lONG TERm FINANCIAl plAN 2015/16 – 2024/25 › files › 7e4d28a8-7039-4a35-ab9b-a48a...3...

lONG TERm FINANCIAl plAN 2015/16 – 2024/25REvISEd ApRIl 2015

LONG TERM FINANCIAL PLAN 2015/16 to 2024/25 (Revised April 2015)

This Plan has been prepared by Ku-ring-gai Council to support the delivery of its long-term strategic direction. It forms part of the Resourcing Strategy for the Community Strategic Plan and Delivery Program and should be read in conjunction with these documents. For more information on this document contact: Ku-ring-gai Council 818 Pacific Hwy, Gordon NSW 2072. Locked bag 1056, Pymble 2073 Ph. (02) 9424 0000 F (02) 9424 0001 [email protected]

i Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised April 2015)

INTRODUCTION ................................................................................................................................................................................................................. 1

OVERVIEW ......................................................................................................................................................................................................................... 3

LONG TERM FINANCIAL PLAN PRINCIPLES .......................................................................................................................................................................... 3

SCENARIO PLANNING ......................................................................................................................................................................................................... 5

LTFP ASSUMPTIONS & SENSITIVITY ANALYSIS .................................................................................................................................................................. 14

HIGHLIGHTS OF THE LONG TERM FINANCIAL PLAN ........................................................................................................................................................... 18

KEY FINANCIAL INDICATORS ............................................................................................................................................................................................ 32

CONCLUSION ................................................................................................................................................................................................................... 39

APPENDICES APPENDIX A ‐ LTFP FORECASTS AND ASSUMPTIONS .................................................................................................................................... 41

1 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised April 2015)

INTRODUCTION A long term financial plan (LTFP) is one of the three key Resourcing Strategies required by the NSW Integrated Planning & Reporting legislation. Local government operations are vital to its community, and it is important that stakeholders can understand the financial implications arising from its Community Strategic Plan, Delivery Program and annual Operational Plan. The Integrated Planning and Reporting Guidelines guide preparation of the LTFP for Local Government in NSW issued by the Office of Local Government. The LTFP includes:

projected income and expenditure balance sheet cash flow statement planning assumptions used to develop the plan sensitivity analysis – highlight factors most likely to affect the plan financial modelling for different scenarios methods of monitoring financial performance

The LTFP contains a core set of assumptions. These assumptions are based on CPI forecasts, interest rate expectations, employee award increases, loan repayment schedules, special price forecasts for certain Council specific items, planned asset sales and other special income and costs. The diagram below illustrates the link between the main elements of the LTFP: service standards, levels and priorities, Capital and Operating budget, major project analysis and assumptions and scenarios.


The diagram below illustrates the link between the main elements of the LTFP: service standards, levels and priorities, Capital and Operating budget, major project analysis and assumptions and scenarios.

Long Term Financial Plan Elements of the Plan


OVERVIEW Ku-ring-gai Council’s current Long Term Financial Plan (LTFP) covers the period 2015/16 to 2024/25. It recognises its current and future financial capacity, to continue delivering high quality services, facilities and infrastructure to the community while commencing new initiatives and projects to achieve the goals set down in its Community Strategic Plan (2030). Financial planning over a 10-year time horizon is challenging and relies on a variety of assumptions that will undoubtedly change during this period. The LTFP is therefore closely monitored, and regularly revised, to reflect these changing circumstances. The LTFP is the core document used to guide all financial planning within Council and is the basis for annual budgets and the preparation of the Delivery Program and Operational Plan. Ku-ring-gai Council is in a sound financial position. The LTFP provides for Operating Surpluses after allowing for the depreciation expense on Council’s $976 million portfolio of depreciable assets such as roads, footpaths, drains and buildings. If capital grants and contributions are excluded, the Operating result remains in Surplus throughout the 10 years of the LTFP. Council maintains healthy levels of working capital and reserves in the LTFP, and has a strategy in place to fund renewal of infrastructure assets and debt funding for major projects via identified sources of repayment. Council has identified increasing funding for infrastructure renewal as a key priority. Two main scenarios have been outlined in detail in the LTFP for consideration. The scenario that Council will adopt best addresses the infrastructure renewal requirements that have been identified. This scenario includes a new funding strategy for assets renewal. As per the new funding strategy, Council will be able to close the gap between the required level of infrastructure renewal funding and the actual funding available.

LONG TERM FINANCIAL PLAN PRINCIPLES Council’s overall guiding principle is to maintain a healthy financial position, underpinned by a sound income base and commitment to control and delivery of services, facilities and infrastructure demanded by the community in an effective and efficient manner. The LTFP puts these principles into action by formulating and applying specific objective tests of financial sustainability to the LTFP and its scenarios:


1. Maximise funds available for projects to upgrade or renew infrastructure by:

Maximising the operating profit before capital items Prioritizing the use of Council cash reserves Borrowing in accordance with policy Timing project expenditure over a longer period and linking to funds availability

2. Satisfy applied tests of financial sustainability:

Achieve an operating surplus (excluding capital grants and contributions), Target a minimum working capital of 5.5% of operating expenses (excluding depreciation) as recommended by Council’s

external auditors. Working capital is determined by taking net current assets less internally and externally restricted reserves and adding those current liabilities to be funded from the next year’s budget. Essentially, working capital is a measure of Council’s liquidity and ability to meet its obligations as they fall due. This will allow for unforeseen expenditure or reductions in revenue or other accounting adjustments.

Maintain a minimum Unrestricted Current Ratio of 2.0 (industry benchmark is 1.5 for ‘satisfactory’ and 2 for ‘good’) Maintain a sustainable debt level and debt service ratio below the industry benchmark (industry green light benchmark less than

20%). Maintain a minimum level of internal discretionary cash reserves (excluding liability cash reserves) of 10% of revenue Only capital items to be funded from cash reserves Proceeds of asset sales returned to reserves for expenditure on assets renewal or major asset refurbishment Maintain all Infrastructure assets ratios at a sustainable level, meeting or outperforming benchmark.

