strategic resource plan - moyne.vic.gov.au · 1 context for the strategic resource plan . council...

Moyne Shire STRATEGIC RESOURCE PLAN

2013 - 2017

Adopted by Council 9 July 2013

Moyne Shire Council | STRATEGIC RESOURCE PLAN 2013-2017

Moyne Shire Council | STRATEGIC RESOURCE PLAN 2013-2017

1 CONTEXT FOR THE STRATEGIC RESOURCE PLAN Council is required by the Local Government Act to prepare a Strategic Resource Plan (SRP) covering both financial and non-financial resources, for a four year period to support the Council Plan 2013-2017. The Strategic Resources Plan aims to set the future financial direction of the Council. It is a ‘plan of the resources required to achieve the strategic objectives’ as set out in the Council Plan. Longer term planning is vital in ensuring that an organisation remains financially sustainable. It will be essential that the Council adhere to a budgetary discipline if the key objectives of the SRP are to be achieved. The SRP identifies the resources available to the Council to deliver services and to provide facilities to the community. Assumptions and anticipated service level changes, borrowings and capital expenditure proposals generate a four-year Forward Plan. The SRP has due regard for priorities identified in Council’s Long Term Financial Plan (LTFP), asset management plans, and strategic plans. The SRP is reviewed annually as part of the financial and business planning process. 2 LINK TO COUNCIL PLAN The Council Plan sets out:

i) the strategic objectives of the Council ii) strategies for achieving those objectives iii) indicators against which the performance of the Council in achieving those

objectives can be monitored; and iv) a Strategic Resources Plan.

The aim in producing the Council Plan is to have a document that is a practical, clear and unambiguous statement of the “corporate intent” of the Council. In that sense the Council Plan contains concise statements about the overall direction of Council, the key strategies that the Council will use to achieve the outcomes it is striving for and the indicators it will use to measure the progress it is making towards achieving the vision and goals it has set. The Council Plan also contains a statement on the Council’s values and its decision-making principles.

Moyne Shire Council | STRATEGIC RESOURCE PLAN 2013-2017 | Page 1

References particularly pertinent to long-term planning include ‘meeting community needs/expectation’, ‘caring for the environment, ‘financial prudence – being mindful of long-term viability’ and ‘giving or have given the opportunity for community input’. It is on the basis of the contents of the Council Plan, which includes the Strategic Resources Plan, that management prepares the annual budget for Council. 3 LINK TO LONG TERM FINANCIAL PLAN Council’s Long Term Financial Plan 2012-13 to 2021-22 has been used to inform the four year Strategic Resource Plan. The LTFP is the key ten year financial planning document of Council that is governed by a series of financial strategies and performance indicators that Council considers and adopts. It establishes the financial framework upon which sound financial decisions are made. The LTFP 2012-13 to 2021-22 is intended to achieve the following objectives in the 10-year time frame:

• Maintain the existing range and level of service provision and develop the capacity to respond to community service needs

• Include extra recurrent effort in some areas, which are described in detail in the plan including roadside vegetation clearing, township maintenance, bridge inspections, and playground maintenance for non-Council owned properties

• Services provided with an emphasis on continuous improvement, productivity, innovation, and efficiency

• Maintain a strong cash position

• Achieve operating statement surpluses with the exclusion of all non-operational items such as granted assets and capital income

• Maintain debt levels below prudential guidelines

• Continue to pursue recurrent grant funding and strategic capital funding aligned with Council plan objectives

• Provide for rate increases that provides the level of funding; o For a sustainability index to exceed 95 per cent, that is meeting the

infrastructure renewal demand o Includes increasing funding for asset upgrade, expansion and new assets

• Provide user fees and charges based on Best Value Principles.


4 FINANCIAL ASSUMPTIONS The 2013/14 Budget has been used as the first year for the forward year estimates. Future year estimates are expressed in real values (i.e. 2013/2014 values). Inflation as measured by CPI is assumed at 2.5%. The SRP assumes overall service levels will remain materially unchanged throughout the planning period. EXPENDITURE Employee costs Increases to employee costs are based on three elements: Enterprise Bargaining Agreement (EBA) increments, movement within pay bandings following annual reviews, and new positions. Council will negotiate a new Enterprise Bargaining Agreement during 2013 for commencement in December 2013 The SRP allows for growth in employees as follows: EBA 3.5% Banding increments 1.0% New positions 1.0% Total 5.5% The allowance of 1% included for growth or new employees, equates to approximately two Equivalent Full Time (EFT) per year. Materials and contracts Materials and contracts are predicted to remain constant in real terms over the life of the SRP. Any cost increases above Consumer Price Index (CPI) will be minimised through efficiency gains and improved work practices including effective purchasing strategies. Outside of these broad parameters there are a number of areas that have been manually included based on their cyclical nature. These include election costs every four years, municipal valuation every two years, core IT software upgrades every four years, and local road survey re-rate every four years. Depreciation Depreciation is based on current asset values plus projected capital spending less any assets disposed of divided by the remaining useful life of the assets. Depreciation estimates will be influenced by future asset revaluations and condition assessments as they occur. Projects / Initiatives An annual provision of $350,000 is provided for one-off non recurrent activities and projects. This can be increased as grants and contributions are sourced.


