The 2021-2031 City of Whittlesea Financial Plan provides an overview of Council’s financial position and how it plans to responsibly invest in community services and infrastructure over the next decade.
The primary objective in developing Council’s Financial Plan is striking a balance between maximising support for our community in the present, while maintaining a sound financial position to enable long term support for our growing community.
Further Financial Plan objectives include:
In developing the Financial Plan, consideration is given to a wide range of financial challenges likely to impact Council and our community over the next decade. The most significant of which in the short term is the COVID-19 pandemic, which continues to present many social and financial challenges globally, nationally and locally for our community. It is through responsible financial management that Council has been able to provide significant additional financial support in assisting our community, whilst continuing to maintain the levels of service and infrastructure investment that our community values and relies upon.
The development of our Financial Plan is supported by a number of underlying assumptions which are outlined in section 3.3. When reviewing key assumptions and financial information, there are a number of important considerations that require some additional context as outlined below.
Council’s operating surplus is calculated as our total revenue received (from sources including rates, fees and charges, grants etc.) less our total operating expenses (employee costs, cost of goods and services etc.).
On face value, Council’s forecasted surpluses over the Financial Plan may appear large. However the reality is that the majority of these surpluses are in the form of contributions received from developers which either don’t equate to cash or represent cash that is restricted for future use and therefore is not at Council’s discretion in how it is spent.
Further, Council’s operating surpluses are also used to fund cash contributions towards Council’s annual capital works programs which are critical in supporting infrastructure development throughout the municipality.
For the above reasons, Council’s cash result (as shown below) is considered a more accurate reflection of Council’s financial performance. The cash result indicates that over the plan, Council is investing the majority of available cash generated back into our community.
|Grants - Capital (non-recurrent)||3,589||16,260||-||-||-||-||-||-||-||-||-|
|Contributions - monetary (capital)||16,892||17,338||12,898||13,156||13,419||13,688||13,962||14,241||14,526||14,816||15,112|
|Contributions - non-monetary||102,039||104,080||106,162||108,285||110,451||112,660||114,913||117,211||119,555||121,947||124,385|
|Adjusted underlying surplus/(deficit)||16,776||8,773||17,236||20,036||23,755||27,875||32,332||38,024||45,094||52,983||61,916|
At present, City of Whittlesea has one of the lowest waste charges across Victorian Councils. This is due to Council not passing on the full cost of providing waste services to our community. For the 2021/22 year, Council has budgeted an under recovery of cost totalling approximately $2.6 million, representing a direct subsidy to our community.
A key of assumption of the financial plan is for Council’s waste charge to be increased by 12% over the first 5 years of the plan, dropping to 5% for the 5 years thereafter. This strategy is intended to bring Council’s waste charge into alignment with the cost of providing waste services to our community. This increase will equate to an additional charge of just $13.72 per household for the 2022/23 financial year. The benefit of this will be additional funds available to invest into our community services and infrastructure.
Rates and charges are Council’s primary source of income and integral to funding the delivery of services and infrastructure investment.
With the introduction of the State Government’s Fair Go Rating System in 2016, Council’s rates and charges are now subject to an annual cap which is outlined annually by the Minister for Local Government. The impact of this has meant that the growth in costs associated with supporting our growing community often far exceeds the increases in our revenue base available to fund such costs.
The Financial plan assumes an annual rate increase of 2% over the financial plan.
City of Whittlesea continues to maintain one of the lowest average rates across Councils located outside the Melbourne fringe.
Similar to our operating surplus, while Council’s cash position may appear significant, the reality is quite different, with over 60% of Council’s cash restricted for future use and therefore not at Council’s discretion in how it is spent. Council’s strategy is to maintain a cash balance that covers short-term financial obligations, whilst also providing adequate funding for future community infrastructure investment.
Council will continue to advocate to both the State and Federal governments on behalf of our community for funding that will support key projects integral to the ongoing development of the municipality over the next decade. This is a key area of focus for Council, as obtaining external funding for projects frees up Council’s cash reserves which can be invested in other areas for further community benefit.