All of the above objective tests are considered together in the overall evaluation of the LTFP and its scenarios. The tests are not necessarily strictly applied each time, particularly where an LTFP scenario only fails the test for a limited period of time. For example, during the next two years, the Infrastructure Backlog Ratio test will not be satisfied due to insufficient funding allocated to assets renewal in previous years, however Council has now adopted a new funding strategy that will address this issue. Thus, the Plan is still regarded as sustainable. The new funding strategy is discussed further in this document.


3. Borrowing Strategy

Loan borrowing is a legitimate and responsible financial management tool and the use of loans to fund capital projects can be an effective mechanism of linking the payment for the assets (via debt payments) to the successive rate-paying populations who receive benefits over the life of those assets. This matching concept is frequently referred to as ‘inter-generational equity’.

Borrowings are considered as a source of funding in the following circumstances: Capital projects that deliver long term benefit to the community Building or purchase of assets where a detailed cash flow analysis shows that full funding costs can be recovered over

the life of the asset or economic investments where a new asset or service decreases existing costs or provides new revenue in excess of their funding costs (positive NPV)

As borrowings are usually the highest cost source of funds:

Internal funding sources are considered and used first (including possible re-allocation of funds from lower priority projects or operating items)

The proposed project may be re-timed to match internal funds availability

SCENARIO PLANNING The LTFP is a model to consider scenarios for the funding of operating and capital expenditure. Detailed forecasts of all sources of operating revenue and expenditure are utilised to derive the maximum surplus available to apply to Council’s rolling program of capital investments in new or refurbished infrastructure. Scenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal Scenario 2 - Scenario without additional funding for infrastructure renewal Both Scenario 1 and 2 are financially sustainable in terms of maintaining a balanced budget, sufficient unrestricted cash and available working capital, sufficient cash reserves and a permissible debt service ratio over the medium term. However, the variance between both scenarios is the level of funding allocated to assets renewal.


Council’s optimal scenario is Scenario 1, which assumes increased investment in renewal of infrastructure as this will help address the asset renewal backlog. It identifies additional funding, in order to meet the identified target renewal expenditure levels. Both scenarios are modelled for a period of 10 years. Each of them considers the impact on key financial indicators in the LTFP, current service levels and asset management. The forecast income statement, balance sheet and cash flow statement for the scenarios are provided in appendices to this report. Scenario 1 – Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal The base scenario of the LTFP shows the financial results of delivering the current level of service as per the 2015/16 budget expanded out over 10 years and adjusted by various price forecast indexes as detailed in the financial assumptions section of this document. This scenario is modelled to address Council’s renewal assets gap by adopting a new funding strategy for assets renewal.

Infrastructure Assets review Council adopted a new funding strategy for Infrastructure assets renewal which is based on the principle that all available surplus funds will be diverted towards Council’s assets renewal as a priority. Additional funding is assumed to be generated from the reallocation of the proceeds of asset sales and reinvestment of these proceeds into Infrastructure Asset Renewals. The new funding strategy was reinforced by a recent independent review on all Council’s Infrastructure assets. Council undertook an independent review of its infrastructure assets and financial data to ensure that there is a consistent organisational approach to infrastructure reporting. The following was reviewed: condition of Council’s assets by asset class, Council’s methodology to determine cost to bring assets to a satisfactory condition, actual asset maintenance compared to required asset maintenance, current assets renewals and required assets renewal. All asset classes reported in Special Schedule 7 “ Report on Infrastructure Assets” have been assessed as part of the review as well as the overall cost to bring infrastructure assets to a satisfactory condition. Based on revised condition assessment of Council’s infrastructure assets ( i.e buildings and roads) and a new backlog methodology, the current backlog on infrastructure assets has been assessed at $32.7 million with a backlog ratio of 6.4% for 2014/15. The review also identified that Council has an annual shortfall of funding for assets renewal. If this shortfall is not addressed it is likely that the infrastructure backlog will continue to increase in future years. In addition, adequate funding also needs to be directed towards maintenance which is already incorporated in the current plan. In light of the infrastructure assets review Council considered funding strategies that prioritises asset maintenance and renewal expenditure over new and upgraded assets expenditure.


New Funding Strategy for Assets Renewal

In light of the infrastructure assets review Council considered a new funding strategy that prioritises asset maintenance and renewal expenditure. The new funding strategy for Infrastructure assets renewal is based on the principle that all available surplus funds will be diverted towards Council’s assets renewal as a priority. Additional funding is assumed to be generated from the reallocation of the proceeds of asset sales and reinvestment of these proceeds into Infrastructure Asset Renewals. Council previously resolved to fund a specific project - Relocation of staff to a new Administration Building (Service Relocation project) through asset sales. Under the current scenario these funds will be diverted towards an assets renewal program and the Services Relocation project will have an alternative funding option as described further. The redirection of this funding will increase expenditure for asset renewals by $43.9 million for 10 years (or $22.6 million in the first two years) and allocate $13.5m on average in maintenance each year as required by the Asset Management Plan. Additional funding will also have a positive impact on Council’s infrastructure backlog, with a reduction in backlog of $22.2 million by 2016/17, from 6.4% in 2014/15 to 2% in 2016/17 meeting the current industry benchmark for the backlog ratio. The low level of backlog will be maintained over the long term by investing all additional surplus funds into assets renewal and providing sufficient asset maintenance in future years to prevent the backlog from growing. The acquisition of the Administration Building in 2012/13 was originally funded by external borrowing with the borrowing to be subsequently discharged by future asset sales. Under the new funding strategy the Administration Building will be fully leased out generating enough net revenue over the life of the plan to discharge the current outstanding debt over a longer period of time. This principle aligns with the matching concept of ‘inter-generational equity’. The relocation of staff to the new administration building is also deferred for a period of 10 years.