Capital Capital expenditure amounts for each asset class have been directly budgeted by asset class for the term of the SRP. An allowance 0.5% for maintenance costs on acquisition of new upgraded assets has been provided for in the operating budget. INCOME Rates income An allowance for supplementary rates of $62,000 per annum. The number of rateable properties is assumed to increase by 0.9% or 100 properties per annum. Energy generators Energy generation developments i.e. wind, gas fired, wave and geothermal will have a significant impact on Council’s rate revenue. Energy generators are rated using fixed state government benchmarks. Currently each energy generator will pay a base of $48,141 plus $1083 per megawatt of generating capacity. The following table illustrates the projected income from energy generators based on constructed developments and an estimate of income for those developments that have plans in place which are not yet constructed. Energy Generators Income Projections

2012/13 2013/14 2014/15 2015/16 2016/17 $000 $000 $000 $000 $000

Constructed 768 1,040 1,040 1,040 1,040 Plans endorsed not commenced - - - 266 266

Total Income Projection 768 1,040 1,040 1,306 1,306 Waste charges Kerbside collection charge is assumed to increase in line with the kerbside collection contract. New tenements are assumed to increase by 50 per annum. Waste facility charge is assumed to increase in line with CPI. Fees and charges Fees and charges are assumed to rise by 4% per annum.


Revenue grants Revenue grants are expected to remain constant in real terms with the exception of the Victorian Grants Commission which is assumed to increase by 4.7%. This is based on an average increase over the last 10 years of 4.7%. It anticipated that the Roads to Recovery program will continue at current levels. Capital grants and contributions These are tied to specific capital programs and are non-recurrent grants. These will be reviewed annually as grant programs become available. An estimate of grant sources is provided below.

Grant Source 2013/14 2014/15 2015/16 2016/17 $'000 $'000 $'000 $'000

LGIF 627 507 Locals First 300 350 250 SRV Major 600 SRV Minor 200 DEED 254 Living Libraries 100 365 Vic Roads 1,000 1,000 600 600 Parks Victoria 20 DSE 120 DPCD 195 Pools Renewal 150 Other 290 Contributions 605 200 80 Total capital grants and contributions 3,816 2,302 1,615 680

Dividends Dividends or profit return to the Council from Council’s two business enterprises are based on the following:

• Caravan park dividends to remain at 33.3% of gross income (excluding kiosk and vending machine sales)

• Mount Shadwell quarry to remain at 28.6% of gross sales (excluding weighbridge income).

Interest received The average nominal interest rate earned on investment funds in years 2013/14 onwards of the SRP is expected to be consistent with the weighted average interest rate earned on funds invested in year 2012/13.


Asset sales Asset sales include the sale of land, and the trade in of plant items in accordance with Council’s long term replacement schedule. Future land sales included in the SRP are listed in the table below. Land sales 2013/14 Nullawarre North Hall/Nirranda Hall/Nullawarre Hall 190,000

Former Port Fairy kindergarten 600,000

Other 20,000

Total 810,000


5 RATING STRATEGY Moyne Shire Council uses the capital improved method of valuation (CIV), which is the market value of a property including land, buildings and improvements. CIV has the following long-term advantages relative to other valuation bases:

• flexibility to apply an unlimited range of strategic differentials; • does not prejudice the industrial, commercial and retail sectors in terms of the

rate burden; and • is easier for people to understand.

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

• construction of a new dwelling or building • subdivision of a property; or • consolidation of properties Council presently undertakes this task on a quarterly

basis. The Rating Strategy adopted by the Council is:

a) Continue with a general rating structure comprised of two elements; • Property values – multiplied by a uniform shire-wide tariff, • Standard municipal charge – to cover the administrative costs of the

Council. b) Municipal charge set to contribute 15% of the income derived from total rate

revenue. The SRP submitted with this rating strategy is based on rate increases to the general and municipal charge in the next four years according to the table below. Council’s key financial targets continue to be met under this structure.

