital projects and land acquisitions that are included in the LTFP and are eligible

under the Contribution Plan are earmarked to be funded from Section 94 Contributions.

A total of $6.460 million funding has been applied to the 2012/13 budget year, for 2013/14

$4.760 million and then just over one million each year from 2014/15 to 2021/22. From

2018/19 through to 2020/21 an additional $12 million is earmarked from Section 94

Contributions to fund Dunningham Park/ Perryman Place Upgrade in Cronulla, including

construction of a seawall. All these contributions are included in the LTFP.

Land acquisitions for future greenspace facilities or infrastructure needs is also included in

the LTFP, with $2 million funding in 2012/13 and $1 million each year thereafter for the life

of the Plan.

It should be noted that much of these funds were received in previous years and the

Operating Statement only reflects actual receipts which are estimated at $3.0 million.

Major external contributions are included in the LTFP for the development sporting playing

fields in the new suburb of Greenhills Beach. Housing development companies are

contributing $25 million over six years to provide the facilities. Contributions are earmarked

for a Skate Park facility for $1 million scheduled for 2012/13 and $4 million for the each of

the six years from 2012/13 through to 2017/18.

CAPITAL CONTRIBUTIONS - ADOPTED ASSUMPTIONS FOR LTFP


Section 94 Funded Land Acquisitions 2012/13 $2 million funding

From 2013/14 onwards $1 million each year funded

Section 94 Funded Capital Projects Playground Upgrades funded in 2012/13 $450,000

Cycleway program funded $1.75 million 2013/14

Passive Parks upgrades funded $1.320 million in 2012/13 and $850,000 in 2013/14

Sporting Facilities upgrade funded $600,000 in 2012/13

Leisure Centre upgrades funded $600,000 in each year of 2012/13 and 2013/14

Silver Beach Masterplan funded



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$200,000 in each year of 2012/13 and 2013/14

Bate Bay Program funded $600,000 in 2012/13 then major works of $ 4 million each year of 2018/19, 2019/20 and 2020/21

Scylla Bay Masterplan $600,000 funding in 2012/13 and 2013/14

Cricket and Net upgrades $60,000 each year funded from 2012/13 to 2016/17 then $30,000 thereafter each year from 2017/18

Specific External Capital Contributions - housing development contributions for recreational facilities at new Greenhills Beach Suburb

$1 million provided in 2012/13 for Skate Park facility

$24 million over 6 years, $ 4 million provided in each year from 2012/13 to 2017/18 to fund construction of playing field facilities

4.2.1.7 Income from Cash Investments

Base Level Income – Income from cash investments is estimated in 2012/13 at around $3.801 million which is around 1.9% of total operating revenues. A further $0.945 million (0.5% of total operating revenues) has been recognised for previously impaired investment asset revaluation. Council invests surplus cash in accordance with an annually adopted Cash & Investment Policy. The Policy outlines the purpose, strategy, risks and procedures associated with investing cash assets. The Policy is in accordance with the Minister’s Investment Order and guidelines published by the DLG. Income from the investment of surplus funds provides a revenue pool, however, some of the income is added to Trust or Revenue funds as per legislative requirement or Council policy. It is the Net Income to General Revenue which directly aids the budget. The expected result for 2012/13 reflects a slight increase in net revenue to general fund as the global financial position is slow in recovering, however, interest rates are predicted to be lower than current rates. The expectation is for negative growth, so the investments have been revised on levels of cashflow and expected annualised lower rates than the past 12 months. The gross income earned is predicted to be lower than the 2011/12 level, however, net income is slightly up as no further transfers to loan sinking fund are required, as the consolidated loan will be fully settled in April 2012. 2011/12 2012/13 Gross Income Earned 4,357,000 3,777,250



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Less: Income returned to:- Section 94 Trust Funds (977,000) (977,000) Property Fund (227,000) (301,000) Loan Sinking Fund (656,328) 0 Security Bonds and Other Areas (131,000) (131,000) NET INVESTMENT INCOME TO $2,365,672 $2,368,250 GENERAL REVENUE A small additional amount of $23,547 has been estimated for interest receivable on Council’s day to day bank account. INCOME FROM CASH INVESTMENTS - ADOPTED ASSUMPTIONS FOR LTFP


Income from Cash Investments 2012/13 was only marginally increased based on more updated cashflow projections and expected market conditions

Increased by 3.0% each year from 2013/14 onwards

4.2.1.8 Income from Property Fund

Base Level Income – Income from Property Fund is estimated in 2012/13 at $6.401 million which is around 3.2% of total operating revenues. Over the past few years a large proportion of Property funds have been utilised to internally fund projects. Total loan funding since 1998 amounts to $30.293m, with $6.846m outstanding at 30 June 2012. From a Property Division income perspective, this has meant that interest income is received from Council rather than from external sources. Recurrent Property Division income can be summarised as follows: - 2011/12 2012/13 Gross Property Rentals and Interest Income $5,031,766 $5,249,552 Less: Associated Rental Property Expenditure - 274,774 - 301,015

TOTAL PROPERTY INCOME $4,756,992 $4,948,537 Income from Property Fund has been distributed on the basis of the historical approach, being to retain 100% of property income in the General Fund. In 2012/13 a one-off receipt of $1.151 million for the sale of the air rights in relation to the Engadine Aged Care facility has been recognised in addition to the above.



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INCOME FROM PROPERTY FUND - ADOPTED ASSUMPTIONS FOR LTFP


Income from Property Fund In line with the Property Fund Business Plan:

Rental income projected 3.0% each year of the LTFP

Interest on internal funding repayments in line with scheduled project repayments.

4.2.1.9 Loan Borrowings

These funds are not part of the Operating Statement.

For many years council has maintained a borrowing program to finance its annual roads and

drainage construction works and, on certain occasions, also has borrowed to finance

building projects and other assets.

The 2012/13 Budget allows for specific purpose borrowings of $2.30 million to fund

the Cronulla Park/Esplanade Upgrade. These loans will be repaid over the next ten years.

Application has been made for this loan under the NSW Government’s Local Infrastructure

Renewal Scheme which provides for an interest rebate on amounts paid. This application

has not yet been determined.

Council also intends to borrow a further $500,000 in 2012/13 to assist in funding major

drainage upgrades for Production Road/ Bay Road at Taren Point. The repayment of this

loan is to be paid from the Stormwater levy over a period of 5 years.

Council has also determined that $2.5m will be borrowed to fund part of the capital program in 2014/15 and could again look to the Local Government Infrastructure Renewal Scheme for subsidised loan funding.

LOAN BORROWINGS - ADOPTED ASSUMPTIONS FOR LTFP


Loan Borrowings Loan borrowings provided in LTFP as follows:

2012/13 year - $2.8 million, including $2.3 million subject to LIRS subsidy

2014/15 year - $2.5 million

No borrowings have been applied to any other forecasted years

4.2.1.10 Cash Reserves

These funds are not part of the Operating Statement.



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4.2.1.10.1 Internally Restricted Cash Reserves (Assets)

Internally Restricted Cash Reserves are funds held in a reserve in accordance with Council Policy or decisions. Council can change the purpose and use of these reserves as they have full control over these reserves. Council has maintained traditionally around 20 to 25 internal reserves from year to year, the major reserves being:

Employee Leave Entitlement – approximate level around $ 5 million

Building Damage Deposits – around $9 million, however use of this reserve is

limited as they are refundable deposits

Property Development Fund – approximate level around $4 to $5 million

Future Works Reserve – level varies and funds are usually already allocated to

future budgets

Works In Progress Reserve – is used as a holding reserve for capital funds unspent

on projects that have commenced but not completed at year end

Election Reserve – held to fund council elections every 4 years – approximate

$800,000 at time of elections

Child Care Centre Reserve – holds surplus operational funds to fund future capital

upgrades for centres- approximate $ 1 million held

Future Works Reserve Long Term Financial Plan funding shortfalls have been anticipated since 2005/06. Since that

time Council adopted a Future Works Reserve, where all efficiencies and savings from

budget reviews and year end budget results are transferred to a cash reserve to support

future budgets. This was implemented in 2005 and to date has generated over $35 million

to assist with future years budgets through the LTFP.

Each year of the Financial Plan is underpinned by a minimum of $1m in efficiency gains. Council, from the start of its longer term financial planning has been regularly informed of the difficulties it would face in maintaining its Capital Program. Future Works Reserve Funding will be utilised in the LTFP as follows: 2012/13 $2.923 million 2013/14 $4.358 million 2014/15 onwards $0.500 million The Financial Plan continues to require the General Manager to find $1 million per year in savings through reform and transfers to the Future Works Reserve.



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Since this requirement was introduced the following gains have been made:

Transfers to Future Works Reserve

$

Reform

$

2003/04 - 500,000

2004/05 - 500,000

2005/06 4,717,267 500,000

2006/07 6,507,336 500,000

2007/08 3,744,354 500,000

2008/09 6,057,571 500,000

2009/10 4,901,041 500,000

2010/11 5,410,647 500,000

2011/12 *3,634,402 500,000

2012/13 **500,000 500,000

Total $35,472,618 $5,000,000

*Transfers YTD, year not yet complete ** Estimated Property Development Fund Reserve The internal funding of $4.0m from the Property Fund replacing the Infrastructure Levy for 2012/13 will fund a number of projects, including roads construction, shopping centre upgrades and the public toilet upgrade program. Over the years the Property Fund has been utilised to fund a wide range of Council infrastructure works with the general fund repayments going back to the Fund. This method of funding is less expensive to Council than external borrowing costs whilst maximising budget flexibility. The Internal Funding from Council’s Property Fund for 2012/13 will fund the following projects.

2012/13

PROGRAM $'000

Roads Construction 1,500 Shopping Centres 543 Drainage Construction/ Water Quality Program 300 Cycleways 100 Active Recreation 100 Passive Reserves/ Parks Upgrades 100 Wharves & Jetties 50 Bate Bay 200 Public Toilets 707 Bushfire Stations 350 Surf Clubs/ Beach Buildings 50

TOTAL - REPLACING INFRASTRUCTURE LEVY 4,000

Captain Cook Drive Road Widening 1,934

2012/13 TOTAL FUNDING 5,934



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Over the years the Property Fund has invested in a wide range of Council infrastructure with general fund repayments going back to the Fund. These projects include: - Hazelhurst Regional Gallery - Engadine Youth Centre - Business Accelerator (SSHED) - Menai Indoor Sports Complex - Engadine Community Centre - Prince Street Seawall The amounts outstanding to the Fund at the end of each financial year are as follows: 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Outstandings $12.8m $17.0m $15.2m $13.1m $11.0m $8.8m $10.3m $8.1m $8.8m $5.5m $9.3m

The Property Fund has continued to provide Council with a steady income stream as the following table demonstrates: All figures shown are in $ million

02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13

3.03 3.26 3.83 3.98 4.39 4.32 4.63 4.65 5.13 4.76 4.96

As mentioned earlier in this report, other commitments which have an annual budgetary impact are the internal amounts repaid to the Property Fund:- 2011/12 2012/13 TOTAL INTERNAL FUNDING REPAYMENTS $3,001,426 $2,672,383 The repayments outlined above relate only to those repaid from internal sources.