This scenario is financially sustainable according to the recognised financial sustainability measures and the one that Council will consider for adoption. It is estimated that additional proceeds from asset sales will produce the following increase in Council revenue over the next 2 years (see table below). This additional funding is sufficient to decrease the backlog to the benchmark of 2% by 2016/17. Future backlog will be further decreased and later maintained by additional funding from Council’s Investment property at 828 Pacific Highway, once the loan is discharged.


Proceeds from Asset Sales

2015/16 $11.58M

2016/17 $12.92M

Total $24.50M

Pending the sale of assets, Council will receive $24.5 million in total over a 2-year period. If the sale of assets does not eventuate and additional funding is not received, only the base funding will be available for assets renewal, leading to increased backlog in future years. The new assets renewal funding strategy ensures that Council has the capacity to provide additional funding to reduce the infrastructure gap, and continue to bring Council’s infrastructure assets to a satisfactory standard within an established timeframe. The benefits of bringing Council’s infrastructure assets to a satisfactory standard will help reduce the annual maintenance requirements as well as the cost of future infrastructure works. The table and charts below display the planned asset renewal expenditure in future years, highlighting the standard renewal program and additional funding provided. The additional income from the new funding strategy has a positive impact on the size of the future asset renewal gap, reducing it in just two years to 2 % by 2016/17.

Asset Renewal ExpenditureProjected Projected Projected Projected Projected Projected Projected Projected Projected Projected

$ '000 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25Required Renewal 17,013 17,182 17,685 19,815 20,050 20,516 20,929 21,266 21,339 21,468Total - Infrastructure Assets Renewal 27,719 28,761 25,005 19,858 21,698 20,557 21,480 21,504 21,802 22,245

Standard Renewal 16,919 16,961 24,005 17,758 20,698 16,357 16,980 16,504 18,302 22,245Additional Renewal Program 10,800 11,800 1,000 2,100 1,000 4,200 4,500 5,000 3,500 0


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2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

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How Council's Infrastructure Backlog Is Being Managed ($M)

Backlog Renewal Program Standard Renewal Expenditure Program

Total Infrastructure Assets ‐ Backlog Ratio Infrastructure Assets ‐ Backlog Ratio Target

Additional funding is diverted into assets renewal in the first years of the LTFP, contributing to a reduction in the assets renewal backlog to 2% by 2016/17. The industry benchmark for the backlog ratio is 2% as defined by T-Corp and the OLG. As Council injects more funding into asset renewals in the first two years of the LTFP the funding gap decreases significantly. Over 10 years of this financial plan a total of $229 million is invested into infrastructure assets renewal and the backlog is eliminated by the end of this financial plan (from $32million in 2014/15 and $22 million in 2015/16 to nil in 2024/25). As part of the infrastructure review, it was identified that some asset classes have a larger backlog than other asset classes. The condition of assets was assessed in terms of service potential and funding redirected to those asset classes that have a larger backlog. This will ensure that all infrastructure assets provide an adequate level of service in future. The allocation of renewal funding will be reviewed annually to make sure that assets conditions do not degrade beyond an objective threshold. The allocation of additional funding into assets classes is shown below. Asset Class Percentage of additional

funding Buildings 20.0% Roads 10.0% Footpaths 10.0% Kerb and Gutter 25.0% Stormwater Drainage 20.0% Open Space/Recreational Assets 15.0%


Asset maintenance and Infrastructure funding

Council’s Asset Management Strategy identifies a shortfall in expenditure on maintenance of infrastructure assets compared to required annual maintenance estimates. Inadequate asset maintenance may result in a shortened useful life and the need for earlier than planned renewal. The current LTFP addresses this issue and allocates adequate funding towards asset maintenance in future years. Council budgeted for $11.5 million (compared to $11 million required expenditure) in maintenance costs for infrastructure assets in 2015/16 budget with further increases in future years. Total maintenance expenditure increases in line with other operating expenses (by an average of 3%), however in 2017/18 to 2018/19 the maintenance expense will increase due to capital projects planned on new assets.

The actual asset maintenance expenditure versus required maintenance, as well as the increasing trend of maintenance expenditure and total operational expenditure are shown below.

Infrastructure Maintenance Expenditure

Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected$ '000 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25Required Maintenance 11,043 11,151 11,478 13,233 13,399 13,710 13,973 14,186 14,237 14,320 Actual Maintenance 11,508 11,842 12,126 13,392 13,713 14,042 14,380 14,725 15,078 15,440

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2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

$M

Infrastructure Asset Maintenance

Required Maintenance Actual Maintenance

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2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Increase in Actual Maintenance Expenditure vs Total Operating Expenditure Over 10 Years

Actual Maintenance Increase (Cumulative) Total Operating Expenditure Increase (Cumulative)


The current LTFP under Scenario 1 allocates adequate funding towards Infrastructure assets in terms of assets maintenance, renewal and new/upgrade as shown in the chart below. A total of $136 million will be allocated to asset maintenance over 10 years, $229 million to asset renewals and $226 million to build new or upgrade existing assets. The new/upgrade expenditure includes new or existing projects largely funded by s94 developer contributions, such as for community facilities to meet the needs of the growing community. Major capital initiatives are planned for the early years of the LTFP (2015/16 to 20118/19) which are listed further in the report.

Funding for capital works is allocated into the following categories listed below (note that these figures also include expenditure on new assets funded by s94 developer contributions). The largest capital expenditure goes to Roads & Transport with 33% of total expenditure for the forecast period, followed by Parks & Recreation (24%) and Streetscape & Public Domain (21%). Parks & Recreation, among others, includes acquisition of Community land, which is funded by s94 contributions.

