Council’s financial position continues to remain sound. A summary of our performance is outlined below. Detailed information relating to Council’s financial performance is included within the Financial Statements and Performance Statement section of the Financial Report.
The Financial Report can be downloaded here.
The value of rateable property at 1 January 2016 was $58 billion. Council is focused on generating funds to fix ageing community infrastructure and facilities while maintaining essential services at existing levels, and where possible, making improvements, especially in access and equity of services and the environmental sustainability of operations. Council’s long-term financial strategy confirms this approach.
FAST FACTS 2016–17
- $35 million of capital works completed
- $29.43 million operating surplus
- $153.68 million increase in net assets from $2,024 million to $2,178 million
- $175.54 million revenue with 57.68 per cent coming from rates and charges
- $146.12 million expenditure
- $61.11 million holdings of cash/investments
- $21.65 million of borrowings outstanding
Council’s operating position for 2016–17 was a surplus of $29.43 million. The operating result is higher than Council’s 2016–17 Budget by $12.21 million. Factors contributing to this include:
- Higher than anticipated revenue from parking infringements income $3.2 million.
- Higher than budgeted open space fee income $2.31 million.
- Higher than anticipated operating grants due to the early receipt of the 2017–18 payment from the Victorian Grants Commission of $1.83 million. The amount of $1.83 million (50 per cent of the 2017–18 grants) was received for financial assistance and local roads funding during the 2016–17 financial year. At the time of approving the 2016–17 Budget, Council had provided for the full amount to be received during 2017–18.
- Increased planning fee income of $1 million due to changes in the planning and subdivision fee regulations from October 2016.
- Better than budget interest income of $504,000, and rates and charges at $232,000. Higher capital grants by $290,000, due to additional funding received.
- Savings of $1.68 million in employee costs, and lower depreciation and amortisation at $1.01 million.
For further information, see note 2(a) of the Financial Report starting on page 19.
The Financial Report can be downloaded here.
Council’s total revenue for the 2016–17 financial year was $175.54 million, $10.6 million favourable to budget (6.43 per cent). The main factors contributing to the favourable variance included:
- statutory fees and fines $3.37 million;
- user fees $1.34 million;
- operating grants $2.1 million;
- monetary contributions $2.31 million; and
- other income $949,000.
Rates and charges revenue was in line with budget in 2016–17. Glen Eira City Council continues to have rates and charges much lower than the average of all inner metropolitan councils (second lowest rates and charges revenue).
Statutory fees and fines were favourable to budget by $3.37 million mainly due to a higher than anticipated revenue from parking infringements income of $3.2 million. There was stricter law enforcement to emphasise safety around schools and balance trader and patron parking due to increased building activity and the grade separation works.
User fees were favourable to budget by $1.34 million mainly due to increased town planning income of $1 million. This increase in user fees is due to the new planning and subdivision fee regulations applicable from October 2016.
Operating grants were favourable to budget by $2.10 million due to the Commonwealth Government announcement that 50 per cent of Council’s Victorian Grants Commission funding would be prepaid in 2016–17. The amount of $1.83 million (50 per cent of the 2017–18 grants) was received for financial assistance and local roads funding during the 2016–17 financial year.
Other income is higher than budget by $949,000 due to Council’s interest on investments being better than budget by $504,000 and unbudgeted items such as liquidation of bank guarantees (relating to contractual disputes with the construction of capital works projects) of $94,000 and income of $211,000 in relation to the grade separation works (level crossing removal project) within the municipality.
Monetary contributions were higher due to better than anticipated open space fees exceeding the budget by $2.31 million.
Refer to Figure 1.
Council’s total expenditure for 2016–17 was $146.12 million (1.09 per cent favourable to budget).
Contributing to this favourable variance were employee costs of $1.68 million and depreciation and amortisation expenses of $1.01 million. This was partly offset by unfavourable variances in other expenses of $512,000 and a share of net loss of joint operations of $385,000.
Refer to Figure 2.