INTERNALLY RESTRICTED CASH RESERVES - ADOPTED ASSUMPTIONS FOR LTFP


Future Works Reserve Funding recognised as follows:

2012/13 - $2.923 million

2013/14 - $4.358 million

From 2014/15 onwards $500,000 for each year applied

Property Fund Reserve Funding recognised as follows:

2012/13 - $4 million replacing dropped Infrastructure Levy to fund same capital programs

2012/13 a further $1.934 million for captain Cook Road Widening

No further reserve funds applied



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after 2012/13

Employees Leave Entitlements Reserve Policy to retain at least minimum 10% of Leave Liability, currently at 14%. No major drawdowns on the Reserve have been allowed.

Other Reserves

Maintained at similar levels to past years

4.2.1.10.2 Externally Restricted Cash Reserves (Assets)

Externally Restricted Cash Reserves, are a mandatory restriction on funds held as required

by legislation or some other external requirement. By law Council can not abolish or unduly

change the purpose for which they are held.

Council currently holds only 4 externally restricted cash reserves, they are:

Developer Contributions (mostly Section 94) unexpended approximate

level $35 million

Domestic Waste Management Reserve – surplus funds approximate level

$2 million

Stormwater Management Levy funds unspent

Specific Purpose Unexpended Grants

EXTERNALLY RESTRICTED CASH RESERVES - ADOPTED ASSUMPTIONS FOR LTFP


Section 94 Contributions (See section 2.1.6.2 Capital Contributions)

Funding recognised as follows:

2012/13 - $6.460 million

2013/14 - $4.760 million

From 2014/15 to 2016/17 - $1.030 million each year

2017/18 - $1.030 million

2018/19 and 2019/20 - $5.030 million each year

2020/21 - $4.0 million

Domestic Waste Management Reserve Funding level maintained at $2 million in Reserve – no cash movements allowed in any year

Stormwater Levy Reserve The model assumes the Levies are all expended in the year they are raised.

Specific Purpose Unexpended Grants Only a minor level of unexpended grants is shown each year on the Balance Sheet



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4.2.2 Operating and Capital Expenditure

4.2.2.1 Employee Costs

Base Level Expenditure – Employee costs are estimated in 2012/13 at $96.006 million which is around 49.8% of total operating expenditure. Salary and Wages Salary and wages estimates have been projected in accordance with expected levels of staffing and future increases of 3.25% in 2012/13 and 3.0% for each year thereafter. Staffing levels are projected to be maintained at existing levels as per the Workforce Strategy Plan. Employee Leave Entitlements Employee Leave Entitlement related estimates for 2012/13 have been included at an increased level in comparison to 2011/12 (up 4.21%), to account for expected retirement and leave patterns. Estimates for employees leave entitlements have been comprehensively reviewed to attempt to reflect patterns over the life of the LTFP. In general, increases of between 4% to 6% have been projected and is a consistent movement from year to year. This pattern mainly reflects the expected increase and growth in leave liability. Superannuation

The Local Government Superannuation Scheme (LGSS) for a number of years required no council contribution rate for the Retirement Fund. In 2006/07 the council contribution required was re-introduced, and for 2008/09 and subsequent years the contribution required was increased. With the recent global financial crisis the LGSS suffered significant investment losses and a revised actuarial assessment proposed a variation to the method applied by the LGSS whereby Council would have to contribute 3.8 times the contribution of the employee for 2010/11. This increased the Retirement Fund contribution from $1.1m in 2005/06 to $4.3m in 2010/11, a significant increase. The LGSS again reviewed the contribution methodology by actuarial assessment for 2011/12 and this resulted in a decrease in expected contributions for council. It is estimated that the 2012/13 contribution will be $3.380m. This is the same level as last year, as this is a closed scheme with employees exiting but no additions. The second component of Council’s superannuation expense is the non-contributory scheme (from the employee’s perspective) whereby Council pays into a super fund a percentage of an employee’s annual salary. Currently, the contribution rate is 9%, being the maximum level. Council’s superannuation expense in relation to the non-contributory scheme should reflect only the increase in salary and wages levels and the growth in the base of employees for whom Council must make contributions. Generally all new staff will



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create a liability for Council, unless they are currently within local government and are members of the LGSS. This contribution is estimated at $5.9m for 2012/13, an increase of $312,200 or 5.575%. The overall impact on Council’s working funds for 2012/13 for all superannuation costs is an increase in expenditure of $312k. Superannuation increases in the LTFP have been assessed on historical trends and expected growth in new staff coming onto the non-contributory scheme this provides for 3.5% to 4.5% increases in future years.

EMPLOYEE COSTS - ADOPTED ASSUMPTIONS FOR LTFP


Salaries and Wages 2012/13 3.25% increase

Each year from 2013/14 onwards projected at 3.0% per year

Employee Leave Entitlements In general increases of between 4% to 6% is projected for each year of the LTFP

Superannuation Costs In general increases of between 3.5% to 4.5% is projected for each year of the LTFP

4.2.2.2 Materials & Contracts

Base Level Expenditure – Materials and contracts are estimated in 2012/13 at $34.634

million which is around 17.9% of operating expenditure.

Materials and services estimates have been projected to a maximum of 3.0%, where

applicable, to take account of the Reserve Bank of Australia's target for the underlying CPI

rate over the next 12 months.

Carbon Pricing Increase Report FIN155-12 outlined the major impacts of the introduction of the Carbon Pricing mechanism on Council's expenditure. As further information comes forward, some adjustments across the areas identified in FIN155-12 for general revenue impacts need to be applied. Adjustments between specific electricity categories have changed the original table in FIN155-12, however, the overall net impact of these adjustments is minimal, the impact still being close to that originally reported. All the impacts identified have been built into the appropriate budgets where clearly earmarked. The other general tipping item and indirect costs amounting to $184,000 is



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difficult to distribute and has been built into the budget as a specific allocation in the Non-Divisional section of the Budget. MATERIALS AND CONTRACTS - ADOPTED ASSUMPTIONS FOR LTFP


General Materials and Contracts Applied 3.0% increase for each year of the LTFP.

Carbon Tax Items An increase of $1.9 million has been applied to specific items in the 2012/13 budget where carbon tax cost impacts have been identified. Domestic Waste has worn $1.1 million of this with the additional cost being built into and recovered from the DWM Charge. The remaining $800,000 has been applied across general revenue budgets as an additional cost with no revenue offset. The inflated 2012/13 items have then been increased by 3.0% for each year of the LTFP.

4.2.2.3 Debt Servicing - Interest on Borrowings and Principal Repayments

Base Level Expenditure – Borrowing Costs are estimated in 2012/13 at $1.429 million (including interest on finance leases and bank overdraft) which is around 0.7% of total operating expenditure. Principal repayments are not part of the Operating Statement. In 2004/05, Council refinanced and consolidated its general purpose external debt into one interest only loan that required specific annual payments into a sinking fund. This loan ($20m) will be fully settled in April 2012. General purpose loans are those loan funds treated as part of operating income, do not relate to any specific project and are incorporated in the debt reduction strategy implemented through the Mayoral Minute adopting the 2000/01 Budget. Specific purpose loans are those loans procured for the undertaking of a specific project, and where a specific source of funding the repayments, in full or in part, has been identified. Specific purpose loans in recent years have been for the Cronulla Community Complex and Engadine Community Facilities. Debt servicing costs are as follows:- GENERAL PURPOSE LOANS 2011/12 2012/13 Interest $1,173,545 $ 595,736 Principal Repayments 419,450 716,605 Sinking Fund Repayments 2,666,049 0 Interest Earned (663,428) 0



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3,595,616 1,312,341 Less Loan Borrowings (3,900,000) 0 NETT DEBT SERVICING COSTS $( 304,384) $1,312,341 Net Principal Outstanding $8.69m $7.97m * The proposed borrowing under the LIRS arrangement is shown separately as a Special Purpose loan below.

SPECIFIC PURPOSE LOANS 2011/12 2012/13 Interest (Net) $ 536,982 $ 674,552 Principal Repayments 1,914,899 2,141,657 Chargeback to Ridge Complex Income (428,835) (680,761) Engadine Community Facilities - Stage 2 Income (300,000) (448,262) 1,723,046 1,687,186 Less Loan Borrowings 0 500,000 DEBT SERVICING COSTS $1,723,046 $1,187,186 Principal Outstanding $10.25m $ 8.60m ** The proposed borrowing in 2012/13 relates to Bay Road / Production Avenue major drainage upgrade. Loan repayments will be funded over the next 5 years from the Stormwater Levy.

SPECIAL PURPOSE LOAN 2011/12 2012/13 Interest - Gross 0 $ 36,762 Interest Rebate 0 (22,623) Principal Repayments 0 0 0 14,139 Less: Loan Borrowings 0 (3,200,0000) DEBT SERVICING COSTS 0 $(3,185,861) Principal Outstanding 0 $ 3.20m * This loan is proposed to be taken up to fund the Cronulla Park - The Esplanade Seawall. The proposal is submitted to take advantage of the arrangements under the State Government Local Infrastructure Renewal Scheme (LIRS).



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In summary:

The LIRS will provide a 4% interest subsidy to assist councils with infrastructure

backlogs to cover the cost of borrowing. The incentive is to make debt funding

more attractive to accelerate infrastructure backlogs.

The LIRS is being administered by the Division of Local Government.

Councils are allowed to submit a maximum of two projects per round. There will

be two to three rounds over the next three years.

Preference will be given to projects or group of projects of similar nature that can

be packaged as a single program with a total cost of at least $1 million.

LIRS should be for specific new works, upgrades, or renewal of infrastructure of the

council that meets a core purpose of local government and is intended for

community use – e.g. roads, community halls, libraries, parks, sports grounds.

External Debt (General Purpose) As at 30 June

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Outstandings

$21.7m

$19.9m

$17.5m

$15.3m

$12.9m

$10.5m

$7.9m

$8.6m

$7.9m

$8.7m

$8.0m

Council’s outstanding debt and debt service ratio provide scope for future borrowing should Council so decide. The table below shows debt levels and debt service ratios based on Council’s current adopted borrowing strategy.