Projected Capital ExpenditureScenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal

Capital Works Project Exp Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected$'000 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Planning, Community & Other 2,101 2,148 2,358 2,451 2,233 2,291 2,353 2,414 2,477 2,541Roads & Transport 15,292 23,130 23,567 11,853 18,720 18,681 16,859 14,843 16,228 13,313Streetscape & Public Domain 2,127 14,614 27,239 4,976 2,015 16,526 15,545 3,094 4,660 20,441Parks & Recreation 19,460 13,923 16,212 10,972 40,208 7,167 3,770 3,349 11,239 3,446Stormwater Drainage 2,706 2,986 986 1,313 1,117 1,780 1,866 1,991 1,717 1,043Council Buildings 4,625 4,618 57,070 1,708 1,152 1,817 1,903 2,029 1,756 1,084Trees & Natural Environment 1,358 999 851 997 0 0 0 0 0 0

Total Projects 47,669 62,418 128,283 34,270 65,445 48,262 42,296 27,720 38,077 41,868


Scenario 2 - Scenario without additional funding for infrastructure renewal This scenario shows the financial results of delivering the current level of service as per the forecast 2015/16 budget expanded out over 10 years without additional funding for infrastructure assets renewal in the short term. The scenario is modelled to address Council’s renewal assets gap in future years only when funding becomes available. The main difference between the two scenarios is the pattern of capital expenditure and the total amount of funding available for asset renewal. This scenario assumes relocation of staff to the new Administration building (Services Relocation Project) mentioned under Scenario 1. The funding strategy under this scenario allocates proceeds from divestment of assets towards discharging Council’s outstanding debt originally drawn to fund the acquisition of this building. Additional borrowing would also be required for extensive capital expenditure to refurbish the administration building before staff relocation. This scenario does not provide funding for assets renewal in the early years of the forecast period. This means that the current infrastructure backlog will not be addressed and with insufficient funding into renewals the backlog will continue to increase in future years. Funding becomes available in the latter part of the LTFP years. This scenario is sustainable according to the recognised financial sustainability measures and can be delivered, however, since it does not address the asset renewal backlog and community concerns about the infrastructure assets it is not the preferred option. Capital expenditure Under this scenario additional renewal funding is not available from proceeds of asset sales, however, funding becomes available in later years from rates growth. The infrastructure backlog remains above FFTF benchmark in the earlier years of the plan and is gradually decreasing by the last year of the plan. It takes significantly more years to reduce the infrastructure backlog. Assets renewal expenditure is less than Scenario 1 mainly because the proceeds from asset sales ($24.5 million) are being used to discharge the total outstanding loan for the administration building in earlier years rather than used for assets renewal.

While remaining within the acceptable limits, other financial indicators are also affected, mainly: reduced operating ratio, higher debt service ratio due to higher principal and interest repayments. The impact on financial ratios is further examined under the “Key financial indicators” section of this report.


The impact of reduced funding for assets renewal under Scenario 2 is demonstrated in the charts below. Both Assets renewal expenditure goes down and infrastructure backlog deteriorate. The infrastructure backlog under this Scenario is higher in 2015/16 at $30 million compared to ($22 million in 2015/16 under Scenario 1) due to less renewal expenditure on infrastructure assets in the first year of the LTFP. The infrastructure backlog is eliminated by 2024/25.

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Backlog Renewal Program Standard Renewal Expenditure Program

Total Infrastructure Assets ‐ Backlog Ratio Infrastructure Assets ‐ Backlog Ratio Target

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Scenario 2 allocates capital funding as follows:

Projected Capital ExpenditureScenario 2 - Scenario without additional funding for infrastructure renewal

Capital Works Project Exp Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected$'000 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Planning, Community & Other 3,058 2,148 2,358 2,451 2,233 2,291 2,353 2,414 2,477 2,541Roads & Transport 10,432 19,079 23,632 12,683 20,563 19,576 17,881 15,950 18,073 16,839Streetscape & Public Domain 2,127 14,614 27,239 4,976 2,015 16,526 15,545 3,094 4,660 20,441Parks & Recreation 17,840 12,573 16,236 11,283 40,823 7,465 4,111 3,718 11,854 4,622Stormwater Drainage 546 1,185 1,059 1,728 1,936 2,178 2,320 2,483 2,537 2,611Council Buildings 4,511 1,492 55,709 2,226 1,971 2,215 2,357 2,521 2,576 2,651Trees & Natural Environment 1,358 999 851 997 0 0 0 0 0 0

Total Projects 39,872 52,090 127,084 36,344 69,541 50,251 44,567 30,180 42,177 49,705