Year Rates and

Charges Increase %

2012/13 5.00 2013/14 5.00 2014/15 5.75 2015/16 5.75 2016/17 5.00

Notwithstanding, in future reviews of the SRP, Council will need to consider whether additional rate increases should be supported in order to fund additional extra efforts towards infrastructure and or service delivery.


6 ASSET MANAGEMENT Council has developed an Asset Management Strategy (AMS), based on the knowledge provided from various service and asset management plans, which sets out the capital expenditure requirements of Council for the next 10 years by asset class and is a key input into the LTFP. A key objective of the AMS is to maintain or renew Council’s existing assets at desired condition levels. Council, as asset managers, need to be able to assess the relative merits of rehabilitation/renewal/replacement options and identify the optimum long-term solution through a decision that relates to levels of service. Council needs to strategically determine an affordable level of service to manage the emerging condition profile. Council has reached the point where it has identified and funded its critical renewal – no asset condition goes beyond its predetermined condition level ranging between 7 and 9. Council will fully fund its renewal requirements and the accumulated backlog by 2021 however will need to plan to commit more resources to renewal beyond then as the gap widens. This is due to ageing infrastructure, in particular buildings, bridges and rural roads. The following graph depicts the predicted level of renewal expenditure required across all asset categories for Moyne Shire Council until 2032.


Parameters of capital works program The following are the parameters against which the capital works program has been developed:

• Alignment to LTFP financial growth assumptions with respect to expenditure and revenue; and

• Priority provision for critical renewal investment, then capital renewal, capital upgrade with capital expansion the most discretionary

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

• Provide for expenditure growth to level of sustainable renewal to meet the community’s service level requirements (based on current asset management plans) by 2021/2022

• Roads to Recovery income assumed to continue at current level spread across relevant projects within the roads program.

Council’s capital works program should underpin the needs and priorities as determined by Council’s AMS. It is Council’s challenge to develop asset management plans that ensure the community’s levels of service are met through the delivery of efficient and effective services. 7 BORROWINGS STRATEGY The use of loans to fund capital expenditure is an effective mechanism of linking the payment for the asset to successive generations who receive benefits over the life of that asset. This matching concept is frequently referred to as ‘intergenerational equity’. The table below highlights Council’s interest-bearing liabilities, principal repayments and loan interest that have occurred over the past two financial years, and forward budget projections.

Year New Borrowings

Loan Principal

Loan Interest

Balance 30 June

30 June $'000 $'000 $'000 $'000 2012 535 328 171 2,730 2013 - 444 183 2,286 2014 1,665 415 152 3,536 2015 - 622 211 2,914 2016 - 559 172 2,355 2017 - 574 136 1,781

Additional borrowing of $1.66 million has been allowed in 2013/14 for the unfunded superannuation liability. The interest rate is assumed at 5.5% over a fixed term of six years. No further borrowing has been included in the SRP.


8 OUTCOMES 8.1 Financial outcomes The following table summarises the key financial outcomes of the SRP for the years 2012-2013 to 2016-2017. Appendix ‘Financial Statements’ includes a more detailed analysis of the financial resources to be used over the next four year period.

Forecast Strategic Resource Plan Indicator

Not

es Actual Budget Projections

2012/13 2013/14 2014/15 2015/16 2016/17 $’000 $’000 $’000 $’000 $’000

Result for the year 29 4,976 3,514 3,053 2,928 Underlying result 1 -4,257 1,094 1,212 1,438 2,248 Cash and investments 2 5,562 4,414 4,694 4,945 6,049 Cash flows from operations 9,476 12,986 14,650 14,229 14,067 Current assets/Current liabilities 2 124.9% 103.5% 106.9% 108.6% 123.0% Capital works 3 19,533 16,311 14,121 13,770 12,737 Net capital expenditure (Net of capital grants and contributions and asset sales) 3 14,323 11,375 11,246 11,639 11,577 Debt servicing/Total revenue 4 0.4% 0.3% 0.5% 0.4% 0.3%