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21

Outstanding Principal ($’000)

14,693 18,935 18,876 16,153 16,870 14,938 12,782 10,455 7,944 5,234 3,019

Debt Servicing Ratio (%)

7.84 3.84 2.90 2.46 2.13 2.14 2.14 2.11 2.08 2.05 1.72

DEBT SERVICING - ADOPTED ASSUMPTIONS FOR LTFP


Principal Repayments on Loans Each year is actual figures based on the financial institutions loan repayment schedule plus estimated loan reschedules for future borrowings.

Interest Repayments on Loans Each year is actual figures based on the financial institutions loan repayment schedule plus estimated loan reschedules for future borrowings.



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4.2.2.4 Depreciation

Base Level Expenditure – Depreciation expense is estimated at $23.459 million in 2012/13

which is around 12.2% of total operating expenditure.

Depreciation is a major expense item shown on the Income Statement representing the

estimated value of the deterioration of council fixed assets over a financial year. The value

of depreciation is calculated by taking the total value of each council fixed asset class,

including regular re-valuations, divided by that asset class useful life.

By accounting standards Council should be spending at least the equivalent of the

depreciation value each year for their existing asset base to keep up with the rate of asset

wear and tear each year on those assets. Newly created assets would be capital expenditure

in addition to the desired depreciation value that should be spent.

Council’s Asset Renewal Ratio performance indicator at 142.2% suggests this is being

achieved.

Depreciation has been charged using the straight-line depreciation method, based on

varying rates applicable to each asset category. This ranges between 1.52% and 1.57% of

the gross asset value each year.

As on-going capital works are undertaken, specifically rectification works, it is expected that

the condition assessment of the asset will improve resulting in an extension of the useful

life. This impacts on the rate of depreciation as the applied method of depreciation

(straight-line) takes account of the asset’s remaining life.

Periodic asset revaluations have also been considered in line with prescribed requirements

for these revaluations.

DEPRECIATION - ADOPTED ASSUMPTIONS FOR LTFP


Depreciation Calculated on the straight-line method with rates varying dependent upon asset class. Between 1.52% and 1.57% of gross asset value with consideration given to revaluation and amended useful life due to works undertaken.



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4.2.2.5 Other Operating Expenses

Base Level Expenditure – Other Operating Expenses (including loss on disposal of assets) are estimated at $37.424 million which is around 19.4% of total operating expenses. Energy and Water charges Ever increasing utility costs are absorbing an extraordinary proportion of Council’s annual budget. Last year it was reported: “One third of the 2.8% rate rise will be absorbed in utility charges increasing above 2010/11 levels, specifically electricity up $226,891 (20%), gas up $36,713 (5%) and water charges up $194,132 (20%). This is on top of street lighting charges expected to increase by $375,540 (8.9%), which is on top of a $1m increase in 2010/11.” The $1m increase in 2010/11 represented a 54% increase in street lighting. FIN155-12 outlined the predicted impact of carbon tax on the 2012/13 Budget. Government & Statutory Charges A number of fees are levied upon local government by various state government bodies. The comparative allocations are as follows:-

2011/12 2012/13 Variance

Charge Charge $ %

Fire & Rescue NSW 2,881,299 3,025,364 144,065 5.00

Contribution to S.E.S 241,884 250,350 8,466 3.50

Contribution to Rural Fire Service 465,500 550,000 84,500 18.15

Department of Planning 365,114 376,067 10,953 3.00

Valuer General (in Finance Unit Budget)

307,000 320,000 13,000 4.20

Street Lighting Charges (part of Roads & Traffic Management)

4,604,590 5,133,728 529,138 11.5

All charges, other than the Valuer General’s fees which are fixed by IPART for a five year period, have been estimated on advice received or in line with past history. The Street Lighting Charges include the allowance for carbon pricing and the increase is consistent with advice received from an SSROC energy consultant. Efficiencies Allocation The funding strategies adopted in Mayoral Minute No 23/10-11 “Draft 2011/12 Budget” also allowed for an organisational annual provision of $500,000 for each year representing efficiency gains. The budget recognises this allocation and the efficiency savings of $500,000 have already been achieved in the 2011/12 budget.



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An allowance of $500,000 for efficiencies has been recognised for each year of the 10 Year Financial Plan from 2013/14 onwards. Council and staff will continue to recognise efficiencies to satisfy organisation reform for the future years of the Plan.

OTHER OPERATING EXPENSES - ADOPTED ASSUMPTIONS FOR LTFP


Energy & Water Charges A specific increase of $492,000 is allocated in 2012/13 for estimated impacts related to carbon tax

Each year of the LTFP has been increased at a rate of 3%, including 2012/13 on top of the carbon tax

Government & Statutory Charges 2012/13 charges are increased as outlined in table above.

Each year from 2013/14 the Fire & Rescue NSW contribution has been increased by 5% along historical data

Every other statutory contribution from 2013/14 has been increased by 3% each year

Other Expenses All years in the LTFP have been increased by 3%

4.2.2.6 Discretionary Funds Program

4.2.2.6.1 Capital Infrastructure Program

In conjunction with council asset management planning specific capital and infrastructure upgrades and maintenance have been incorporated into the LTFP. As outlined earlier, council projects operating service levels and recognises operating revenue for each year of the LTFP, the excess of revenue over operating expenditure provides council with a level of “discretionary funds” available for spending on capital requirements. Capital spending is provided in the LTFP identifying appropriate other sources of capital funding to assist with the discretionary revenue funds available. Like many other councils, the required level of funding does not satisfy the level of funding available. For Council to maintain its capital programs for 2013/14 to 2021/22, it will need to take further decisions as to how these programs will be funded.



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There are many options, including: - Borrow internally from the Property Fund if funds are available - Borrow externally, including under the LIRS - Utilise Section 94 Funds where permitted - Approaches to IPART for special variations - Review of future year operating levels and capital programs Savings and efficiencies will continue but the return will diminish and it is anticipated that future councils will be reluctant to seek special rate variations from IPART.

CAPITAL INFRASTRUCTURE EXPENDITURE - ADOPTED ASSUMPTIONS FOR LTFP


Specific Capital Projects and Programs Outlined in Section 5.5 is the full capital program for each year 2012/13 to 2021/22 including sources of capital funding

4.2.2.6.2 Corporate Support Program

The Corporate Support program is regarded as a discretionary spending program as

opposed to an on-going service level delivery (operating expense).

The items included under this program are :

- acquisition and sale of plant and vehicles,

- new technology/ corporate initiatives,

- library capital resources,

- NSW Rural Fire Service equipment,

- NSW State Emergency Service equipment

CORPORATE SUPPORT PROGRAM - ADOPTED ASSUMPTIONS FOR LTFP


Acquisition and sale of Plant and Vehicles Base level for 2012/13 is $1.175 million acquisitions and $1 million in sales. Each year after the base level is increased by $25,000 for acquisitions. Sales have been kept at $ 1 million throughout the LTFP.

New Technology/ Corporate Initiatives 2012/13 to 2014/15 is $300,000 each year. From 2015/16 onwards it is increased to $400,000.

Library Capital Resources Base level for 2012/13 is $1.080 million. Each year thereafter increments of $40,000 to $60,000 has been applied.

NSW Rural Fire Service equipment Every year of the LTFP is $50,000

NSW State Emergency Service equipment

Every year of the LTFP is $30,000



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4.3 Financial Risk Assessment, Strategies and Sensitivity Analysis

4.3.1 IPART Rates Review & Rate Pegging

The Independent Pricing and Regulatory Tribunal (IPART) was established by the NSW State

Government in 1992 as a separate independent body to review pricing and financial policy

matters referred to it by the NSW Government. IPART now regulates council rates and

charges on an annual review basis including development of an annual local government

cost index, recognition of an annual industry productivity factor, setting the rate pegging

limit and assessment of all council requests for a special rate variation. This relationship was

established in 2009.

Rate pegging was introduced in 1977 and has remained in NSW local government since. It is

the only state that imposes rate pegging limits. For the first time since rate pegging was

introduced, under the new IPART regime, a council who demonstrates high quality

performance in strategic and financial management may be granted exemption from rate

pegging for up to four years. No council has been granted this exemption to date.

Rate pegging has been set at conservative levels in the LTFP as outlined in the Plan, with the

assumption that rate pegging continues and council does not apply for any special rate

variation in the life of the current adopted LTFP.

It is possible that rate pegged limits applied in this model may be above or below those

assumed, however it is forecast that any movement either way would also have a similar

movement in CPI which would move expenditure in a similar pattern. This is based on the

fact that rate pegging is mostly aligned to the Local Government Cost Index developed by

IPART each year.

4.3.2 Changes in Economic Conditions and Investment Markets

The LTFP is framed around stable economic and investment conditions over the life of the

Plan. Investments and expenditure are based on conservative market growth with no major

changes in conditions impacting.

Changes in economic and investment conditions can impact on many assumptions within

the Plan, including but not limited to investment returns, revenue and expenditure slow

down or growth, superannuation contributions, employment conditions, grants, borrowing

levels, changing demand for services and assets, population growth to name a few.

It is therefore difficult to factor in major shifts in markets as the combination of scenarios

and options becomes excessively large and without reasonable relevance. Stable conditions

have therefore been forecast in the LTFP.



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However, major changes are a threat to financial sustainability and must be recognised as a

possible reality.

4.3.3 Grant Dependency

There is a strong reliance on the continuation of the Financial Assistance Grant (FAG) in the

LTFP. The $4.6 million grant level has been continued throughout the LTFP based on CPI

growth each year. The assumption is that the per capita minimum grant will be maintained

for Council.

A number of reviews are scheduled over the next few years to look at efficiency and equity

factors relating to the distribution and process of the FAG system. One outcome could be a

reduction or elimination of the current level provided to council. A reduction in the current

level would have a significant impact on the LTFP, possibly millions of dollars each year.

Elimination of the grant would be a current $4.6 million impact each year.

Council would need to look at many options to offset any reductions, including a special rate

variation, reduction in service levels or a reduced or slow down in capital infrastructure

replacement and renewal.

Other than the FAG, there is not a strong reliance on other grants in Council’s revenue base,

only reoccurring operating grants and specific capital grants offsetting projects has been

allowed in the LTFP.

4.3.4 Cost Shifting

Based on the latest figures released, cost shifting by other governments to councils remains

high at 5.74% of local government’s total income. Even though cost shifting has been

recognised for many years two new cost shifting examples have emerged – revenue

restrictions on Council managed Crown Lands and the shortfall in cost recovery for

development applications as a result of fire regulation.