LTFP ASSUMPTIONS & SENSITIVITY ANALYSIS

The Long Term Financial Plan contains a wide range of assumptions, including assumptions about interest rates, potential effect of inflation on revenues and expenditures, current service levels and others. Major assumptions in the current version of the LTFP are listed below and a detailed list is attached to this report. Some of these assumptions have relatively limited impact if they are inaccurate; some have a major impact on Council’s future financial plan. The LTFP is a dynamic financial model and is updated quarterly to ensure the assumptions are continually updated with the latest information available. The Plan is also tested by varying the amounts of the moderate to significant assumptions and the impact is analysed. CPI Forecast: An annual 2.9% increase in CPI has been built into the LTFP for both income and expenditure in line with Access Economics forecast for CPI. The Reserve Bank’s target for inflation remains between 2% and 3%. Income from Rates is limited to rates pegging set by IPART (2.4% for 2015/16) averaging an annual increase of 3% from 2015/16 onwards. In addition, the LTFP assumes an increase of 0.7% annually resulting from population and property growth. The LTFP assumes continuation of the Environmental special rate variation for the ten-year period. Fees and charges are expected to increase by 2.9% annually. Charges for domestic and trade waste have been increased to reflect cost increases in providing the service. Investment revenue has been estimated based on current cash levels and future expected earnings of BBSW + 0.7% over the 10 year period. The annual interest rate is estimated to 3.2% for 2015/16, 4.1% for 2016/17 and 4.3% for the remaining years to 2024/25. Grants for both Recurrent and Capital purposes have been increased by 2.6% as per CPI, except for the Financial Assistance Grant, which is not indexed in the LTFP. Proceeds from Asset Sales are projected in the LTFP mainly in the early years of the plan. The next 2 years are the most critical as the proceeds from sale will be used for infrastructure assets renewal. These properties have previously been identified and reported to Council. Employee costs have been estimated based on agreed award increases. Workers compensation has been factored by the same rate, which is an average of 3.7% per year.


Operational materials and contracts expenditure are estimated to increase by 2.9% as per CPI for 2015/16 and 2016/17, and 2.4% for the remaining years. Capital materials and contracts expenditure is assumed to increase by an average 2.6% annually based on ABS infrastructure index. Borrowing Costs have been estimated based on 135 basis points over 90 day BBSW per annum. The annual interest rate is estimated at 3.9% for 2015/16, 4.8% for 2016/17, and 5% for the remaining years to 2024/25.

Sensitivity Analysis The following table lists the major assumptions affecting the LTFP results and shows the impact of varying them. This impact is classified as Low, Moderate or Significant in terms of quality and quantum of service delivery to constituents.

Impact Comment Revenue Inflation/CPI Low Changes in inflation will affect both revenue and expenditure, but increases in the

assumption are likely to be negative for the projected operating surplus.

Rates Income – Rate Peg

Moderate to Significant

The rate peg for 2015/16 announced by IPART is 2.4%. Rates income also assumes rates growth of 0.7% per annum through increased development. Changes in rate pegging will affect revenue forecasts, and these will have a moderate impact on the LTFP Model, compared to the calculations using the average LGCI. Non-achievement of property and rates income growth forecasts will directly affect provision of new infrastructure and the rate at which existing infrastructure can be renewed.

Investment Earnings and Interest Expense

Moderate Investments are placed and managed in accordance with the Council’s adopted Investment Policy in compliance with the Local Government Act. Council’s investments portfolio is subject to fluctuations in interest rates. An adverse movement in interest rates will reduce investments income and impact on capital expenditure and service levels, with only a minor offset through savings in variable interest loan costs.

Proceeds from Asset Sales

Significant The LTFP assumes sale of assets for the 10 years. Proceeds from asset sales will be used for infrastructure asset renewal leading to a reduction in Councils infrastructure


Impact Comment Revenue

backlog. If the proceeds and timing of sales are not realised as per the plan, this will have a major impact on Council’s key infrastructure assets indicators. There will be insufficient funding available to address the current assets backlog. The Asset’s Renewal Ratio will deteriorate together with the Infrastructure backlog ratio. Asset sales are also planned to fund Council’s co-contribution in its s94 Developer Contributions plan. If these asset sales are not realised, either cuts to services and other capital would have to be made or alternatively the s94 projects requiring Council co-contributions would have to be deferred or deleted from the program.

Grants Low for specific purpose grants. Moderate/Significant for general purpose grants

The LTFP model includes operational grants and capital grants that have already been awarded. The Council does not have a strong reliance on specific purpose grants revenue in comparison with other sources of revenue. Programs funded by specific purpose grants may not be offered by the Council if the grants were eliminated. The general purpose component of the Council’s Financial Assistance Grant is currently $3.5 million. If this grant were reduced or eliminated, the Council would need to consider significantly reducing capital expenditure and operating service levels.

Expenditure Employee Costs Significant This is Council’s largest cost. The number of employees in operating activities is

assumed to remain constant with cost increases in line with forecast or known Award changes. This volume assumption is at risk from possible future changes to conditions, further devolvement of functions from other levels of government and from growth in Council services requiring additional staffing. The Award increase assumptions are at risk as Council has no direct control over this. Employees engaged in capital projects may increase slightly with increased funding for infrastructure, however this would be met from the new budget allocations.

Borrowing costs Moderate Council’s outstanding loan balance is expected to decrease to $25.4 million by 2015/16. This includes a line of credit loan where interest capitalises and is discharged by future net revenue generated from leasing out the new Administration building. This carries a moderate risks in term of delays in realising income if the current building is not fully leased out as predicted in the LTFP assumptions.


The following table illustrates monetary sensitivity to variations in the assumptions.

Income & Expenditure Categories

Assumption 2015/16 Base$'000

Sensitivity to a 10% Variation in the

Assumption $

Sensitivity to a 20% Variation in the

Assumption $

INCOME: Rates 3.2% 57,647 184,470 368,941 Annual Charges (DW & others) 8.5% 20,740 176,290 352,580 Fees & Charges 2.9% 16,938 49,120 98,240 Operating Grants 2.9% 7,566 21,941 43,883 Interest on Investments 3.2% 4,182 13,382 26,765 Other Income 2.9% 10,723 31,097 62,193 EXPENDITURE Employee Costs 3.2% 37,534 120,109 240,218 Borrowing Costs 3.9% 1,093 4,208 8,416 Materials & Contracts 2.9% 35,617 103,289 206,579 Depreciation 1.8% 19,155 34,629 69,257 Other Expenditure 2.9% 20,930 60,697 121,394

The sensitivity analysis shows that Rates income and Employee costs would have the greatest impact if there is a future variation from the LTFP assumptions. If there are adverse variations in the future from the LTFP assumptions, adjustments will need to be made to operations and capital programs to maintain financial sustainability. The sensitivity analysis brings into sharp focus the need to manage employee numbers and costs.