Borrowings outstanding 4

2,286

3,536

2,914

2,355

1,781 Notes to Indicators 1 Underlying result: Council aims to achieve positive underlying results in the long term. 2 Cash and Liquidity: Working capital is forecast to decrease in 2013/2014 due to expenditure of reserve funds towards the defined benefit superannuation liability, however improves to 123% by 2016/2017. A reduction in cash in 2013/2014 to $4.4 million due to utilising cash reserves of $1.0 million to part fund the defined benefit superannuation liability, however cash holdings increase over the term of the Strategic Resource Plan to $6 million. 3 Capital works: Total capital expenditure forecast for the four year totals $57 million on average of $14.24 million per annum. Asset renewal expenditure over the four year period will total $40.6 million at an average of $10.1 million per year. 4 Debt Levels: Council’s debt levels are well within the local government prudential guidelines that set limits for levels of debt and debt commitment costs. Total borrowing outstanding reduced to $1.8 million by 2016/2017.


8.2 Non-financial outcomes In addition to the financial resources to be consumed over the planning period, Council will also consume non-financial resources, in particular employee resources. The following table summarises the non-financial resources for the next four years.

Indicator

Strategic Resource Plan Budget Budget Projections 2012/13 2013/14 2014/15 2015/16 2016/17

$'000 $'000 $'000 $'000 $'000 Employee costs 14,510 15,392 15,872 16,287 16,803

Equivalent Full Time Employees 228.32 234.03 236.03 237.03 239.03 A total of 234.03 Equivalent Full Time (EFT) staff is proposed for the 2013/14 year, an increase of 5.71 EFT. This increase includes 2 unfunded positions and 3.71 funded positions. The forward years allow for growth of 2 EFT position per annum. Note the 2015/2016 increase of only 1 EFT is due to the completion of funded position in the prior year. 9 CONCLUSION This Strategic Resources Plan provides a framework for Council against which it can make decisions for the future. Regular reviews of the underlying assumptions and resultant implications must be undertaken. If Council is not satisfied with the projected outcomes of this SRP and presumably it wants to:

• increase expenditure on recurrent programs; and/or

• include additional capital works; and/or

• curtail the level of revenue increases (rates and/or fees and charges). Then an appropriate course of action is to review one or more of the following:

• identify any non-core activities, with a view to reducing or eliminating the related expenditure commitment; and/or

• reduce the current level of services in selected areas; and/or

• identify any additional revenue increments that will be accepted; and/or

• further review the potential for asset sales; and/or

• increase borrowings; and/or

• seek greater productivity improvements. Due regard should also be given to Council’s capacity to complete capital and other projects within the year given resourcing levels.


APPENDIX A FINANCIAL STATEMENTS


FINANCIAL STATEMENTS

Moyne Shire Council Budgeted Standard Income Statement

For the four years ending 30 June 2017

Forecast Strategic Resource Plan Actual Budget Projections 2012/13 2013/14 2014/15 2015/16 2016/17 $'000 $'000 $'000 $'000 $'000 Revenues from ordinary activities Rates charges 16,635 17,800 18,383 19,250 19,755 User fees and fines 9,814 9,678 9,749 9,767 9,994 Contributions - Operating 228 185 230 190 190 Contributions - Capital 426 696 Grants - Operating 10,000 12,504 12,514 12,542 12,713 Grants - Capital 3,880 3,186 2,302 1,615 680 Other revenues 492 386 400 410 443 Total revenues 41,475 44,435 43,578 43,774 43,775

Expenses from ordinary activities Employee benefits 14,510 15,392 15,872 16,287 16,803

Materials and services 16,848 13,223 13,142 13,353 12,960 Depreciation and amortisation 9,884 10,692 10,839 10,909 10,948 Finance costs 183 152 211 172 136 Total expenses 41,425 39,459 40,064 40,721 40,847

Net gain on disposal of property, infrastructure, plant and equipment (21) Surplus (deficit) for the year 29 4,976 3,514 3,053 2,928



Moyne Shire Council Budgeted Standard Balance Sheet


Forecast Strategic Resource Plan Actual Budget Projections 2012/13 2013/14 2014/15 2015/16 2016/17 $'000 $'000 $'000 $'000 $'000 Current assets Cash and cash equivalents 5,562 4,414 4,694 4,945 6,049 Trade and other receivables 2,878 2,868 2,898 2,927 2,991 Other financial assets 678 657 659 661 668 Total current assets 9,118 7,939 8,251 8,533 9,708 Non-current assets Trade and other receivables 27 16 9 3 3 Property, infrastructure, plant & equipment