Council finances are placed under extreme pressure whenever cost shifting occurs without

any shift in funding. Usually funding is not provided, hence it is a pure cost impost on council

to meet from the existing revenue base.

Future cost shifting has not been recognised in the LTFP, however any future cost shifting

without funds provided will pose a real financial threat on levels projected in the current

LTFP.



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4.3.5 Change in Employee Costs and Liability Conditions

Council’s total employee costs, including superannuation and leave entitlements, is around

$90 million which accounts for approximately 45% of the operating budget. A shift of 1%

equates to $900,000 which is a large impost if any conditions change in employee cost

assumptions or conditions.

It is not expected that wage indexation will dramatically rise above the 3.0% allowed each

year in the LTFP, however changes to employer superannuation contributions could affect

financial levels. If the defined benefits (retirement) scheme or national non-contributory

scheme required increased employer contributions then council faces a financial challenge

to meet the additional costs.

At this stage the LTFP has built in current levels of staff and superannuation contributions

with no expected increased levels.

4.3.6 Change in Future Community Service and Infrastructure Demands

Assumptions in the current LTFP are aligned with outcomes from the Community Strategic

Plan, Delivery Program and Asset Management Strategy. It is therefore based on current

information and does not allow for any significant changes in community demands and

shifts in relation to operating service levels or asset infrastructure priorities.

It is unlikely that any major shifts would occur as the Community Strategic Plan should have

already identified these shifts, however it is worth noting that major change in population

demographics, economic climate or rapid technology changes may cause shifts in services

and asset considerations.

It is difficult here to assess what, if any, impact could occur in LTFP projections, however it

should be noted.

4.3.7 Condition of Infrastructure Assets and Ageing

Special Schedule No 7 of the 2010/11 Statement of Account show the “Condition of Public Works”. Estimated cost to bring up to a satisfactory condition/standard $96.373m Required Annual Maintenance $15.009m Current Annual Maintenance $15.516m Whilst current spending levels are around what is required, the backlog is not being addressed. Finance Committee Report FIN169-12 provides Council with information on the condition of road pavement and footpaths. Additional funds of $2.0m for road pavement rehabilitation



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and an extra $100,000 for footpath maintenance in the 2012/13 Budget will assist, however current funding sources will never breech the gap in bringing all assets any way near a satisfactory condition. All councils and the State Government face the same issue. The Local Infrastructure Renewal Scheme will assist but the $70m interest subsidy will not meet the reported $1b backlog in NSW councils. Finance Report FIN169-12 provided the example of footpaths with $4.46m of defects which have not been scheduled for rectification. The condition of Council’s buildings are also being assessed. An unexpected failure of an asset is also a possibility, even though asset management systems are in place to detect any failings earlier than later. It is a challenge to ensure asset systems contain the best and up to date asset information, however the implementation of our Asset Management Capability Improvement Plan will ensure this happens within a reasonable timeframe.

4.3.8 Continual Increased Governance Requirements

Continually the NSW State Government imposes new governance requirements on local

councils. Requirements such as strategic and integrated planning reforms, codes and best

practice guidelines, internal audit and corruption strategies, onerous freedom of

information processes to name a few.

It is important that these measures are acknowledged as essential and good management

practice, however in many cases the requirements are extremely prescriptive and at a cost

to the community. In most cases resources are required to service these requirements,

most councils can not increase their resources due to lack of funds, so the usual outcome is

to shift existing resources to accommodate the requirements. This shift can come at the

expense of a front line service. Weighing up the benefits of these requirements against

delivering front line services

4.3.9 Other Unexpected Impacts

It is difficult to cover all events that may impact financially on the LTFP. Certain possibilities

are covered in section 3.1 to 3.8 of this document. Assumptions and testing is based on

existing knowledge and some degree of uncertainty exists that all parameters will be met as

projected in the LTFP.

Events such as natural disasters, climate change, changing legislation, shifts in asset

management plans, more rapid deterioration of assets etc may have significant cost impacts

that are real but unexpected at this stage.



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The LTFP has been prepared on best information and forecasts, however it should be

acknowledged that unexpected events can vary the modelling as it now stands.

4.4 Financial Performance Monitoring

The following table shows Council’s sound financial performance for some of the reported indicators over the past 7 years: June

05 June 06

June 07

June 08

June 09

June 10

June 11

Unrestricted Current Ratio

168 221 253 145 183 153 169

Debt Service Ratio 4.05 3.82 3.67 3.70 3.18 4.11 7.84

Rates Coverage Ratio

58 59 60 62 56 59 60

Rates Outstanding Radio

4.76 6.08 5.19 5.02 5.06 4.72 4.32

The external auditor as part of the 2010/11 Audit Report commented on Council’s financial reports and financial indicators as follows: “Council is considered to be in a sound and stable financial position. Most indicators are better than accepted industry benchmarks”. Council will continue to monitor financial health through relevant performance indicators to assist financial sustainability and to recognise any early signs of financial stress. The financial performance indicators to be used for future monitoring are outlined in this section.

4.4.1 Operating Result

The Operating Result shows council’s ability to fund operating services. It can be shown

before capital revenue and after capital revenue. It is derived from the Operating Income

Statement where total operating expenses are deducted from total operating revenue. The

Operating Result before capital revenue provides a more stringent measure of Council’s

financial position.

In both bases, the result does not indicate Council’s cash position as the ratio is highly

influenced by depreciation calculations which are a non-cash expense. Depreciation

represents a council’s ongoing consumption of the assets in its ownership or control. It is

extremely difficult to fully fund the level of depreciation as capital allocation is generally on

a priority basis and resources are limited without compromising existing service levels and

community expectation.



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Targets

Operating Result including capital revenue Greater than equivalent total capital

revenue shown on Income Statement

Operating Result before capital revenue Greater than $0 (zero)

The 2010/11 Results

Operating Result including capital revenue $18.9 million was slightly under capital

revenue of $19.3 million

Operating Result before capital revenue Slightly below zero, $404,000 deficit

4.4.2 Unrestricted Current Ratio

The Unrestricted Current Ratio measures short term liquidity. It shows the ability to fund

short term financial commitments and obligations. It is derived from the Balance Sheet

where unrestricted current liabilities are deducted from unrestricted current assets,

excluding external restricted assets.

Target

Unrestricted Current Ratio Greater than 1:1

The 2010/11 Results

Unrestricted Current Ratio 1.69:1 better than target

4.4.3 Debt Service Ratio

The Debt Service Ratio shows what percentage of council’s revenue is being consumed to

service total debt. Debt service cost of annual principal and interest payments is divided by

operating revenue which excludes capital revenue and any specific purpose grants and

contributions. It is derived from a combination of information from the Income Statement

and Balance Sheet.

Target

Debt Service Ratio Less than 10%

The 2010/11 Results

Debt Service Ratio 7.84% better than target.

**Note : 2010/11 was an abnormal year for this ratio, as normal level has been around 4%

in past years. The inflated figure was due to a once off large loan payment of $6.9 million.



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4.4.4 Rates and Annual Charges Coverage Ratio

This ratio shows what percentage of council’s revenue is reliant on rates and annual charges

income. It is derived from the Income Statement simply as a percentage of rates and annual

charges revenue to total operating revenue. It basically shows the dependency council has

on rate revenue to fund operating levels.

Target

Rates and Annual Charges Coverage Ratio Greater than 50%

The 2010/11 Results

Rates and Annual Charges Coverage Ratio 60.07% better than target.

4.4.5 Rates and Annual Charges Outstanding Ratio

This ratio measures the impact of uncollected rates and annual charges on council liquidity

and the adequacy of recovery efforts. It is derived from information from both the Income

statement and Balance Sheet.

Target

Rates and Annual Charges Outstanding Ratio Less than 5%

The 2010/11 Results

Rates and Annual Charges Outstanding Ratio 4.32%, better than target.

**Note : The Outstanding Ratio includes outstanding rates for pensioners and deferred

rates which is a council policy not to pursue recovery action. The ratio is therefore inflated

due to this non recovery policy for these class of debtors.

4.4.6 Asset Renewal Ratio

This ratio measures the rate at which assets are being renewed relative to the rate at which

they are depreciating. The information is derived from the Income Statement and Balance

Sheet where asset renewal expenditure is divided by depreciation. The asset renewal

expenditure is for infrastructure and building assets only.

Target

Asset Renewal Ratio Greater than 100%

The 2010/11 Results

Asset Renewal Ratio 142.2%, better than target.



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4.5 Financial 10 Year Projections, Strategies and Outcomes

4.5.1 Listing of Adopted Decisions and Assumptions Applied in LTFP

Listed as follows are the adopted decisions and assumptions that have been applied to the

LTFP. The tables are repeated from the applicable content outlined in section 4.2 of this

document with reference back to the related section if more information is required.

All assumptions are used in ALL three financial models shown in sections 4.5.2 – 4.5.4 unless

otherwise stated in that model.

RATING INCOME– ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.1


Ad Valorem Rating structure To remain and applies to all forecasted years

Rate Pegging To remain and pegged limit of 3% to remain stable and applied to each year forecasted

Special Rate Variation (SRV)Increase None, no commitment to apply for a SRV for any year forecasted

Pensioner Rate Rebates Both mandatory and voluntary rebates to remain for all years forecasted

Rating Growth Minor growth has been applied for future years allowing for potential residential and strata development

DOMESTIC WASTE - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.2


That the Regular Service Charge and Shared Service Charge be gradually phased in to become the same Charge

This is incorporated in the LTFP to be 2014/15 from that date the Charges are the same. This is a shift between types of services and does not relate to generating additional income.

The carbon tax impact, increased Section 88 Levy and tip gate fee increases of 12% increase be recognised.

This impact has been built into the 2012/13 year and carried forward as an on-going impact in future forecasted years.

DWM Reserve level at around $2 million.

This reduced level down from $3 million to $2 million has been maintained throughout the LTFP. There has been no direction to increase the Reserve level.

Clean – Up trial to a demand service rather than scheduled service.

Same service levels have been applied throughout the LTFP, there has been no variance to existing levels as it is difficult to predict without the necessary trialling.

Cost and Revenue Growth Both have been increased by 3% per annum each year forecasted, after allowing for specific items recognised above.



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STORMWATER MANAGEMENT CHARGE - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.3


Stormwater Management Charges No change to the current charges for any year forecasted in the LTFP.

Stormwater funding raised per annum is $2 million.

This figure has not been increased by growth or CPI as the Charges have been forecasted to remain the same. Therefore $ 2million is a constant income figure applied to every year of the LTFP.