HIGHLIGHTS OF THE LONG TERM FINANCIAL PLAN

Financial Performance Summary – Forecast Ku-ring-gai Council’s LTFP details Council’s expected income, operational and capital expenditure within the external environment that Council is expected to face in future. Council is forecasting a strong operating result with operating surpluses in each year. All key financial ratios are predicted to meet or outperform benchmarks. The following forecast summary on financial performance is based on Scenario 1. This Scenario represents the new funding strategy with additional income from divestment of assets for Infrastructure assets renewal. This is Council’s optimal scenario and is financially sustainable in terms of key financial measures.

Operating Result The operating result after accounting for capital items is a surplus in all projected years. The overall trend in operating result is improving over the forecast period due to revenue growth (averaging 4.9% p.a.) outstripping expenditure growth (averaging 2.5% p.a.). Revenue growth is driven by rates and annual charges, user fees and charges and other revenue including rent income. Another factor in increased revenue is the inflow of additional funds from the property development activity that is expected to grow the rates base. The strong results in 2016/17 to 2018/19 are primarily due to forecast gains from sale of assets to fund infrastructure renewal works as well as capital income from partner contributions partly funding major projects (such as Lindfield Village Green mentioned further in the report). Planning for these projects, should consider the inclusion of commercial opportunities of sufficient return to cover ongoing operational costs of the public spaces in the precinct. The proceeds from asset sales are restricted and will be solely used for assets renewal. The charts below show the forecast operating result before and after capital grants and contributions items and income from sale of assets. The Net Operating Result for the year includes capital grants and contributions as well as asset sales revenue. As these items are capital in nature, it is useful to focus on the operating result that excludes capital items and assets sales. The elimination of these items are made to focus on analysis of core operating council’s results. In 2015/16 Council achieves an operating surplus of $27.2 million after allowing for the depreciation expense. If capital grants and contributions are excluded, the operating result remains in Surplus, with a result of $9.1 million.


Projected Income Council obtains revenue from a variety of sources including rates and annual charges, user charges and fees for services, interest and investment revenue, other revenue and grants and contributions for both operating and capital purposes. Council’s revenue has been forecast to increase from $141.5M in 2015/16 to $175.2M over the ten years, which is an average of 3% increase per year. The projected income for the forecast period is detailed in the chart below.


20 40 60 80 100 120 140 160 180 200

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

$M

YearProjected Income ($M)

Rates & Annual Charges User Charges & FeesInterest & Investment Revenue Other RevenuesGrants & Contributions for Operating Purposes Grants & Contributions for Capital PurposesNet gains from the disposal of assets

917.0 , 55.5%

195.9 , 11.9%

40.0 , 2.4%

141.2 , 8.6%

71.7 , 4.3%

252.0 , 15.3%

33.6 , 2.0%

Projected Income ‐ 10 Year Total ($M)

Rates & Annual Charges

User Charges & Fees

Interest & Investment Revenue

Other Revenues

Grants & Contributions forOperating Purposes

Grants & Contributions for CapitalPurposes

Other Income:

Net gains from the disposal ofassets

Rates Income & Annual Charges Council’s dependence upon rates income and annual charges is approximately 56%. The rest of the costs of Council’s operations are funded from non-rates income. Part of the increased income from rates is due to the forecast development activity leading to additional dwellings, which will be allocated to assets renewal from 2015/16 onwards and have been incorporated into the LTFP scenarios. Two special rate variations are included in the LTFP:

The SRV for Infrastructure is a permanent levy from 2014/15 onwards granted by IPART in 2013/14 based on Council’s application for a continuation of this SRV.

Environmental SRV - an 8-year environmental levy is in place for a special environmental program. This formally expires in 2018/19, although it is likely that Council seeks renewal of this levy. Accordingly, the LTFP assumes continuation of the program of works that it funds and continuation of the levy.


User Charges & Fees Charges Council derives approximately 12% from user charges & fees and these are forecast to increase by an average of 4.5% per year over the forecast period primarily driven by expected rent revenue from the services relocation project.

Interest Income Council has forecast an earning rate on its investments of the expected BBSW rate + 0.7% over the forecast period. Interest revenue changes in line with cash and investment balances.

Operating Grants & Contributions Operating grants and contributions increase by an average of 1% p.a. Council’s main form of grant assistance is the financial assistance grant, which is a federal untied grant that is distributed between the States based on their percentage of the total population. Financial assistance grants consist of two components both of which are distributed to councils: general-purpose component and a local road component.

Capital Grants Capital grants and contributions are volatile over the forecast period as they can relate to specific one-off major projects.

Developer Contributions Council collects contributions from Developers (s94 Contributions) to help pay for new infrastructure and facilities for the growing population of the area. The Long Term Financial Plan includes the works listed in the Ku-ring-gai Contributions Plan 2010, which came into effect on 19 December 2010. This Contributions Plan applies to development in Ku-ring-gai that gives rise to a net additional demand for infrastructure identified in the Contributions Plan. This period accounts for both the estimated pattern of receipt of Section 94 contributions as well as the delay between contribution receipt and Council’s ability to complete works. Some of the works to be undertaken in the s.94 plan cater for the existing population and these works require a co-contribution from Council’s general funds. Revenue from divestment of Council property assets will be used to meet Council’s commitment in its s.94 Developer Contributions Plans for co-contributions of general revenues to accompany developer contributions. The amount of funding required from property asset divestment over the 10 years of the LTFP is $15 million.