FIGURE 1. 2016–17 SOURCES OF INCOME (%)
Figure 2. 2016–17 Categories of Expenditure (%)
During 2016–17, $35 million was expended on capital. Variance to budget for new capital works was $161,000 including the following major activities:
- Land: unbudgeted spend of $3.5 million due to the acquisition of two land parcels during the 2016–17 year at Magnolia Road, Gardenvale and Aileen Avenue, Caulfield South.
- Buildings: underspent by $924,000 due to works at Town Hall, Lord Hex Pavilion, Carnegie and Marlborough Pavilion, Bentleigh East continuing in 2017–18.
- Open space: under budget by $1.18 million due to works not completed by year-end, which will be carried forward into 2017–18.
Refer to Figure 3.
ASSET EXPENDITURE CATEGORIES
The major asset expenditure categories of capital works were:
- land $3.50 million;
- buildings $2.80 million;
- plant and equipment $3.91 million;
- roads $7.43 million;
- footpaths $1.76 million;
- drainage $3.86 million;
- open space and recreation $9.08 million;
- car parks $698,000;
- streetscape works $418,000; and
- carried forward projects from 2015–16 $1.55 million.
For further information, see note 2(b) of the Financial Report starting on page 22.
The Financial Report can be downloaded here.
The $35 million was comprised of renewal at 42.27 per cent ($14.8 million); upgrade at 33.73 per cent ($11.81 million); expansion at 19.19 per cent ($6.72 million) and 4.81 per cent ($1.68 million) of new expenditure.
Refer to Figure 4.
FIGURE 3. CAPITAL WORKS EXPENDITURE 2006–07 TO 2016–17 ($M)
Figure 4. 2016–17 Capital Works expenditure — by type (%)
PUBLIC OPEN SPACE STRATEGY
Expenditure on open space projects for 2016–17 ($8.21 million) relates to initiatives for: Booran Reserve equalling $4.62 million; land acquisitions at 6 Aileen Avenue, Caulfield South, costing $2.11 million; and 53 Magnolia Road, Gardenvale, costing $1.48 million.
Contributions to the public open space reserve during the financial year relate to contributions received as public open space levies pursuant to the provisions of Section 18 of the Subdivision Act 1988. Council has achieved the new uniform levy rate of 5.7 per cent (Planning Scheme Amendment C120).
Council has a requirement to report on major initiatives pursuant to Section 127 of the Local Government Act 1989. The progress of the major initiatives for 2016–17 as at 30 June were:
- Booran Reserve: works at Booran Reserve were completed and opened to the public on 7 April 2017.
- Marara Reserve: stage two works have commenced and are scheduled to be completed during 2017–18.
- Hopetoun Gardens: landscape enhancement works at Hopetoun Gardens were completed in early 2017.
- EE Gunn Reserve Oval 2: surfacing and warm season grass works on Oval 2 has commenced, with completion due in 2017–18.
- Bailey Reserve Oval 2: redevelopment of Oval 2, including warm season grass and new irrigation installation, was completed during 2016–17.
- Energy efficiency and renewable energy for existing Council buildings and lighting: $983,000 was spent on sustainability initiatives, including the installation of LED lighting and replacement of insulation and power supply voltage regulators in Council buildings — cost $533,000; the installation of solar energy systems on Council assets to generate renewable energy — cost $217,000; and the upgrading of public park lighting to LEDs — cost $233,000.
To bridge the infrastructure gap, Council invested $35 million in renewing, upgrading and expanding assets during the 2016–17 year. This was funded from operations, without new borrowings.
Council’s asset renewal ratio, which is measured by comparing asset renewal and upgrade expenditure to depreciation, was 125 per cent. This was due to a renewal expenditure of $14.8 million and an upgrade expenditure of $11.81 million.
Refer to Figure 5.
Working capital is the excess of current assets above current liabilities. This calculation recognises that although Council has current assets, some of those assets are already committed to the future settlement of liabilities in the following 12 months, and are therefore not available for discretionary spending.