FEES, CHARGES AND OTHER INCOME - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.4


Regulatory Fees and Charges Increased by 3.6% for 2012/13


Discretionary Fees and Charges. Increased by 3.6% for 2012/13


Other Income

Increased by 3.6% for 2012/13


Asset Sales

Only Asset sales provided is plant and vehicle disposals at $1 million for each year of the LTFP

OPERATING GRANTS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.5.1


Financial Assistance Grant Increased by 3.6% for 2012/13


Specific Purpose Grants Increased by 3.6% for 2012/13


CAPITAL GRANTS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.5.2


Road Construction Grants – Roads to Recovery & Regional Roads

2012/13 $2.062 million (all for Captain Cook Drive)

2013/14 allocated $1.134 million

2014/15 a provision of $325,000 has been allocated for RTA Road Maintenance Program



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From 2014/15 onwards around $351,000 gradually increasing each year to $371,000 in 2021/22 for Regional Roads Program

Roads to Recovery grants from 2014/15 to 2017/18 has been allowed at $1.0 million each year.

From 2018/19 onwards no provision is provided for Roads to Recovery Program.

WASIP Grant Funding From 2012/13 to 2014/15 funding has been provided at $310,000 per year

From 2015/16 onwards no further funding provided as no grant commitment

Traffic Management Program From 2012/13 onwards every year $550,000 has been provided in the LTFP

Bushfire Stations and Equipment 2012/13 $480,000 funding

2013/14 $800,000 funding

2014/15 $500,000 funding

2018/19 $150,000 funding

Every other year of LTFP no funding provided

Cycleway Grants From 2012/13 onwards $150,000 is provided each year of LTFP

Wharves and Jetties A specific allocation of $100,000 is provided in 2014/15 for Tom Ugly Wharf

OPERATING CONTRIBUTIONS - ADOPTED ASSUMPTIONS FOR LTFP – refer Section 4.2.1.6.1


Operating Contributions Increased by 3.6% for 2012/13


CAPITAL CONTRIBUTIONS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.6.2


Section 94 Funded Land Acquisitions 2012/13 $2 million funding

From 2013/14 onwards $1 million each year funded

Section 94 Funded Capital Projects Playground Upgrades funded in 2012/13 $450,000

Cycleway program funded $1.75 million 2013/14

Passive Parks upgrades funded $1.320 million in 2012/13 and $850,000 in 2013/14

Sporting Facilities upgrade funded



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$600,000 in 2012/13

Leisure Centre upgrades funded $600,000 in each year of 2012/13 and 2013/14

Silver Beach Masterplan funded $200,000 in each year of 2012/13 and 2013/14

Bate Bay Program funded $600,000 in 2012/13 then major works of $ 4 million each year of 2018/19, 2019/20 and 2020/21

Scylla Bay Masterplan $600,000 funding in 2012/13 and 2013/14

Cricket and Net upgrades $60,000 each year funded from 2012/13 to 2016/17 then $30,000 thereafter each year from 2017/18

Specific External Capital Contributions - housing development contributions for recreational facilities at new Greenhills Beach Suburb

$1 million provided in 2012/13 for Skate Park facility

$24 million over 6 years, $ 4 million provided in each year from 2012/13 to 2017/18 to fund construction of playing field facilities

INCOME FROM CASH INVESTMENTS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.7


Income from Cash Investments 2012/13 was only marginally increased based on more updated cashflow projections and expected market conditions

Increased by 3.0% each year from 2013/14 onwards

INCOME FROM PROPERTY FUND - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.8


Income from Property Fund In line with the Property Fund Business Plan:

Rental income projected 3.0% each year of the LTFP

Interest on internal funding repayments in line with scheduled project repayments.



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LOAN BORROWINGS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.9


Loan Borrowings Loan borrowings provided in LTFP as follows:

2012/13 year - $2.8 million, including $2.3 million subject to LIRS subsidy

2014/15 year - $2.5 million

No borrowings have been applied to any other forecasted years

INTERNALLY RESTRICTED CASH RESERVES - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.10.1


Future Works Reserve Funding recognised as follows:

2012/13 - $2.923 million

2013/14 - $4.358 million

From 2014/15 onwards $500,000 for each year applied

Property Fund Reserve Funding recognised as follows:

2012/13 - $4 million replacing dropped Infrastructure Levy to fund same capital programs

2012/13 a further $1.934 million for captain Cook Road Widening

No further reserve funds applied after 2012/13

Employees Leave Entitlements Reserve Policy to retain at least minimum 10% of Leave Liability, currently at 14%. No major drawdowns on the Reserve have been allowed.

Other Reserves

Maintained at similar levels to past years

EXTERNALLY RESTRICTED CASH RESERVES - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.1.10.2


Section 94 Contributions (See section 2.1.6.2 Capital Contributions)

Funding recognised as follows:

2012/13 - $6.460 million

2013/14 - $4.760 million

From 2014/15 to 2016/17 - $1.030 million each year

2017/18 - $1.030 million

2018/19 and 2019/20 - $5.030 million each year

2020/21 - $4.0 million

Domestic Waste Management Reserve Funding level maintained at $2 million in Reserve – no cash



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movements allowed in any year

Stormwater Levy Reserve The model assumes the Levies are all expended in the year they are raised.

Specific Purpose Unexpended Grants Only a minor level of unexpended grants is shown each year on the Balance Sheet

EMPLOYEE COSTS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.1


Salaries and Wages 2012/13 3.25% increase

Each year from 2013/14 onwards projected at 3.0% per year

Employee Leave Entitlements In general increases of between 4% to 6% is projected for each year of the LTFP

Superannuation Costs In general increases of between 3.5% to 4.5% is projected for each year of the LTFP

MATERIALS AND CONTRACTS - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.2


General Materials and Contracts Applied 3.0% increase for each year of the LTFP.

Carbon Tax Items An increase of $1.9 million has been applied to specific items in the 2012/13 budget where carbon tax cost impacts have been identified. Domestic Waste has worn $1.1 million of this with the additional cost being built into and recovered from the DWM Charge. The remaining $800,000 has been applied across general revenue budgets as an additional cost with no revenue offset. The inflated 2012/13 items have then been increased by 3.0% for each year of the LTFP.

DEBT SERVICING - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.3


Principal Repayments on Loans Each year is actual figures based on the financial instituitions loan repayment schedule plus estimated loan reschedules for future borrowings.

Interest Repayments on Loans Each year is actual figures based on the financial instituitions loan repayment schedule plus estimated loan reschedules for future borrowings.



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DEPRECIATION - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.4


Depreciation Calculated on the straight-line method with rates varying dependent upon asset class. Between 1.52% and 1.57% of gross asset value with consideration given to revaluation and amended useful life due to works undertaken.

OTHER OPERATING EXPENSES - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.5


Energy & Water Charges A specific increase of $492,000 is allocated in 2012/13 for estimated impacts related to carbon tax

Each year of the LTFP has been increased at a rate of 3%, including 2012/13 on top of the carbon tax

Government & Statutory Charges 2012/13 charges are increased as outlined in table above.

Each year from 2013/14 the Fire & Rescue NSW contribution has been increased by 5% along historical data

Every other statutory contribution from 2013/14 has been increased by 3% each year

Other Expenses All years in the LTFP have been increased by 3%

CAPITAL INFRASTRUCTURE PROGRAM - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.5.1


Specific Capital Projects and Programs Outlined in Section 5.5 is the full capital program for each year 2012/13 to 2021/22 including sources of capital funding

CORPORATE SUPPORT PROGRAM - ADOPTED ASSUMPTIONS FOR LTFP – Refer Section 4.2.2.5.2


Acquisition and sale of Plant and Vehicles Base level for 2012/13 is $1.175 million acquisitions and $1 million in sales. Each year after the base level is increased by $25,000 for acquisitions. Sales have been kept at $ 1 million throughout the LTFP.

New Technology/ Corporate Initiatives 2012/13 to 2014/15 is $300,000 each year.



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From 2015/16 onwards it is increased to $400,000.

Library Capital Resources Base level for 2012/13 is $1.080 million. Each year thereafter increments of $40,000 to $60,000 has been applied.

NSW Rural Fire Service equipment Every year of the LTFP is $50,000

NSW State Emergency Service equipment

Every year of the LTFP is $30,000

4.5.2 Financial Model 1 – Base Scenario Commentary and Outcomes

The Base Scenario represents the current adopted council budget framed on existing service

levels and the capital program as consulted to the community. It is based on all the

assumptions and decisions as listed in Section 4.5.1 and explained in detail in Section 4.2 of

this document.

The only variation to the LTFP adopted by council is that any annual shortfall result in any

years is assumed to be adjusted by reducing the future capital program rather than service

levels. Any income gains are assumed to be offset by expenditure and service level

increases. The reduced capital programs in future years have an effect on the level of asset

renewal and replacement spending.

This model demonstrates the effect of reducing the planned capital expenditure and the

impact it has on council’s fixed asset base.

The following statements are enclosed within this Section of the document and comments

on each are as follows:

Projected Discretionary Funds Budget Statement

Under this Model proposed annual general revenue discretionary funds available is mainly

constant each year from 2014/15 through to 2021/22 at around $15 to $16 million.

Discretionary funds for 2013/14 are higher at $18.4 million which is attributable to greater

level of funds being available through the Future Works Reserve, that is $4.358 million in

2013/14 compared to only $500,000 estimated from 2014/15 onwards.

The Proposed Infrastructure/ Capital Program has been reduced to meet the discretionary

funds available.

Proposed Gross Capital Works generally decreases each year from $33.4 million in 2013/14

down to $20.9 million. This trend is mainly due to reduced capital funding which is difficult

to estimate in future years.

The Discretionary Funds available are fairly constant to meet similar asset spending levels,

however the lack of identifying future other capital funding sources results in the gross

capital spending level.



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Projected Financial Performance Indicators

Operating Result

Within Model 1, Operating Result including Capital Revenue in the earlier years of the

financial projections reflects positive results (surpluses) before deficits occur in the latter

periods. This is primarily due to the level of capital revenues currently identified. It would be

expected that as these years approach, additional funding, particularly from grants, will be

available to support the capital program.

The Operating Result before Capital Revenue in each year of the projections reflects deficit

results. This does not mean that Council hasn’t the funds to continue operating, as the main

contributor to the deficits is depreciation, which is a non-cash recognition of Council’s

consumption of its assets.

The reality in this Model is that Council has maintained an extensive capital program,

however, the level of depreciation is very high due to the significant number and value of

Council’s assets. The Projected Discretionary Funds Budget Statement is a more accurate

portrayal of Council’s financial capacity to provide current services as well as undertake

capital works.