Income from Asset Sales This income from asset sales is from rationalisation of property assets that will start in 2015/16. Planned asset sales are to fund:

Infrastructure Assets Renewal Council’s co-contribution for projects identified in the Development Contributions Plan 2010. These sales are planned to commence

in 2017/18 and continue over a 4-year period as Contribution Plan projects proceed. The total proceeds from asset sale will be used for projects commencing in this financial plan ($15 million) and the rest will be restricted to the Assets Sales Reserve available for projects commencing beyond 10 years.

The chart below provides projected asset sales over a 10 year period and identifies the categories to which the funding will be allocated.

‐ 2 4 6 8

10 12 14

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

$M

Projected Asset Sales

Infrastructure Renewal Program CP2010

Projected Operational Expenditure Council incurs the following expenditure in the course of its operations: employee benefits and on-costs, borrowing costs, materials and contracts, depreciation, other expenses. Total operating expenses are projected to increase by an average annual increase of 2.5% over the forecast period. The projected operational expenditure for the 10 year forecast period is detailed in the chart below.


20 40 60 80 100 120 140 160

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

$M

YearProjected Expenditure ($M)

Employee Benefits & On‐Costs Borrowing Costs

Materials & Contracts Depreciation & Amortisation

Other Expenses Other Operational Projects Expenses

446,644 , 34.4%

5.3 , 0.4%

360.8 , 27.8%

219.7 , 16.9%

221.0 , 17.0%

45.3 , 3.5%

Projected Expenditure ‐ 10 Year Total ($M)

Employee Benefits & On‐Costs

Borrowing Costs

Materials & Contracts

Depreciation & Amortisation

Other Expenses

Other Operational ProjectsExpenses

Employee Costs Employee costs increase by an average of 4% p.a. over the forecast period. Employee related expenditure is the largest expense type incurred by Council. The LTFP reflects the Workforce Strategy. With the allocation of additional funding to Council’s infrastructure assets renewal program, workforce resourcing allocation will require review and adjustment in order to meet increased workload demands. Other employee related issues such as maintaining/improving workforce capacity are dealt with in the Workforce Strategy and have therefore not been addressed in the LTFP.

Workers compensation Workers compensation insurance premium payments are based on previous claims history. Projected premiums therefore take the most recent premium and increase it by CPI.

Capitalisation rate for employee related expenditure Council capitalises a portion of employee related expenditure that relates to the construction of assets per the requirements of AASB 116 – Property, Plant and Equipment. The percentage of employee related expenditure capitalised has been assumed to stay constant from year to year for the purpose of the LTFP.


Superannuation Contributions by Council to both defined benefit and defined contribution superannuation plans have been forecast to increase per the increase in salaries and wages plus the expected increase in the superannuation guarantee. The Government has announced an increase in the superannuation guarantee rate from 9% to 12% between the 2013/14 and 2019/20 financial years.

Employee benefits Employee leave entitlements such as annual leave and long service leave have been projected to increase at the same rate as general salaries expenditure.

Borrowing costs Borrowing costs incurred include interest on loans held by council. Borrowing costs form 0.4% of the total expenditure incurred by Council. Borrowing cost projections are based on current loans, including the loan facility for the services relocation project and a $2M loan for the Local Infrastructure Renewal Scheme that Council took in 2012/13. This loan was used for Gordon Library upgrade and public toilet upgrades and will involve a ten year repayment schedule. The LTFP plans no further borrowings in future years.

Materials & Contracts Materials and contracts expenses increase by an average of 2% p.a. over the forecast period. Materials and contractors is the second largest cash expense item incurred by council (28% of total expenditure in the 2015/16 financial year). Materials and contracts payments include contractor and consultancy costs, which also relate predominantly to Council’s maintenance program. Other materials and contracts costs include operating lease expenses, legal expenses, and auditor fees.

Depreciation and Amortisation Depreciation and amortisation expenses increase by an average of 2% p.a. Depreciation and amortisation are dealt with in the Asset Management Strategy (AMS), and details on all assumptions used in depreciation/amortisation calculations can be found in the AMS.

Other expenses Other expenses increase by an average of 5.1% per year from 2015/16.


Projected Capital Expenditure A significant highlight of the LTFP is its commitment to capital works program. The LTFP forecasts delivery of a total capital works and other major projects program over 10 years totalling over $536 million (at future prices). A portfolio of all project proposals has been developed, including estimates of costs and funding sources to determine current and future funding requirements. This project portfolio has been linked to the LTFP. Some significant projects included in this and delivered in the next year are listed below:

Major capital projects initiatives for 2015/16 Council considers a range of available projects competing for resources each year and evaluates major ones based on their financial sustainability and potential contribution to Community needs. During 2015/16, the following projects will be commenced or progressed:

Local Infrastructure Renewal Scheme (LIRS) – this initiative, funded by loans at subsidised interest rates, allowed the renewal and upgrade of Council’s main library and continues to fund many Public Toilet amenity buildings.

The Waste Less, Recycle More (Waste and Resource Recovery Initiative) – is a continuation of last year’s initiative which provides a range of new waste related project initiatives funded by payments received form the State Government following increased recycling of domestic waste

Implementation of Koola Park Master Plan – the first two stages of the redevelopment of this significant recreation area have been

completed over the last 3 years. These include the stormwater harvesting system from Rocky Creek, a 600,000 litre underground storage tank, the relocation and expansion of cricket practice nets, store room and plant room addition to the amenities building, and a sewer connection to replace the old septic system. In 2015/16 we will see the construction of stages 3 & 4. These stages include field levelling, drainage, irrigation, an extension of the playing fields to gain an additional full size sports ground for the Ku-ring-gai community, sports field floodlights, as well as a children's play space, outdoor exercise equipment, perimeter exercise path and additional car parking facilities.

