This section describes the internal and external contexts which informed the 10-year financial projections and assumptions.
3.1 Financial Policy Statements
See below the policy statements and associated measures which demonstrate how Community Plans to fund the aspirations of the Community Vision and the Community Plan in a sustainable way.
Policy Statement |
Measure |
Target |
Forecast actual |
2020-21 |
2021-22 |
2022-23 |
2023-24 |
2024-25 |
2025-26 |
2026-27 |
2027-28 |
2028-29 |
2029-30 |
2030-31 |
Council achieves an adjustd underlying surplus (operating surplus less contributions, less non-recurrent capital grants) ($'000) |
Adjusted underlying surplus > $0 |
> $0 |
$16,776 |
$8,773 |
$15,736 |
$20,036 |
$23,755 |
$27,875 |
$32,332 |
$38,024 |
$45,094 |
$52,983 |
$61,916 |
Council maintain a Liquidity ratio greater than or equal to 1:1 |
Current Assets / Current Liabilities > 1 |
> 1 |
4.26 |
4.55 |
4.62 |
4.66 |
4.55 |
4.18 |
4.35 |
4.63 |
4.83 |
4.81 |
4.93 |
Allocate adequate funds towards renewal capital in order to replace assets and infrastructure as they reach the end of their service life |
Asset renewal and upgrade expenses / Depreciation above 100% |
> 100% |
125.47% |
129.40% |
106.90% |
69.18% |
77.16% |
75.63% |
74.78% |
74.76% |
75.16% |
74.64% |
101.13% |
That Council applies loan funding to new capital and maintains total borrowings in line with rate income and growth of the municipality |
Total borrowings / Rate revenue to remain below 60% |
< 60% |
1.50% |
12.30% |
10.29% |
8.37% |
14.32% |
29.23% |
25.57% |
21.79% |
19.74% |
23.04% |
20.62% |
Council maintains sufficient unrestricted cash to ensure ongoing liquidity as well as to address unforeseen cash imposts if required |
Unrestricted cash / current liabilities to be maintained above 80% |
> 80% |
93.19% |
127.06% |
119.52% |
115.62% |
106.03% |
74.71% |
78.71% |
94.05% |
105.09% |
97.52% |
102.23% |
Council generates sufficient revenue from rates plus fees and charges to ensure a consistent funding for new and renewal capital |
Capital Outlays as a % of Own Source Revenue to remain above 30% |
> 30% |
37.44% |
36.54% |
28.34% |
31.38% |
37.43% |
48.22% |
26.60% |
25.26% |
29.17% |
39.19% |
33.51% |
3.2 Strategic Actions
Following a series of community engagement activities, Council has identified the following strategic actions that will support the aspirations of the Community Plan. The strategic actions are included in the 10-year financial plan and, where appropriate, referenced in the commentary associated with the 10-year Comprehensive Income Statement and the 10-year Statement of Capital Works. Some of Council’s key strategic actions include:
- Rate cap increase in accordance with current CPI information
- Setting of Waste charge at a sustainable level that covers the cost of providing the service
- Identification of efficiency savings in the operating budget that can be reinvested for future community benefit
- Setting of Council’s fees and charges at a level that achieves balance between community benefit and financial sustainability
- Continuing to identify sources of alternative revenue streams and advocate for external funding to reduce the burden on rate revenue
- Monitor of Council’s investment in asset renewal to ensure an appropriate balance between new infrastructure for growth areas and asset renewal for established areas
3.3 Assumptions to the financial plan statements
This section presents information regarding the assumptions to the Comprehensive Income Statement for the 10 years from 2021/22 to 2030/31. The assumptions comprise the annual escalations / movement for each line item of the Comprehensive Income Statement.
Escalation Factors % movement |
2021-22 |
2022-23 |
2023-24 |
2024-25 |
2025-26 |
2026-27 |
2027-28 |
2028-29 |
2029-30 |
2030-31 |
Rate Cap Increase |
1.50% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
Waste Charge Increase |
2% |
12% |
12% |
12% |
12% |
5% |
5% |
5% |
5% |
5% |
Population Growth |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
Statutory fees and fines |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
User fees |
2% |
2% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
Grants - Operating |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
Grants - Capital |
No Growth Assumption used. Capital Grants only included when reasonable evidence the grant will be received. |
Contributions - monetary |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
Contributions - non-monetary |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
Other income |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
2% |
Employee costs |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
Materials and services |
4% |
4% |
4% |
4% |
4% |
4% |
4% |
4% |
4% |
4% |
Depreciation & Amortisation |
4% |
4% |
4% |
4% |
4% |
4% |
4% |
4% |
4% |
4% |
Other expenses |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3% |
3.3.1 Rates and charges
The introduction of the Fair Go Rates System by the Victorian Government from 2016 now requires all Victorian Councils to comply with an annual rate cap. This applies to general rates and municipal charges.
The rate cap for 2021/22 was set at 1.5% as approved by the Minister for Local Government, in comparison to 2% for 2020/21.
The Financial Plan is based on Council complying with the annual rate cap, which for the purposes of this document is assumed to be 2% for future years.