This section describes how the Financial Plan links to the achievement of the Community Vision and the Community Plan within the Integrated Strategic Planning & Reporting framework. This framework guides the Council in identifying community needs and aspirations over the long term (Community Vision), medium term (Community Plan) and short term (Annual Budget) and then holding itself accountable (Annual Report).
The following diagram provides an overview of the core legislated elements of an integrated strategic planning and reporting framework and outcomes.
A community vision reflects a consensus view of the future community wants and needs, and the high level actions required to achieve desired outcomes.
Vision statements reflect shared values and aspirations and create active tension between the current and desired future state.
|10 years +||
There is a consensus view of the desired future (10+ years) for the community and potential pathway to achieve this.
A Financial Plan is used by Council, community and the organisation to ensure the long-term viability and sustainability of the Council. It supports the achievement of the Community Vision and establishes investment and spending thresholds.
|10 years +||
Financial Plan 10-year financial framework to support achievement of Community Vision and Community Plan
Improved understanding of Council's capability to achieve its vision.
Clear view of the fiscal capacity and constraints of Council.
Financial risk and potential areas of volatility are managed.
Community Plan, strategies, programs and projects can be resourced.
Council is a trusted and responsible steward and community assets meet future community needs.
Community Plan outlines the agenda for a new Council and supports the achievement of the Community Vision through Strategic objectives and strategies.
|4 years +||
Council owns the Community Plan and the community is clear on its strategic direction.
There is clarity on how strategic objectives will be achieved and consistency with available resources.
There is alignment with and progress towards the Community Vision.
It is clear how Council will collect revenue to support activities.
Council will develop and adopt a budget each year that describes in more detail the way in which revenue will be raised and expenditure directed.
The budget must include 3-year financial projections as well as description of services, major initiatives and performance measures.
The CEO must prepare and maintain a 4-year Workforce Plan.
|4 years +||
Strategies and initiatives to achieve
Community Plan are clearly articulated, mapped and resourced.
Programs and initiatives have quality and cost standards.
Resources (including people) required to deliver on commitments are understood.
The community has had an opportunity for deliberative engagement.
The Council is accountable for its performance through the Annual Report, Local Government Performance Reporting Framework and mandatory quarterly financial reports that are presented to Council.
Many Councils develop and maintain additional mechanisms to ensure public accountability, these include: quarterly reporting on achievement of capital works and Community Plan initiatives, routine reporting on project, program and policy initiatives.
|3 years +||
Transparent monitoring of financial, service and program performance.
Improved accountability to Council and community for achievement of objectives.
Improvement opportunities captured and incorporated into planning.
The Financial Plan provides a 10-year financially sustainable projection regarding how the actions of the Community Plan may be funded to achieve the Community Vision. The Financial Plan is developed in the context of the following strategic planning principles:
The Financial Plan demonstrates the following financial management principles:
Council has undertaken extensive engagement to understand the community’s ideas and priorities over the next four to ten years. The following principles have been adopted during the engagement process:
Council services are designed to be targeted towards community needs and value for money. The service performance principles are listed below:
Integration between the Financial Plan and Asset Plan is a key principle of the Council’s strategic financial planning principles. The purpose of this integration is designed to ensure that future funding is allocated in a manner that supports service delivery in terms of the ongoing effective management and future plans of Council’s assets.
The Asset Plan identifies the operational and strategic practices which will ensure that Council manages assets across their life cycle in a financially sustainable manner. The Asset Plan, and associated asset management policies, provide Council with a sound base to understand the risk associated with managing its assets for the community’s benefit.
The Asset Plan is designed to inform the 10-year Financial Plan by identifying the amount of capital renewal, backlog and maintenance funding that is required over the life of each asset category. The level of funding will incorporate knowledge of asset condition, the risk assessment issues as well as the impact of reviewing and setting intervention and service levels for each asset class.
In addition to identifying the operational and strategic practices for managing assets across their life cycle in a financially sustainable manner, the Asset Plan quantifies the asset portfolio and the financial implications of those practices. Together the Financial Plan and Asset Plan seek to balance projected investment requirements against projected budgets.