Throughout the 10 year period covered, the Unrestricted Current Ratio is well above the

target level and the industry benchmark of 1 : 1 which indicates Council’s sound financial

position and ability to satisfy short term obligations from current funds available.

Debt Servicing Ratio

Throughout the 10 year period covered, the Debt Service Ratio is well below the target level

of 10%. This indicates that Council has significant capacity to increase borrowings if so

desired and be able to service the debt without compromising the financial position. The

ratio is progressively decreasing over the period as debt is repaid and finalised. No

borrowings have been identified in this model after 2014/15 meaning that outstanding debt

and the subsequent servicing costs are decreasing resulting in the decreasing ratio.

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

Operating Result including Capital Revenue ('000) $7,261 $6,212 $5,560 $2,702 $2,297 $2,418 ($2,905) ($3,443) ($4,407) ($5,143)

Operating Result before Capital Revenue ('000) ($4,391) ($3,732) ($4,726) ($6,354) ($6,764) ($6,648) ($7,126) ($7,514) ($8,478) ($9,214)

Unrestricted Current Ratio 1.48 : 1 1.41 : 1 1.34 : 1 1.42 : 1 1.44 : 1 1.46 : 1 1.49 : 1 1.47 : 1 1.45 : 1 1.43 : 1

Debt Service Ratio 2.79% 2.36% 2.02% 2.02% 1.99% 1.94% 1.84% 1.80% 1.40% 1.16%

Rates and Annual Charges Coverage Ratio 62.62% 63.28% 63.41% 63.96% 64.04% 64.10% 65.53% 65.60% 65.74% 65.76%

Rates and Annual Charges Outstanding Ratio 4.94% 4.94% 4.94% 4.94% 4.95% 4.95% 4.95% 4.95% 4.95% 4.95%

Assets Renewals Ratio 190% 143% 139% 109% 110% 103% 123% 121% 120% 93%



Page 111 Asset

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Rates and Annual Charges Coverage Ratio

Throughout the 10 year period covered, the Rates and Annual Charges Coverage Ratio is

well above the target level of 50%. This indicates that Council has maintained a significant

degree of dependence upon revenue from rates and annual charges which reflects the

security of Council’s income over the period.

Rates and Annual Charges Outstanding Ratio

This ratio has remained stable across the period of the financial plan and marginally below

the target level of 5%. Although this ratio generally indicates the effectiveness of Council’s

recovery action, consideration should be given to Council’s existing policy of not pursuing

recovery action for pensioners and deferred rates which make up a considerable proportion

of the total outstandings. This policy results in an inflated outcome to this ratio.

Asset Renewal Ratio

For all but the last year of the financial plan the Asset Renewal Ratio of 100% has been

satisfied. The ratio fluctuates between periods depending on the level of capital expenditure

allocated to the relevant assets. Although the ratio has fallen below the target level in the

final year, amendments to the capital program, through reallocation of funds of

approximately $1.0 million, would result in the ratio increasing above the target level.



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$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Discretionary Funds Available

Available Working Funds Brought Forward 500 500 -

Recurrent Operations 143,722 12,659 12,987 15,104 15,073 14,910 14,744 14,526 14,249 14,603 14,867

Future Works Reserve 11,281 2,923 4,358 500 500 500 500 500 500 500 500

Organisational Reform 4,066 - 66 500 500 500 500 500 500 500 500

Engadine Community Facilities Stage II 1,214 20 974 220 - - - - - - -

Additional Borrowing (Net of Debt Servicing Costs) - - - - - - - - - - -

Other - 160,783 - 16,102 - 18,385 - 16,324 - 16,073 - 15,910 - 15,744 - 15,526 - 15,249 - 15,603 - 15,867

Proposed General Revenue Capital Program 160,783 16,102 18,385 16,324 16,073 15,910 15,744 15,526 15,249 15,603 15,867

* Funding Sources to be Considered for Future Budgets - - - - - - - - - -

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

TOTAL PROGRAM

General Revenue Funding 130,312 13,451 15,685 13,549 13,123 12,885 12,634 12,331 11,969 12,248 12,437

Other Funds 111,599 241,911 27,098 40,549 14,178 29,863 13,066 26,615 9,416 22,539 9,241 22,126 9,666 22,300 8,451 20,782 8,221 20,190 8,171 20,419 4,091 16,528


Other Funds 10,000 40,471 1,000 3,651 1,000 3,700 1,000 3,775 1,000 3,950 1,000 4,025 1,000 4,110 1,000 4,195 1,000 4,280 1,000 4,355 1,000 4,430

TOTAL PROPOSED GROSS CAPITAL WORKS 282,382 44,200 33,563 30,390 26,489 26,151 26,410 24,977 24,470 24,774 20,958

GENERAL REVENUE COMPONENT OF PROGRAM

130,312 13,451 15,685 13,549 13,123 12,885 12,634 12,331 11,969 12,248 12,437

30,471 2,651 2,700 2,775 2,950 3,025 3,110 3,195 3,280 3,355 3,430


TEN YEAR FINANCIAL PLAN MODEL - MODEL I

TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

Annual Surplus/Shortfall - - - - - -

Cumulative Surplus/Shortfall - - -

- - - - -

-

PROPOSED INFRASTRUCTURE/CAPITAL PROGRAM - MODEL I

TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

- - - - - -

Proposed Gross Other Capital Works

2019/20 2020/21 2021/22

Proposed Gross Infrastucture Program





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30 June 2013 30 June 2014 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 30 June 2022

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

INCOMERevenue:

Rates and Annual Charges 125,381 129,082 132,894 136,820 140,864 145,029 149,320 153,739 158,290 162,979

User Charges & Fees 28,838 29,703 30,594 31,512 32,457 33,431 34,434 35,467 36,531 37,627

Interest and Investment Revenue 4,265 4,393 4,524 4,660 4,800 4,944 5,092 5,245 5,402 5,564

Investment Revaluation Increases (See note) 945 870 388 51 - - - - - -

Other Revenues 17,892 18,429 18,982 19,551 20,137 20,742 21,364 22,005 22,665 23,345

Grants and Contributions - Operating 11,239 11,576 11,923 12,281 12,650 13,029 13,420 13,822 13,823 14,237

Grants and Contributions - Capital Purposes 11,652 9,944 10,286 9,056 9,061 9,066 4,221 4,071 4,071 4,071

Other income: - - - - - - - - - -

Profit from Disposal of Assets - - - - - - - - - -

Profit from Interests in Joint Ventures and Associates - - - - - - - - - -

Total Income from Continuing Operations 200,212 203,997 209,591 213,931 219,969 226,241 227,851 234,349 240,782 247,823

EXPENSESEmployee Costs 96,006 99,305 102,705 106,234 109,896 113,697 117,643 121,738 125,991 130,406

Materials and Contracts 34,633 34,800 35,936 37,108 38,319 39,570 40,863 42,197 43,576 45,000

Borrowing Costs 1,429 1,352 1,206 1,161 1,025 875 712 537 366 320

Depreciation & Amortisation 23,459 23,797 24,512 25,879 26,374 26,376 26,950 27,409 27,982 28,563

Interest & Investment Losses - - - - - - - - - -

Other Expenses from Ordinary Activities 36,924 38,031 39,172 40,347 41,558 42,805 44,088 45,411 46,774 48,177

Loss from Disposal of Assets 500 500 500 500 500 500 500 500 500 500

Loss from Interests in Joint Ventures and Associates - - - - - - - - - -

Total Expenses from Continuing Operations 192,951 197,785 204,031 211,229 217,672 223,823 230,756 237,792 245,189 252,966

NET OPERATING RESULT FOR YEAR 7,261 6,212 5,560 2,702 2,297 2,418 (2,905) (3,443) (4,407) (5,143)

Net Operating Result Attributable to Council 7,261 6,212 5,560 2,702 2,297 2,418 (2,905) (3,443) (4,407) (5,143)

Net Operating Result Attributable to Minority Interests - - - - - - - - - -

7,261 6,212 5,560 2,702 2,297 2,418 (2,905) (3,443) (4,407) (5,143)

Net Operating Result for the year before Grants and

Contributions provided for Capital Purposes (4,391) (3,732) (4,726) (6,354) (6,764) (6,648) (7,126) (7,514) (8,478) (9,214)

Note: This amount represents investment revaluations for unrealised losses previously identified in the financial statements

INCOME STATEMENT (MODEL I) FOR THE YEAR ENDED



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$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

ASSETSCurrent Assets

Cash and cash equivalents 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000

Investments 59,393 56,745 60,293 65,724 69,163 72,351 72,250 72,324 72,307 76,322

Receivables 11,775 12,069 12,455 12,745 13,124 13,515 13,870 14,276 14,702 15,141

Inventories 5,249 5,258 5,268 5,278 5,288 5,299 5,309 5,321 5,332 5,344

Other 1,546 1,593 1,640 1,689 1,740 1,792 1,846 1,901 1,958 2,017

Total Current Assets 89,963 87,665 91,656 97,436 101,315 104,957 105,275 105,822 106,299 110,824

Non-Current Assets

Investments 2,000 2,000 2,000 - - - - - - -

Receivables 1,090 1,115 1,148 1,183 1,218 1,255 1,292 1,331 1,371 1,413

Infrastructure, property, plant & equipment 1,119,352 1,130,437 1,183,114 1,203,318 1,202,746 1,217,742 1,216,989 1,213,601 1,209,943 1,201,888

Investment property 50,943 53,375 55,922 58,591 61,387 64,316 67,386 70,602 73,971 77,501

Other 640 423 184 - - - - - - -

Total Non-Current Assets 1,174,025 1,187,350 1,242,368 1,263,092 1,265,351 1,283,313 1,285,667 1,285,534 1,285,285 1,280,802

TOTAL ASSETS 1,263,988 1,275,015 1,334,024 1,360,528 1,366,666 1,388,270 1,390,942 1,391,356 1,391,584 1,391,626

LIABILITIESCurrent Liabilities

Payables 17,562 18,089 18,632 19,191 19,766 20,359 20,970 21,599 22,247 22,914

Interest bearing liabilities 3,104 2,693 2,874 3,129 3,331 3,427 3,651 3,181 2,645 1,893

Provisions 38,062 40,509 42,986 45,484 47,996 50,509 53,015 55,496 57,937 60,321

Total Current Liabilities 58,728 61,291 64,492 67,804 71,093 74,295 77,636 80,276 82,829 85,128

Non-Current Liabilities


Provisions 4,692 4,858 5,029 5,203 5,382 5,565 5,751 5,941 6,134 6,332

Total Non-Current Liabilities 21,878 20,181 20,832 18,759 16,515 14,206 11,703 9,704 8,417 7,773

