2014/15 DRAFT OPERATING PLAN AND BUDGET GENERAL MANAGER’S OVERVIEW Introduction: All councils in NSW are now required to prepare a ten year Community Strategic Plan which is informed by a resourcing strategy comprised of a ten year Asset Management Plan, a ten year Long Tem Financial Plan and a four year Workforce Strategy. In turn these documents will inform a four year Delivery Programme and the annual Operational Plan and Budget for 2014/2015. This is the third occasion Council has had to prepare this suite of documents (known as the Integrated Planning and Reporting Documentation) and it can be considered an evolving process with the quality of the contents of the various documents being progressively enhanced as part of an ongoing process. The Draft 2014/15 Integrated Planning and Reporting Documentation was adopted by Council in principle and went on display on Tuesday 27 May, 2014. It will remain on display until Monday, 23 June, 2014 and submissions from the general public will be received up to 12 midday that day. A programme for a round of Community Forums is being planned for the three week period immediately following the adoption in principle of the draft Budget and Operational Plan for 2014/2015 in early June, 2014. Details of these forums will be available from Council’s website and in the local media. These Forums will give both elected members and senior management staff the opportunity to meet with local residents and ratepayers not only to explain the contents of the 2014/15 Draft Budget, Operational Plan and supporting documentation Integrated Planning documentation, but to also bring them up to date with the ongoing local government reform process which is now approaching a critical stage. 2014/15 Draft Budget The Budget has been cast on the basis of fully taking up the 2014/15 rate pegging allowance of 2.3% across all funds. Whilst the Water, Sewerage and Waste funds are forecast to operate at a surplus before depreciation, Council is still struggling to be able to achieve a balanced General Fund even before any attempt to fully provide for depreciation in that fund. Council needs to be able to fully fund depreciation and achieve a surplus to be able to forecast a sound and sustainable future. On more positive note, Council should be able to achieve a small surplus when all fund forecasts are consolidated. A summary of the forecast results for each fund is set out in the following table: Fund Operational Capital General Fund (4,239,399) 8,224,806.00 Water Fund (528,898.00) 737,000.00 435,599.00 (227,497.00) Sewer Fund (232,726.30) 200,000.00 175,415.00 (208,141.30) Waste Fund (60,271.80) - Depreciation Result 3,985,407.00 Balanced - (60,271.80 This year’s Draft Budget has been prepared with a special focus on two key elements. The first is to endeavour as far as possible to ensure Council continues to be financially sound, flexible and sustainable. This is particularly important having regards to the 2012 assessment of Walgett Shire as having a Financial Sustainability Rating (FSR) of “Moderate” with a “Negative” Outlook. Last year Council recognised that a number of issues that were flagged in local government reform documentation were already in train at Walgett. These included applications to IPART and the Division of Local Government for an extra 3% increase in the general rate across the Shire over and above the rate pegging limit to fund our rural roads Betterment Programme and for a loan interest subsidy under the State Government’s new Local Infrastructure Renewal Subsidy (LIRS) scheme respectively. The second is to address, and adequately provide for, the fact that large parts of Council’s area continue to be badly affected by drought. Unfortunately, the State and Federal Government assistance available in this regard continues to fall far short of community expectations. Council’s efforts to pick up the short fall in certain areas will come at a cost. At this stage we are still assessing the ramifications of the Federal Budget and are not sure what new programmes and grant schemes are available and how they will impact on Council. A similar situation exists with regards the State Budget which will not be handed down until Monday 16 June, 2014 . The exceptions to this are that that Federal FAG grants have been capped until 2018 and this will mean an initial loss of grant funds estimated to be in the order of $200K in the first year compounding to an estimated total loss of $2M over the next four years. At a State level, RMS grants for 2014/15 have been provisionally advised to be a total of $3.427M, down from $7.989M in 2013/14. We have also now fully expended flood damage grants. To a degree the size of flood damage grants over the last three years has masked our tight liquidity situation. This lower level of grant funding will place additional pressure on ensuring we have adequate work for our outdoor workforce. Hopefully, however, details of other Federal and State programmes will become available over the next few weeks and possibly mean that Council will be able to make due provision in the final Plan/Budget where appropriate. This will include new programmes for bridge renewal works, regional water security, green army initiatives, black spot funding, R2R, the National Stronger Regions Fund and 2015 centenary projects As a result though, we still remain in a position of having to do a lot more with what little resources we have at our disposal. As in the past, this represents an enormous challenge. More than ever, we will have to do a lot of things differently if our community is to gain the greatest benefits. Council’s staff has been examining various options available to us including ensuring the impact of unfunded mandates and provision of services on behalf of other tiers of government and to the private sector is fully recouped. In the main this will be done in three ways, through increasing the indirect overheads charges on various grant and private works to a more reasonable level so as to completely cover our costs, the regular review of plant hire charges in line with CPI fluctuations and through the Outback Shires Association joint resourcing initiatives. Other issues such as superannuation and workers’ compensation premiums are also being closely scrutinised along with asset management issues to properly provide for both adequate asset maintenance and renewal. Our workers’ compensation premium in 2014/15 is estimated to rise to being in the order of $500K. Superannuation will rise by 0.25% to 9.5%. It is important for Council to take the hard option and provide for the future by way of adequate transfers to identified reserves. In the years to come, these reserves will be able to be used to fund various key acquisition and/or revenue items without any adverse impact on Council’s financial integrity at that time. In view of our extremely tight financial situation, our