Late Items Agenda of Elected Members' Briefing Session

CITY OF WANNEROO SUPPLEMENTARY Items Agenda OF Elected Members' Briefing Session 12 September, 2017 2

supplementary Items Agenda

Item 5 Supplementary Reports

5.1 Review of the Long Term Financial Plan 2017/18-2036/37

File Ref: 30249 – 17/295039

Responsible Officer: Director Corporate Strategy and Performance

Disclosure of Interest: Nil

Attachments: 1

Issue

To outline the development of the Long Term Financial Plan 2017/18-36/37 (LTFP).

Background

The 2017/18 Integrated Planning & Reporting (IPR) development process commenced early in 2017 with a series of workshops with Elected Members. There were four workshops, with the subsequent adoption of the City’s Budget on the 27 June 2017. Two additional workshops were held on the 3 July and 29 August to review the Long Term Financial Plan and discuss the Long Term Capital Works Program. These workshops focused on the assumptions and parameters of the 20 Year Long Term Financial Plan.

The August workshop considered three scenarios which provided a view of the impact of rating strategies and cost assumptions on the City’s operating result. Upon discussion the Elected Members agreed that the 2017/18 LTFP should be based on a balanced approach scenario, referred to as Scenario 3, designed at keeping operating results within a targeted range. Rates increases for this scenario were within the range of CPI +0.5% to CPI +2%, and cost increases within the range of CPI to CPI +2.5%. Reflecting this prudent approach the municipally funded capital works program for the first four years of the plan was set within the range of $23m to $25m. The capital works plan incorporated key strategic projects and took into account the Active Reserves Masterplan.

Detail

The Draft Long Term Financial Plan (Attachment 1) uses the 2017/18 Budget to reflect the current financial position (‘the baseline’). The estimates for future years use this baseline as the starting point and then projects future years using assumptions from a variety of sources including:

· City Strategy and Planning documents

· Capital Works Programs

· Asset Management Plans

· id forecast

· State and Federal Budgets

· Economic Forecasts from WA Treasury Corporation and WALGA

These assumptions are recurring and have an ongoing impact more so than one-off capital expenditures. However, the most important set of inputs to the plan are the City’s Strategic Community Plan, Corporate Business Plan, and Capital Works Program.

The variables have been adjusted to enable the City to present a stable financial result which provides the community services and required capital works over the next 20 years. To achieve this result a realistic rating scenario has been developed which adjusts rates within an acceptable range to achieve the desire outcome.

The supporting narrative has been updated in the Long Term Financial Plan to reflect these changes. Consideration has also been given to ensure compliance with the Local Government Act 1995, Sections 6.34 (a) and (b) that the proposed rating strategy is within the limit on income from general rates of not less than 90% or more than 110% of the budget deficiency.

The following assumptions form the basis upon which this Long Term Financial Plan has been constructed:

General

· This Plan covers a period of 20 years.

Variables

All escalation, inflation and growth factors and percentages used in this model are summarised in the ‘Variables’ report.

Population Growth The population forecasts by .id Forecast have been applied.

Consumer Price Index -

(CPI) Department of Treasury have provided forecast data up to 2018/19. Perth CPI was forecasted to increase to 2.25% in 2017/18 then to 2.5% in the following years. The rate of 2.5% has been used to determine: Operating Grants, Subsidies and Contributions, Fees and Charges, Other Revenue, Insurance, and Other Expenditure.

Rates Base Based on the current rate increase for 2017/18 of 2.45% with future increases set to CPI + 0.5% to 2%. This is based on a balanced approach to achieve either a small operating surplus or a minimal deficit.

Rates Growth Based on the population growth forecast provided by id Forecast. The projected figure in 2018/19 is 3.65%, decreasing over the remaining years to 2.40% by 2036/37.

Operating Grants etc. Based on the Perth CPI figures as quoted above.

Fees and Charges Based on the Perth CPI figures as quoted above.

Interest Yield Based on the current yield at 2.75% for the life of the Plan.

Other Revenue Based on the Perth CPI figures as quoted above.

Employee – Establishment Costs are based on the current Enterprise Agreement which consists of 3% in 2017/18 and 3% in 2018/19. For the following projected years the current CPI index rate + 0.5% to 2.0% is used. Superannuation Guarantee costs are projected to increase from 9.5% to 12% and have also been incorporated into the plan.

Employee – Growth It is intended to minimise growth of employee numbers by funding improvements to technology, whilst taking into consideration the City’s expansion including new facilities. Employee growth has been set at 1.5% every year for the life of the Plan.

Materials & Contracts Based on the current CPI index rate + 0.5% to 2.0% throughout the life of the plan.

Materials & Contracts

– Asset Growth Calculation of historical data has shown that the increase in maintenance and other materials costs has been consistently in the 5% range.

Utility Charges With regular annual increases in Government charges plus consistent increases in City growth, this variable has been kept at 10% for the first 10 years of the LTFP. This is also consistent with past trends. However from Years 11 to 20 the rate has been decreased to 7.5% based on future initiatives that will be implemented by the City.

Depreciation Is calculated from current asset values and future assets from the capital works program. These increases taper off from 4% in Years 2 to 5, to 3.5% in Years 6 to 14 and 3% in Years 15 to 20.

Insurance Based on the Perth CPI figures as quoted above.

Other Expenditure Based on the Perth CPI figures as quoted above.

Consultation

This document has been prepared in consultation with the Executive Leadership Team and the Elected Members.

Comment

It is anticipated that the Draft 20 Year Long Term Financial Plan and associated 20 Year Capital Works Program will provide some clarity for the long term financial sustainability of the City and present the community with a timeframe of when major capital projects are likely to occur. Through the review of this report and its supporting documents and any subsequent discussions, the Long Term Financial Plan will be prepared for adoption by Council on the 19 September 2017.

Statutory Compliance

As per the Department of Local Government and Communities guidance notes and the Integrated Planning & Reporting Framework.

Strategic Implications

The proposal aligns with the following objective within the Strategic Community Plan 2017 – 2027:

“4 Civic Leadership

4.2 Good Governance

4.2.2 Provide responsible resource and planning management which recognises our significant future growth”

Risk Management Considerations

Risk Title	Risk Rating
Strategic Community Plan	Low
Accountability	Action Planning Option
Director Corporate Strategy and Performance	Manage

Risk Title	Risk Rating
Integrated Planning and Reporting	Low
Accountability	Action Planning Option
Executive Leadership Team	Manage

Risk Title	Risk Rating
Financial Management	Low
Accountability	Action Planning Option
Executive Leadership Team	Manage

Risk Title	Risk Rating
Long Term Financial Plan	Moderate
Accountability	Action Planning Option
Director Corporate Strategy and Performance	Manage

Risk Title	Risk Rating
Long Term Capital Works Program	Moderate
Accountability	Action Planning Option
Director Assets	Manage

The above risks relating to the issue contained within this report have been identified and considered within the City’s Strategic and Corporate risk registers. Action plans have been developed to manage these risks and to support existing management systems.

Policy Implications

This report and attachments are aligned to the guidelines identified with the Strategic Budget Policy.

Financial Implications

As outlined in the attachments to this report.

Voting Requirements

Simple Majority

Recommendation

That Council APPROVES the Long Term Financial Plan 2017/18-2036/37 as detailed in Attachment 1.

Attachments:

1 ⇩.

2017-18 20 Year Long Term Financial Plan

17/301290