A comprehensive independent financial sustainability review commissioned by Council has identified that the impacts of consecutive natural disasters and the COVID pandemic during the last five years has significantly depleted revenue and increased operational costs.
According to the financial report, the net cost of recovery from the disasters, including subsidies and waivers on fees and charges, reduced the available cash of Council by $14.6 million. It also concludes that there is a current annual shortfall of between $25 million and $35 million in the General Fund that needs to be addressed through a number of recommended strategies.
In June this year, Council initiated the review to interrogate the Long-Term Financial Plan when it adopted the 2023-24 Annual Budget and Delivery Program Operational Plan.
“We engaged in this financial review process understanding that there were ongoing budget deficits that needed to be addressed and paused some of the planned capital works projects while we worked through the detail with Councillors and the organisation,” said Chief Executive Officer, Stephen Dunshea.
“We’ve managed and funded the impacts of 13 disasters in recent years and it’s imperative that we act on the information we have been provided so that we have the resources and primarily the cash available to respond to the next natural disaster and maintain financial stability for the long term,” Mr Dunshea said.
“The findings of the review present us with the reality of providing city wide services with a regional town budget. We have to adjust our approach to sustain the needs of a growing city and address the backlog of infrastructure maintenance that’s been a priority for years,” he said.
“Investing more in repairing roads and asset renewal will ultimately reduce the ongoing costs of reactive maintenance and the backlog of servicing that’s required,” he said.
“Finding efficiencies within the organisation will come from improving the way we operate – by being more strategic, improving our management systems and financial controls we can enhance our productivity and responsiveness.
The review outlines that the Council’s finances are impacted by limited income through sustained, lower average property rates for residential and business categories compared to similar-scale and neighbouring council areas.
Additionally, increased costs of loan interest rates to fund a large number of capital works programs during the last eight years are adding to the operating expenses of Council.
The unprecedented rises in inflation have further increased the gap in its revenue and expenditure, through additional costs of construction and operating costs.
It is recommended that Council increase revenue through a Special Rate Variation of 32% inclusive of the rate peg in 2024-25 and review the pricing for fees and charges of Council services. Modelling has also been done to stage the variation over two or three years.
Rationalising land and assets is also advised to improve the balance of unrestricted cash to rebuild the balance of Council reserves, which can be drawn on as required and saved for emergencies and disaster events.
A number of measures to improve efficiencies and reduce costs have been identified including improving governance and financial controls, establishing productivity targets and service reviews.
Some of these are already underway and include the development of stringent project management systems to qualify and interrogate information for durable forward planning, particularly for asset management and capital works projects.
“Resetting Council’s stability is not an easy task and it’s a range of measures over time that will achieve that. The efficiency measures such as undertaking service reviews and establishing a governance framework for project selection and delivery do not provide the immediate cash injection that the expert advice concludes is essential to protect the city in the event of further natural disasters particularly as we move into the fire season,” he said.
Council will meet on Monday 20 November to consider the recommendations of the report, including placing the updated draft Resourcing Strategy on public exhibition for 28 days.
The business paper is available on Council’s website.