Cash and cash equivalents (including financial assets) was $61.11 million as at 30 June 2017. This cash balance is sufficient to cover Council’s short-term restricted assets, including trust funds and aged care deposits of $29.87 million and funding for the public open space reserve at $3.70 million.
Council needs to ensure working capital is maintained and that sufficient cash reserves are available to meet normal cash flow requirements. Council will continue to have a large investment in capital works projects. The liquidity ratio expresses the level of current assets the Council has available to meet its current liabilities.
Council should hold sufficient cash to cover ‘Restricted Assets’ such as: Residential Aged Care Deposits; Public Open Space Reserve; Contract Deposits; and Fire Services Property Levy.
Refer to Figure 6.
FIGURE 5. ASSET RENEWAL RATIO (INCLUDING UPGRADE) (%)
FIGURE 6. LIQUIDITY RATIO (WORKING CAPITAL) (%)
Council’s asset base increased from $2,108 million to $2,261 million, mostly due to the increased value of Council’s fixed assets — up from $2,048 million to $2,184 million.
Consistent with the historical trend, property, infrastructure, plant and equipment has increased due to the impact of Council’s revaluation of assets, the net result of the capital works program, depreciation of assets and the sale of property, plant and equipment.
Refer to Figure 7.
FIGURE 7. PROPERTY, INFRASTRUCTURE, PLANT AND EQUIPMENT AND INTANGIBLES ($M)
As part of the Glen Eira Council and Community Plan 2017–2021, Council has prepared a Strategic Resource Plan for the 10 years 2017–18 to 2026–27. In order to achieve financial sustainability in the medium to long-term, the Plan has the following financial objectives:
- Manage finances appropriately within the constraints set by the State Government’s rate capping regime.
- Funds are to provide for additional public open space and to renew and upgrade our ageing assets and community facilities.
- Maintain essential services at not less than current levels.
- Set fee increases that are manageable and sustainable.
- Focus on continuous improvement.
- Keep day-to-day costs and rates below our peers.
The 2017–18 Annual Budget is based on a rate increase of two per cent. This is in line with the new Fair Go Rates System (FGRS) which has capped rates increases by Victorian councils to the forecast movement of two per cent in the Consumer Price Index (CPI). Council elected not to apply to the Essential Services Commission (ESC) for a variation.
Our focus for the 2017–18 year is to continue to deliver on the projects and services that make our City a great place to live and respond to the challenges we are currently facing. These challenges include:
- Provide top-up funding for services that we provide on behalf of the State and Federal Governments to the local community (such as school crossing supervision); over time the funds received by local governments have not increased inline with real cost increases, leaving a gap.
- Increase investment in the maintenance of our ageing community and infrastructure assets.
- Respond to growth and increasing diversity in the population within the municipality.
To support Council’s $2.19 billion of community assets, new capital expenditure is projected at $34.08 million for asset renewals, upgrades and expansions. Highlights of the capital works program include the following:
- Priority items, such as the renewal and upgrade of Council’s major infrastructure assets. These include: road reconstruction ($5.19 million), Drainage Improvement Program ($3.57 million), footpaths ($2.01 million), and local road resurfacing ($1.5 million).
- Building works comprising buildings and building improvements, and the upgrade and renewal of community facilities such as municipal offices, sports facilities, and pavilions ($5.53 million).
- Open space, including initiatives such as parks, playing surfaces, and playground equipment ($8.83 million).
- Environmental initiatives including planting warm season grasses, Council’s Bicycle Strategy (continuation of off-road paths, extensions to the on-road network and works to improve existing conditions), installation of LED lights, park lighting energy efficiency upgrade, and photovoltaic systems on Council assets to generate renewable energy ($1.92 million).
- Transport and planning, comprising safety projects at cross intersections, pedestrian safety and speed limits, school safety, shopping centres, sustainable transport, and disabled parking upgrades ($1.2 million).
- Plant and equipment, including plant, machinery and equipment, information technology and telecommunications, and library collections ($5.51 million).
The Budget was developed through a rigorous process of consultation and review and Council endorses it as financially responsible.
The Financial Report can be downloaded here.