TOTAL LIABILITIES 80,606 81,472 85,324 86,563 87,608 88,501 89,339 89,980 91,246 92,901

NET ASSETS 1,183,382 1,193,543 1,248,700 1,273,965 1,279,058 1,299,769 1,301,603 1,301,376 1,300,338 1,298,725

EQUITYRetained earnings 1,057,129 1,063,341 1,068,901 1,071,603 1,073,900 1,076,318 1,073,413 1,069,970 1,065,563 1,060,420

Revaluation reserves 126,253 130,202 179,799 202,362 205,158 223,451 228,190 231,406 234,775 238,305

Council equity interest 1,183,382 1,193,543 1,248,700 1,273,965 1,279,058 1,299,769 1,301,603 1,301,376 1,300,338 1,298,725

Minority equity interest - - - - - - - - - -

TOTAL EQUITY 1,183,382 1,193,543 1,248,700 1,273,965 1,279,058 1,299,769 1,301,603 1,301,376 1,300,338 1,298,725

SUTHERLAND SHIRE COUNCIL

BALANCE SHEET (MODEL I) AS AT



Page 115 Asset

Management


$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts:



Interest 5,128 5,209 4,857 4,654 4,741 4,883 5,030 5,180 5,336 5,496

Grants and Contributions 18,061 17,563 18,163 17,396 17,691 18,075 17,667 17,881 17,872 18,286

Other 18,206 18,753 19,316 19,895 20,492 21,107 21,740 22,392 23,064 23,756

Payments :

Employee Costs (93,674) (96,712) (100,079) (103,582) (107,228) (111,023) (114,975) (119,091) (123,381) (127,851)

Materials and Contracts (34,499) (34,661) (35,793) (36,962) (38,168) (39,415) (40,702) (42,032) (43,406) (44,825)

Interest (1,429) (1,352) (1,206) (1,161) (1,025) (875) (712) (537) (366) (320)

Other (37,233) (37,781) (38,897) (40,127) (41,520) (42,766) (44,049) (45,370) (46,731) (48,133)

Net cash provided by (or used in) operating activities 28,439 29,490 29,525 28,113 27,961 28,094 27,389 27,254 26,823 26,617

CASH FLOWS FROM INVESTING ACTIVITIES

Receipts:

Sale of Investments 10,528 2,647 - - - - 102 - 17 -

Sale of Real Estate Assets - - - - - - - - - -

Sale of Property, Plant and Equipment 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000

Sales of Interests in Joint Venturers/Associates - - - - - - - - - -

Other - - - - - - - - - -

Payments:

Purchase of Investments - - (3,548) (3,431) (3,439) (3,189) - (74) - (4,016)

Purchase of Real Estate Assets - - - - - - - - - -

Purchase of Property, Plant and Equipment (39,950) (30,863) (27,640) (23,689) (23,301) (23,510) (26,027) (25,520) (25,824) (22,008)

Purchase of Investment Property - - - - - - - - - -

Purchases of Interests in Joint Venturers/Associates - - - - - - - - - -

Net cash provided by (or used in) investing activities (28,422) (27,216) (30,188) (26,120) (25,740) (25,699) (24,925) (24,594) (24,807) (25,024)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipts:

Borrowings and Advances 2,800 - 2,500 - - - - - - -

Lease Liabilities 900 900 900 900 900 900 900 900 900 900

Payments:

Borrowings and Advances (2,858) (2,316) (1,881) (2,038) (2,268) (2,443) (2,513) (2,710) (2,068) (1,647)

Lease Liabilities (859) (858) (856) (855) (853) (852) (851) (850) (848) (846)

Net cash provided by (or used in) financing activities (17) (2,274) 663 (1,993) (2,221) (2,395) (2,464) (2,660) (2,016) (1,593)

Net increase/(decrease) in cash held - - - - - - - - - -

Cash assets at beginning of reporting period 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000

Cash assets at end of reporting period 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000

NOTE : Investments will be purchased and sold at different rates throught each of the periods depending on interest rates, terms, opportunities etc.

The figures shown above in relation to investments reflect the net result of the sale and purchase throughout the year.

STATEMENT OF CASH FLOWS (MODEL I) FOR THE YEAR ENDED



Page 116 Asset

Management

4.5.3 Financial Model 2 – Improved Scenario Commentary and Outcomes

The Improved Scenario represents an improved position on Model 1- Base Scenario and the

assumptions applied in that model. Again it is based on all the assumptions and decisions as

listed in Section 4.5.1 and explained in detail in Section 4.2 of this document, except for the

specific assumptions outlined below.

The variations to Model 1 – the Base Scenario are:

- a 1.0% reduction in operating expenses across the council without affecting current

service levels (council resolution adopted in Mayoral Minute 22/11-12 of 21/5/12)

- recognition of specific rating growth for new properties around $200,000 for 3 years,

this income is projected forward as part of council’s rate income base for future years,

- The Ridge Golf Course becoming full operative will inflate income and expense levels,

however it is a self sufficient funding entity which will not impact on working funds

but will increase figures on the Income Statement,

- capital asset program levels that were reduced in Model 1 to fund any annual

shortfalls have been re-instated,

- after allowing for income and expenditure adjustments above any further annual

shortfalls have been adjusted by re-visiting capital program levels and applying any

necessary reductions.




Under this Model proposed annual general revenue discretionary funds available is

increased over time by around $2million each year compared to Model 1. Around $934,000

is identified as expenditure reductions due to applying the 1% cut in operating expenses. In

addition an increased allocation of around $200,000 for each of three years for rating

growth has been applied. The 1% expenditure cuts impacts in 2012/13 and is projected

through the years of the Plan, as is the rating growth which impacts in 2013/14 and also

compounds in the revenue base into the future.

Discretionary funds from recurrent operations are mainly constant each year from 2014/15

through to 2021/22 at around $16 to $17 million. Discretionary funds for 2013/14 are higher

at $18.4 million which is attributable to greater level of funds being available through the

Future Works Reserve, that is $4.358 million in 2013/14 compared to only $500,000

estimated from 2014/15 onwards.

The Proposed Infrastructure/ Capital Program has been reduced to meet the discretionary

funds available.



Page 117 Asset

Management

Proposed Gross Capital Works generally decreases each year from $33.4 million in 2013/14

down to $20.9 million. This trend is mainly due to reduced capital funding which is difficult

to estimate in future years.

The Discretionary Funds available are fairly constant to meet similar asset spending levels,

however the lack of identifying future other capital funding sources results in the gross

capital spending level.


Operating Result





available to support the capital program.









capital works.



target level and the industry benchmark of 1 : 1 which indicates Council’s sound financial

position and ability to satisfy short term obligations from current funds available.

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

Operating Result including Capital Revenue ('000) $8,195 $7,979 $7,872 $5,239 $4,862 $5,012 ($282) ($790) ($1,722) ($2,426)



Debt Servicing Ratio 2.79% 2.35% 2.01% 2.00% 1.97% 1.92% 1.83% 1.78% 1.39% 1.15%






Page 118 Asset

Management





ratio is progressively decreasing over the period as debt is repaid and finalised. No

borrowings have been identified in this model after 2014/15 meaning that outstanding debt

and the subsequent servicing costs are decreasing resulting in the decreasing ratio.












Asset Renewal Ratio

For all but the last year of the financial plan the Asset Renewal Ratio of 100% has been

satisfied. The ratio fluctuates between periods depending on the level of capital expenditure

allocated to the relevant assets. Although the ratio has fallen minimally below the target

level in the final year, amendments to the capital program, through reallocation of funds of

approximately $350,000, would result in the ratio increasing above the target level.




$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000




Future Works Reserve 10,781 1,989 5,292 500 500 500 500 500 500 500




Other - 179,959 - 16,102 - 20,537 - 18,122 - 18,125 - 18,024 - 17,921 - 17,769 - 17,559 - 17,982 - 17,818



$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

TOTAL PROGRAM


Other Funds 111,599 261,087 27,098 40,549 14,178 32,015 13,066 28,413 9,416 24,591 9,241 24,240 9,666 24,477 8,451 23,025 8,221 22,500 8,171 22,798 4,091 18,479


Other Funds 10,000 40,471 1,000 3,651 1,000 3,700 1,000 3,775 1,000 3,950 1,000 4,025 1,000 4,110 1,000 4,195 1,000 4,280 1,000 4,355 1,000 4,430



149,488 13,451 17,837 15,347 15,175 14,999 14,811 14,574 14,279 14,627 14,388

30,471 2,651 2,700 2,775 2,950 3,025 3,110 3,195 3,280 3,355 3,430


TEN YEAR FINANCIAL PLAN MODEL - MODEL II

TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22



- - - - -

-

PROPOSED INFRASTRUCTURE/CAPITAL PROGRAM - MODEL II

TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

- - - - - -


2019/20 2020/21 2021/22








$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

INCOMERevenue:





Other Revenues 17,892 18,429 18,982 19,551 20,137 20,742 21,364 22,005 22,665 23,345



Other income: - - - - - - - - - -






Borrowing Costs 1,429 1,352 1,206 1,161 1,025 875 712 537 367 320







NET OPERATING RESULT FOR YEAR 8,195 7,979 7,872 5,239 4,862 5,012 (282) (790) (1,722) (2,426)

Net Operating Result Attributable to Council 8,195 7,979 7,872 5,239 4,862 5,012 (282) (790) (1,722) (2,426)


8,195 7,979 7,872 5,239 4,862 5,012 (282) (790) (1,722) (2,426)




INCOME STATEMENT (MODEL II) FOR THE YEAR ENDED





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000



Investments 60,327 57,296 61,410 67,425 71,465 75,273 75,808 76,539 77,199 82,411

Receivables 11,775 12,069 12,455 12,745 13,124 13,515 13,870 14,276 14,702 15,142

Inventories 5,249 5,258 5,268 5,278 5,288 5,298 5,309 5,320 5,332 5,344

Other 1,546 1,592 1,640 1,689 1,740 1,792 1,846 1,901 1,959 2,017

Non-current assets classified as held for sale - - - - - - - - - -


Non-Current Assets

Investments 2,000 2,000 2,000 - - - - - - -

Receivables 1,090 1,115 1,148 1,183 1,218 1,255 1,293 1,331 1,371 1,412

Inventories - - - - - - - - - -


Investments account for using equity method - - - - - - - - - -


Intangible assets - - - - - - - - - -

Other 640 423 184 - - - - - - -


TOTAL ASSETS 1,264,922 1,277,717 1,339,037 1,368,078 1,376,781 1,400,979 1,406,274 1,409,340 1,412,254 1,415,013


Payables 17,562 18,089 18,632 19,191 19,766 20,359 20,970 21,599 22,247 22,915


Provisions 38,062 40,509 42,986 45,484 47,996 50,510 53,015 55,496 57,937 60,321



Payables - - - - - - - - - -


Provisions 4,692 4,858 5,029 5,203 5,382 5,564 5,751 5,941 6,134 6,331



NET ASSETS 1,184,316 1,196,245 1,253,713 1,281,515 1,289,174 1,312,478 1,316,935 1,319,361 1,321,008 1,322,112





TOTAL EQUITY 1,184,316 1,196,245 1,253,713 1,281,515 1,289,174 1,312,478 1,316,935 1,319,361 1,321,008 1,322,112


BALANCE SHEET (MODEL II) AS AT





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000


Receipts:



Interest 5,128 5,209 4,857 4,654 4,741 4,883 5,029 5,180 5,336 5,496


Other 18,207 18,753 19,316 19,896 20,492 21,107 21,740 22,392 23,064 23,756

Payments :

Employee Costs (93,207) (96,231) (99,583) (103,071) (106,702) (110,481) (114,417) (118,517) (122,789) (127,242)


Interest (1,429) (1,352) (1,206) (1,161) (1,025) (875) (712) (537) (367) (320)

Other (36,953) (37,407) (38,168) (39,377) (40,747) (41,969) (43,228) (44,525) (45,861) (47,237)



Receipts:

Sale of Investments 9,593 3,031 - - - - - - - -




Other - - - - - - - - - -

Payments:

Purchase of Investments - - (4,115) (4,015) (4,040) (3,808) (535) (731) (660) (5,212)







Receipts:

Borrowings and Advances 2,800 - 2,500 - - - - - - -


Payments:



Net cash provided by (or used in) financing activities (17) (2,274) 663 (1,993) (2,221) (2,396) (2,464) (2,660) (2,016) (1,593)






STATEMENT OF CASH FLOWS (MODEL II) FOR THE YEAR ENDED



Page 123 Asset

Management

4.5.4 Financial Model 3 – Borrowing Scenario Commentary and Outcomes

The Borrowing Scenario is based on Model 2 where reduced capital levels to fund annual

shortfalls are re-instated and replaced by loan borrowings. Again it is based on all the

assumptions and decisions as listed in Section 4.5.1 and explained in detail in Section 4.2 of

this document, except those specific assumptions introduced in Model 2 and this Model.

The variations to Model 2 – the Improved Scenario are:

- capital asset program levels that were reduced in Model 2 to fund any annual

shortfalls have been re-instated,

- annual shortfalls each year are now replaced by loan borrowings.




Under this Model proposed annual general revenue discretionary funds available is

increased by up to $2 million each year from 2013/14 to 2016/17 compared to Model 1,

however, as this Model is based on increased borrowings, the level of increased

discretionary funds progressively decreases after this until only about $800,000 more in

2021/22 due to the impact of loan repayments. In comparison to Model 2, discretionary

funds remain at a similar level until 2015/16 when again they progressively reduce due to

the impact of the loan repayments. Around $934,000 is identified as expenditure

reductions due to applying the 1% cut in operating expenses. In addition an increased

allocation of around $200,000 for each of three years for rating growth has been applied.

The 1% expenditure cuts impacts in 2012/13 and is projected through the years of the Plan,

as is the rating growth which impacts in 2013/14 and also compounds in the revenue base

into the future.

Utilisation of the Future Works Reserve funds is the same in this Model as in Model 2.

The Proposed Infrastructure/ Capital Program has not been reduced and the shortfalls each

year have been supported by borrowings. As previously stated, the borrowings begin to

have a major impact on the discretionary funds available from 2016/17 when debt servicing

costs begin to take effect. Although the discretionary funds have been reduced comparably,

the level of capital works has actually increased.



Page 124 Asset

Management


Operating Result





available to support the capital program. Because this model relies on additional borrowings

to maintain the proposed capital program, the operating result is slightly less than the

previous models from 2015/16 as the impact of the borrowing costs are recognised.









capital works.



target level and the industry benchmark of 1:1 which indicates Council’s sound financial

position and ability to satisfy short term obligations from current funds available. The level

of the ratio is slightly less than the previous models as borrowings are undertaken and the

next year’s principal repayments are recognised as current liabilities.





2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

Operating Result including Capital Revenue ('000) $8,195 $7,979 $7,872 $5,218 $4,692 $4,683 ($768) ($1,485) ($2,725) ($3,753)



Debt Servicing Ratio 2.79% 2.35% 2.01% 2.01% 2.09% 2.19% 2.24% 2.38% 2.25% 2.28%






Page 125 Asset

Management

ratio has decreasing over the period as current debt is repaid and finalised, however, as the

Model is predicated on increasing borrowings to maintain the proposed capital program

from 2015/16, the ratio continues an upward trend after this year in recognition of the

repayment of the new loans.












Asset Renewal Ratio

For all years of the financial plan the Asset Renewal Ratio of 100% has been satisfied. The

ratio fluctuates between periods depending on the level of capital expenditure allocated to

the relevant assets. This model, in comparison to the previous models, maintains the level

of capital expenditure at the current proposed level resulting in renewals being undertaken

at a greater rate ensuring the ratio is above the target amount.



Page 126 Asset

Management

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000




Future Works Reserve 10,781 1,989 5,292 500 500 500 500 500 500 500




Other - 172,162 - 16,102 - 20,537 - 18,122 - 18,104 - 17,767 - 17,372 - 16,877 - 16,212 - 15,982 - 15,087



$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

TOTAL PROGRAM


Other Funds 136,999 278,690 27,098 40,549 14,178 32,015 13,066 28,413 11,066 26,220 11,641 26,383 12,116 26,378 11,751 25,433 12,871 25,803 13,621 26,248 9,591 21,248


Other Funds 10,000 40,471 1,000 3,651 1,000 3,700 1,000 3,775 1,000 3,950 1,000 4,025 1,000 4,110 1,000 4,195 1,000 4,280 1,000 4,355 1,000 4,430



141,691 13,451 17,837 15,347 15,154 14,742 14,262 13,682 12,932 12,627 11,657

30,471 2,651 2,700 2,775 2,950 3,025 3,110 3,195 3,280 3,355 3,430


TEN YEAR FINANCIAL PLAN MODEL - MODEL III

TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22



- - - - -

-

PROPOSED INFRASTRUCTURE/CAPITAL PROGRAM - MODEL III

TOTAL 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

- - - - - -


2019/20 2020/21 2021/22






Page 127 Asset

Management


$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

INCOMERevenue:





Other Revenues 17,892 18,429 18,982 19,551 20,137 20,742 21,364 22,005 22,665 23,345



Other income: - - - - - - - - - -






Borrowing Costs 1,429 1,352 1,206 1,185 1,156 1,137 1,109 1,113 1,173 1,369







NET OPERATING RESULT FOR YEAR 8,195 7,979 7,872 5,218 4,692 4,683 (768) (1,485) (2,725) (3,753)

Net Operating Result Attributable to Council 8,195 7,979 7,872 5,218 4,692 4,683 (768) (1,485) (2,725) (3,753)


8,195 7,979 7,872 5,218 4,692 4,683 (768) (1,485) (2,725) (3,753)




INCOME STATEMENT (MODEL III) FOR THE YEAR ENDED



Page 128 Asset

Management


$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000



Investments 60,327 57,296 61,410 67,449 71,550 75,451 76,153 77,136 78,144 83,777

Receivables 11,776 12,069 12,455 12,745 13,124 13,515 13,870 14,276 14,702 15,142

Inventories 5,249 5,258 5,268 5,278 5,288 5,299 5,309 5,320 5,332 5,344

Other 1,546 1,592 1,640 1,689 1,740 1,792 1,846 1,901 1,959 2,017

Non-current assets classified as held for sale - - - - - - - - - -


Non-Current Assets

Investments 2,000 2,000 2,000 - - - - - - -

Receivables 1,090 1,115 1,148 1,183 1,218 1,255 1,292 1,331 1,371 1,412

Inventories - - - - - - - - - -


Investments account for using equity method - - - - - - - - - -


Intangible assets - - - - - - - - - -

Other 640 423 184 - - - - - - -


TOTAL ASSETS 1,264,923 1,277,717 1,339,037 1,369,731 1,380,598 1,406,696 1,414,423 1,420,842 1,427,270 1,432,848


Payables 17,562 18,089 18,632 19,215 19,849 20,534 21,281 22,106 23,020 24,018


Provisions 38,063 40,509 42,986 45,484 47,996 50,510 53,015 55,496 57,937 60,321



Payables - - - - - - - - - -


Provisions 4,692 4,858 5,029 5,204 5,382 5,564 5,751 5,941 6,135 6,331



NET ASSETS 1,184,316 1,196,245 1,253,713 1,281,494 1,288,982 1,311,958 1,315,929 1,317,660 1,318,304 1,318,081





TOTAL EQUITY 1,184,316 1,196,245 1,253,713 1,281,494 1,288,982 1,311,958 1,315,929 1,317,660 1,318,304 1,318,081


BALANCE SHEET (MODEL III) AS AT



Page 129 Asset

Management


$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000


Receipts:



Interest 5,128 5,209 4,857 4,654 4,741 4,883 5,029 5,180 5,336 5,496


Other 18,207 18,753 19,316 19,921 20,551 21,199 21,876 22,589 23,329 24,086

Payments :

Employee Costs (93,207) (96,231) (99,583) (103,071) (106,702) (110,481) (114,417) (118,517) (122,789) (127,242)


Interest (1,429) (1,352) (1,206) (1,185) (1,156) (1,137) (1,109) (1,113) (1,173) (1,369)

Other (36,953) (37,407) (38,168) (39,377) (40,747) (41,969) (43,228) (44,525) (45,861) (47,237)



Receipts:

Sale of Investments 9,593 3,031 - - - - - - - -




Other - - - - - - - - - -

Payments:

Purchase of Investments - - (4,115) (4,039) (4,101) (3,901) (701) (983) (1,009) (5,633)







Receipts:

Borrowings and Advances 2,800 - 2,500 1,650 2,400 2,450 3,300 4,650 5,450 5,500


Payments:



Net cash provided by (or used in) financing activities (17) (2,274) 663 (344) 54 (259) 318 1,192 2,235 2,224






STATEMENT OF CASH FLOWS (MODEL III) FOR THE YEAR ENDED



Page 130 Asset

Management

4.5.5 Current Adopted 10 Year Discretionary Funds Program – Capital Infrastructure and

Corporate Support Program

To be inserted at a later date (Blue Pages).

Documents

Our Shire Our Future Resourcing Strategy 2013/14 2022/23