This section describes the internal and external contexts which informed the 10-year financial projections and assumptions.
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|
|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%|
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:
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%|
|Statutory fees and fines||3%||3%||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%|
|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%|
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.
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.
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.
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:
This section presents information regarding the following Financial Plan Statements for the 10 years from 2021/22 to 2030/31.
If you would like accessible versions of the Financial Plan Statements please contact Council on 9217 2170 or firstname.lastname@example.org.
The following table highlights Council’s projected performance across a range of key financial performance indicators. These indicators provide an analysis of Council’s 10-year financial projections and should be interpreted in the context of the organisation’s objectives and financial management principles.
If you would like accessible versions of the financial performance indicators and notes to indicators please contact Council on 9217 2170 or email@example.com.
In developing Council’s Financial Plan, borrowings are an important consideration as a source of funding for the capital works program. The decision to utilise borrowings as a source of funding should not be viewed as ‘living beyond our means’, but rather a decision that is impacted by factors including Council’s current borrowing levels and interest rate levels which determine the cost of debt.
The decision to fund some projects via borrowings takes into consideration the fact that the funding burden of capital projects that will benefit future generations should not be entirely borne by present-day ratepayers.
The Financial Plan has made provision for proposed borrowings over the next 10 years which are outlined in section 6.1.2 below.
6.1.1 Current Debt Position
The total amount of Council borrowings as at 30 June 2021 was $2.54 million.
6.1.2 Future Borrowing Requirements
If you would like an accessible version of the Future Borrowing Requirements please contact Council on 9217 2170 or firstname.lastname@example.org.
6.1.3 Performance Indicators
If you would like an accessible version of the Performance Indicators please contact Council on 9217 2170 or email@example.com.
Council considers all proposed borrowings in line with its capital management strategy and maintains a financially responsible approach towards borrowings based on achieving the below indicators.
6.2 Reserves Strategy
Financial Reserves are used by Council to manage restricted cash relating to developer contributions and also to allocate funding for proposed future investment. Financial Reserves are operated in accordance with Council’s Financial Reserves policy.
If you would like an accessible version of the table which provides the balance and annual movement for Council’s reserves over the Financial plan please contact Council on 9217 2170 or firstname.lastname@example.org.
6.2.1 Asset Development Reserves
Council’s Asset Development Reserves comprise the following:
Developer Contribution Plan Reserve – Funds received from developers for the future construction of infrastructure throughout the municipality
Parklands Contributions (open space) Reserve – Funds received from developers for the future provision of open space and associated infrastructure
Community Facilities Reserve – Developer contributions received for future community facilities and assets
Planning Permit Drainage Levy – Funds received from developers to expand drainage infrastructure to absorb extra inflow due to multi-unit developments
Net Gain Compensation Reserve – Funds received from developers for replanting of trees as per planning permit condition
Plenty Road Duplication – Funding from developers for Plenty Road duplication works
6.2.2 Asset Replacement Reserves
Council’s Asset Replacement Reserves comprise the following:
Strategic Properties Reserve – Reserves used to plan and fund strategic property purchases
Technology Improvement Fund Reserve – Reserve established to enable organisational capability and fund digital transformation
Strategic Investment Reserve – Reserve established to invest any surplus cash funds for future investment in Council projects and to assist with bridging Council’s asset renewal gap
Synthetic Turf Replacement Reserve – Reserve established to capture contributions received from sporting clubs for future replacement of synthetic turf
Transport Infrastructure Reserve – Reserve established to fund investment in future Transport Infrastructure
Waste Reserve – Reserve established to capture any future surplus from waste operations and reinvest in line with legislative framework
LASF Defined Benefits Liability – Reserve was established to plan for future defined benefits liability calls and to fund Council’s liability
Native Vegetation Offset Site Maintenance – Reserve established to fund native vegetation works which Council takes over from developers
Non-standard Street Lighting Contribution – Contributions received from developers for a non-legislative fee that was introduced as part of Council’s non-standard public lightning policy
Lutheran Church – Reserve established to purchase the Lutheran Church site at a future point in time
Traffic Light Construction – Contributions from developers for developer-funded traffic signals