355,823

360,387

363,096

365,442

366,750

Other 333 333 333 333 333

Total non-current assets

356,183

360,736

363,438

365,778

367,086

Total assets

365,301

368,675

371,689

374,311

376,794 Current liabilities Trade and other payables 2,672 2,716 2,715 2,717 2,716 Interest bearing loans and borrowings 415 623 559 574 480 Provisions 4,213 4,329 4,448 4,570 4,696 Total current liabilities 7,300 7,668 7,722 7,861 7,892 Non-current liabilities Interest bearing loans and borrowings 1,871 2,914 2,355 1,781 1,301 Provisions 1,165 816 821 825 830 Other 2,664 Total non-current liabilities 5,700 3,730 3,176 2,606 2,131 Total liabilities 13,000 11,398 10,898 10,467 10,023

Net assets

352,301

357,277

360,791

363,844

366,771 Equity

Accumulated surplus

190,866

196,375

199,994

202,576

204,915

Asset revaluation reserve

159,070

159,070

159,070

159,070

159,070 Other reserves 2,365 1,832 1,727 2,198 2,786

Total equity

352,301

357,277

360,791

363,844

366,771



Moyne Shire Council Budgeted Standard Cash Flow Statement For the four years ending 30 June 2017

Forecast Strategic Resource Plan Actual Budget Projections 2012/13 2013/14 2014/15 2015/16 2016/17 $'000 $'000 $'000 $'000 $'000

(Outflows

) (Outflows

) (Outflows

) (Outflows

) (Outflows

) Cash flows from operating activities Receipts General rates and charges 16,792 17,765 18,366 19,224 19,740 Operating grants 10,000 12,504 12,514 12,542 12,714 Capital grants 3,880 3,211 2,302 1,615 680 Contributions 655 856 230 190 190 Interest 443 408 397 408 436 User fees & fines 9,663 9,709 9,733 9,763 9,939 41,433 44,453 43,542 43,742 43,699 Payments Employee costs (14,344) (15,228) (15,748) (16,160) (16,673) Materials and contracts (17,612) (16,240) (13,143) (13,353) (12,960) (31,956) (31,468) (28,891) (29,513) (29,633) Net cash provided by operating activities 9,477 12,985 14,651 14,229 14,066 Cash flows from investing activities Proceeds from sale of property, plant and equipment 903 1,054 573 516 480 Payments for property, plant and equipment (19,533) (16,311) (14,121) (13,770) (12,737) Repayment of loans and advances 146 24 11 7 5 Net cash used in investing activities (18,484) (15,233) (13,537) (13,247) (12,252) Cash flows from financing activities Finance costs (183) (151) (211) (172) (136) Proceeds from borrowings 0 1,665 0 0 0 Repayment of borrowings (444) (414) (623) (559) (574) Net cash provided by (used in) financing activities (627) 1,100 (834) (731) (710) Net increase (decrease) in cash & cash equivalents (9,634) (1,148) 280 251 1,104 Cash & cash equivalents at the beginning of the year 15,196 5,562 4,414 4,694 4,945 Cash & cash equivalents at end of year 5,562 4,414 4,694 4,945 6,049



Moyne Shire Council Budgeted Standard Capital Works Statement


Forecast Strategic Resource Plan Actual Budget Projections 2012/13 2013/14 2014/15 2015/16 2016/17 $'000 $'000 $'000 $'000 $'000 Capital works areas Roads 12,419 8,813 8,915 9,167 8,951 Drains 294 430 308 297 292 Open space 2,000 777 1,145 712 613 Buildings 2,360 3,606 1,545 1,489 1,022 Plant, equipment and other 2,460 2,685 2,208 2,105 1,859 Total capital works 19,533 16,311 14,121 13,770 12,737 Represented by: Renewal 13,054 11,039 10,001 9,892 9,655 New assets 6,479 5,272 4,120 3,878 3,082 Total capital works 19,533 16,311 14,121 13,770 12,737



Moyne Shire Council Budgeted Statement of Investment Reserves


Forecast Strategic Resource Plan Actual Budget Projections 2012/13 2013/14 2014/15 2015/16 2016/17 $'000 $'000 $'000 $'000 $'000 Restricted

Subdivision

380

405

175

245

315

Heritage loan

108

108

108

108

108

Total restricted reserves

488

513

283

353

423 Discretionary

Business enterprise

883

1,000

1,021

1,056

1,100

Southcombe park sporting complex

68

68

68

68

68

Quarry

925

103

144

253

406

Waste development

1

148

211

468

789

Total discretionary reserves

1,877

1,319

1,444

1,845

2,363

Total reserves

2,365

1,832

1,727

2,198

2,786


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