It is anticipated that an additional $4 million per annum will be driven by growth across the municipality (additional properties) through supplementary rates, growing at a rate of 10% per annum over the life of the Financial Plan.
Further information about rating principles can be found in Council’s Revenue and Rating plan 2021-25.
Following the introduction of a separate Waste Charge, Council has heavily subsidised the costs of delivering the waste service across the municipality, previously only increasing the service charge by 2% despite much higher cost increases to Council in delivering the service. In 2021/22 Council is subsidising in the order of $2.6 million by not recovering full cost, a practice which is not considered to be financially sustainable over the period of the Financial Plan. In years 2 to 5 of the plan the waste charge assumption is set at a level that will enable Council to achieve alignment between the charge and the cost of providing the service to our community.
3.3.2 Statutory fees and fines
The Financial Plan indexes statutory fees, set by legislation, according to the estimated annual rate of CPI. This may be a ‘best case scenario’ as some fees are outside Council’s control and therefore may be subject to increases less than the annual rate of CPI.
3.3.3 User Fees
User fees and charges are those that Council charge to recover proportions of the costs of delivering services to the community.
A key consideration in setting user fees and charges is to ensure access to key services and infrastructure is affordable, while balancing the financial capacity of Council to subsidise these services.
3.3.4 Grants
Council receives various grant funding and recognises the importance of actively pursuing grant funding to deliver significant projects and services to the community. Operating grants are expected to increase in line with CPI increases for future years. Council only allows for confirmed capital grant funding in budget allocations. Capital grants are essential for Council to deliver projects that will have intergenerational benefits.
3.3.5 Contributions
Council receives contributions from developers. These represent funds to enable Council to provide the necessary infrastructure, and infrastructure improvements, to accommodate development growth. The contributions are for specific purposes and often require Council to outlay funds for infrastructure works before receipt of this income source. These contributions are statutory contributions and are transferred to a restricted reserve until utilised for a specific purpose through the capital works program or delivered as works in kind by developers.
3.3.6 Other Income
Revenue from other income mainly comprises interest income and rental income received from the hire of Council buildings and facilities.
3.3.7 Employee costs
Employee costs is one of the largest costs incurred by Council to support the community and meet organisation commitments. Employee costs constitute a combination of direct wages and salaries, including on-costs such as superannuation, WorkCover, leave entitlements, training and temporary staff arrangements. The Financial Plan assumes a 3% increase for employee costs that reflects a combination of salary increases, banding movements for all staff pursuant to the Enterprise Bargaining Agreement as well as increased staff resources to meet the demand for delivery of Council services as the municipality continues to grow.
3.3.8 Materials and Services
Material costs include items required for the maintenance and repair of Council buildings, roads, drains and footpaths which are governed by market forces based on availability. Cost of Council maintenance contracts for parks and open space are expected to exceed the CPI due to the continued growth in Council assets and also the cost of raw materials like concrete, asphalt and other road items that continue to exceed CPI. These costs have been set accordingly.
Waste costs, which are a part of cost recovery for Council’s waste charge, have increased significantly in 2021/22 due to increased tonnage, an anticipated increase in landfill levies in line with the new State Government levy which commenced in July 2021, and an increase in contractual costs for landfill charges.
Other associated costs included under this category are utilities, materials and consumable items for a range of services. Council also utilises external expertise on a range of matters, including legal services and audit. These costs are kept to within CPI levels year on year.
3.3.9 Depreciation and amortisation
Depreciation assumptions have been based on the projected capital spending contained within this Financial Plan document. Depreciation has been further increased by the indexing of the replacement cost of Council’s fixed assets and as Council continues to receive contributed assets.
3.3.10 Borrowing costs
Borrowing costs comprise the interest expense to service Council's loan portfolio that is described in Section 5.1 Borrowing Plan.
3.3.11 Other expenses
Other expenses include costs such as utilities, insurance, contributions and other administration costs associated with the day-to-day running of Council.
3.4 Other Matters impacting the 10‑year financial projections
There are a range of challenges Council continues to face which may impact future assumptions in the Financial Plan. Examples include but are not limited to:
- Population Growth – City of Whittlesea continues to be one of the fastest growing municipalities in Victoria which will continue to create cost pressures for Council
- Rate Capping – The ongoing impact of rate capping will force Council to continue to review its services and capital works investment, and seek alternative sources of revenue in order to remain financially sustainable into the future
- Pandemic Recovery – Council will continue to support our local community through the COVID-19 pandemic as the ongoing economic and social consequences continue to be felt
- Cost Shifting – Cost shifting occurs where Local Government provides a service to the community on behalf of the State or Federal Government. Over time the funds received by Local Governments do not increase in line with real cost increases. Examples include areas such as Maternal & Child Health, Immunisation Services and Library Services, where the level of payment received by Council from the State Government does not reflect the real cost of providing the service to the community
- Renewal Gap – The need to ensure that Council is investing appropriately in the renewal and upgrade of existing infrastructure assets
- DCP Funding Gap – The need to identify and manage potential shortfalls between monetary contributions received from developers and the costs associated with the future delivery of infrastructure across the municipality City