Finance Manager has been requested to review our externally restricted grant/internally restricted reserves to see if there is any possibility of bringing some funds into play to provide for additional capital works in 2014/15. This information will be available before Council formally adopts the 2014/15 Operational Plan and Budget in late June, 2014. The matter of “user pays” has been revisited in relation to domestic waste, water and sewerage charges. Particular attention is being paid to endeavouring to apply this approach the consumers from the area surrounding Lightning Ridge who regularly draw water from the town supply but make no contributions. Service delivery standards will be under scrutiny during the coming year as a means of ensuring the broader community becomes more aware of the competing basis for fund allocation. As is usually the case, it is anticipated that a number of submissions will be forthcoming during the public exhibition period. Council will have the opportunity to consider the various issues raised when it considers the formal adoption of the draft documentation plans at a Council Meeting in the last week in June 2014. Legislation provides for Council’s activities to be split into “strategic” issues in the Community Strategic Plan, provide details of ongoing works and services to be undertaken in the four year Delivery Programme and set out projects, works and services to be undertaken in the next twelve months in “operational” functional areas in the annual Operating Plan and Budget for 2014/2015. This allows Council and the community to be afforded the opportunity of having greater input and, in turn, greater responsibility and ownership of the planned outcomes. Council has reviewed the various strategic issues identified in the Community Strategic Plan and made minor amendments as required. Councillors have also identified additional specific issues to be addressed in the 2014/15 Operational Plan, and similarly there have been some items flagged in the four year delivery programme that are either new inclusions or elevated in priority. Details of key capital items that, were considered for inclusion in the 2014/2015 Draft Budget and Operational Plan and the years ahead, are set out in the capital items worksheet. Most had already been given high, medium or low priorities at the strategic planning meeting held on 8 April, 2014 and this has assisted with long term financial planning. During 2014/15 it is proposed to undertake a review of all of Council’s assets with the aim of identifying “lazy assets” that might be turned into cash to fund future capital works project. Details of Councillors’ Budget Requests and how they have been within the budget limitations are included on a separate spreadsheet. 2012/2022 Community Strategic Plan The Community Strategic Plan has been updated to provide for the following issues:  Walgett Weir Strategy  Shire Airports Strategy  Transport/Freight Centre Strategy  Land Development 2012/2016 Delivery Programme and 2014/2015 Operational Plan The Delivery Plan and Operational Plan have been updated or amended as required to reflect changes and provisions made/included in the 2014/15 Draft Budget. 2014/2015 Statement of Revenue Policy The 2014/2015 Revenue Policy provides for the following: General Purpose Rating General rates modelling for the 2014 / 2015 financial year has been undertaken based on the current valuations including consideration of the following factor:   The total notional increase set by IPART for the 2014 / 2015 year of 2.3 % The 2014 / 2015 budget incorporates total general purpose rate income with an increase of 2.3 %. The rating schedule detailing the rating structures and notional income return for each category is included within the Fees and Charges schedule included within the special budget attachments folder. 2014 / 2015 Fees and Charges The fees and charges have been reviewed and largely remain at 2013 / 2014 levels. Some fees such as the Sec 603 rates certificate are legislated and the fee reflects advice from the Office of Local Government. The fee for line marking sporting ovals has been increased to $690.80 (inc GST) to reflect a position closer to cost recovery for this service. The full Schedule of Fees and Charges schedule is included within the supporting documentation. Section 356 Donations Council has included within its 2014 / 2015 budget a total of $624,000 to be given in accordance with section 356 of the Local Government Act as detailed below; Section 356 Donations and Subsidies Section 356 Section 356 Association Section 356 Section 356 Total Draft 2012/13 Budget $ Expenditure – Community Assistance Expenditure – Glengarry Grawin Sheepyards Miners 10,000 Expenditure – Burren Junction Pool Expenditure – Lightning Ridge Pool 26,000 20,000 350,000 Section 356 Lightning Ridge Opal Queen Section 356 Lightning Ridge Jewellery Design Award Section 356 Lightning Ridge Information Centre Subsidy – Fees and Charges Rebates, Local Churches Clr Geoffrey (Dick) Colless Scholarship Donation – Barwon Cup CWA Medical Scholarship Scheme Community Centre operational support Housing subsidy – Medical Practitioners Lightning Ridge Australian Opal Centre 6,000 3,500 115,00 15,000 10,000 3,000 10,300 5,200 10,000 $584,000 2012/2022 Long Term Financial Plan The Long Term Financial Plan has been revised in accordance with the various provisions made in the 2014/15 Draft Budget. Other Integrated Planning and Reporting Documentation Other supporting documentation has been updated as necessary as reflected by changes in the principal documentation Conclusion: The community is urged to take an active interest in reviewing and commenting on the Draft 2014/15 Budget, Operational Plan and associated documentation now on public exhibition until midday on Monday 23 June, 2014. I would like to take this opportunity to extend my thanks for the time and efforts our key staff have put into the preparation of this plan. It would be inappropriate to single out anyone in what has really been a concerted team effort but I commend them all on the fruits of their labours. Messrs Brad Pascoe, our Finance Manager, Stephen Holland, our Director of Corporate Services, and I will be available at any time to respond to any enquiries in relation to any issues associated with the draft documentation. Quite often a few minutes spent now can save a lot of time and heartache later. Remember well founded comments on the Plan are always welcome. It also needs to be recognised that our draft 2014/15 Budget and Operational Plan, coupled with the supporting integrated planning and reporting documentation, are living breathing documents that can and will be varied following the exhibition period to meet emerging or changing circumstances. Interested members of the Shire community are invited to put forward their views by way of submission during the public exhibition period.