Implementation of St Ives Village Green Master Plan – 2014/15 saw the demolition of the old scouts and girl guides halls, with the groups relocated newly renovated facilities at Warrimoo Oval St Ives Chase. This will enable the construction of the new youth precinct, including skate and bike park, basketball court and performance space, as well as a new and expanded children’s playground, picnic and BBQ facilities, commencing in mid-2015/16. The following years will see other parts of the master plan being implemented, including a perimeter exercise path, terraced seating around William Cowan Oval, relocation of the tennis courts to be adjacent to the bowling club, additional car parking in Cowan Road and Memorial Avenue, and an additional footpath on the park side of the Village Green. This path will provide much improved safety and access to and around the park.


Lindfield Village Green – this project will involve constructing a new public park on the site of Council’s car park on Tryon Road

Lindfield. The existing car parking will be relocated to a new basement car park under the park. The park will become a focus for community events, markets and outdoor dining.

Lindfield Community Hub – the community hub is planned to be located on Council’s car park off Woodford Lane on the western side of Lindfield, the project will deliver a new park and town square, as well as a new branch library and community centre. The hub will become a focus for community activities for the southern part of the Ku-ring-gai LGA.

St Johns Avenue, Gordon streetscape upgrade works – this project will involve the reconstruction of the footpath areas on St Johns Avenue between the Pacific Highway and the railway station. The footpaths will be made wider to cater for outdoor dining; the work will also include new high quality paving, street furniture, street trees and LED street lighting.

Gordon Cultural Hub – The Cultural & Civic Hub is proposed to be located in the heart of Gordon on Council’s land at 818 Pacific Highway and 9-17 Dumaresq Street. The new cultural precinct will be designed to address the cultural needs of the local community; it will be a sub-regional facility that is a focal point for the Ku-ring-gai LGA. The project will also deliver a new civic plaza as a site for outdoor civic ceremonies.

Turramurra Community Hub - the community hub is planned to be located on Council’s car park on the northern side of the Pacific Highway between Ray Street and the rail line. The project will deliver a new park and town square, as well as a new branch library and community centre. The hub will become a focus for community activities for the northern part of the Ku-ring-gai LGA.

Construction of St Ives Showground Regional Play Space – During 2015/16 we will be constructing the regional play space and accessible toilet at St Ives Showground. The regional play space is partly funded by a $250,000 grant from the NSW Metropolitan Greenspace Program and the accessible toilet facility is partly funded by a $50,000 grant from the NSW Crown Lands Public Reserves Management Fund Program.


Assumptions around capital expenditure, asset valuations and asset management are covered in the Asset Management Strategy and have been incorporated into the LTFP. A summary of future capital expenditure by asset category is provided below:

Projected Capital ExpenditureScenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal

Capital Works Project Expenditure Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected$'000 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Planning, Community & Other 2,101 2,148 2,358 2,451 2,233 2,291 2,353 2,414 2,477 2,541Roads & Transport 15,292 23,130 23,567 11,853 18,720 18,681 16,859 14,843 16,228 13,313Streetscape & Public Domain 2,127 14,614 27,239 4,976 2,015 16,526 15,545 3,094 4,660 20,441Parks & Recreation 19,460 12,836 17,328 10,972 40,208 7,167 3,770 3,349 11,239 3,446Stormwater Drainage 2,706 2,986 986 1,313 1,117 1,780 1,866 1,991 1,717 1,043Council Buildings 4,625 4,618 57,070 1,708 1,152 1,817 1,903 2,029 1,756 1,084Trees & Natural Environment 1,358 999 851 997 0 0 0 0 0 0

Total Projects 47,669 61,331 129,399 34,270 65,445 48,262 42,296 27,720 38,077 41,868 The largest capital expenditure will go to Roads & Transport with 33% of total expenditure for the forecast period, followed by Parks and Recreation (24%) and Streetscape & Public Domain (21%). Parks & Recreation includes acquisition of Community land, which is funded by Section 94 Contributions. The chart below provides the breakdown of capital expenditure by category for the next 10 years and the sources and use of funds for capital projects

$10 $10 $30 $50 $70 $90 $110 $130

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

$M

Year Capital Expenditure by Asset Category ($M)

Planning, Community & Other Roads & Transport Streetscape & Public Domain

Parks & Recreation Stormwater Drainage Council Buildings

Trees & Natural Environment


Working Capital & Cash Reserves Working Capital Working capital is a measure of Council’s liquidity and ability to meet its obligations as they fall due. It is one of the primary measures of the overall financial position of Council, which allows for unforeseen expenditure, reductions in revenue or other accounting adjustments. Council’s current policy is to maintain a minimum working capital of 5.5% of operating expense. This equates to a projected amount of $4.6M for 2015/16. The working capital is gradually increasing by an average of 4% annually in future years. The level of working capital highlights an adequate liquidity position with Council being able to meet its short term liabilities when they fall due.

Cash Reserves Council has a number of cash reserves which are held for the following reasons:

legal constraint (externally restricted) - e.g. Section 94 Developer Contributions to manage cash flow for abnormal items and thus reduce impact on service delivery specific revenue - e.g. contribution to works

There are three (3) types of cash reserves, namely:

1. Statutory (externally restricted) - eg S94 Developer Contributions, Specific Purpose Unexpended Grants, Domestic Waste Management, Infrastructure Levy and Environmental Levy

2. Internal Liability Reserves – to provide for future liabilities e.g. employee entitlements 3. Internal Project Reserves – to provide for future expenditure on Projects

External reserves can only be used for the purpose for which funds were collected. Internal projects reserves are used solely to fund capital items. One of the targets identified in the LTFP is to maintain a minimum level of internal discretionary cash reserves (excluding liability cash reserves) of 10% of revenue. Any surplus cash funds are allocated towards future assets renewal.

Cash reserves are carefully managed to achieve optimum investment income and to be available when needed for planned expenditures.


Charts below illustrate the level of working capital and internal cash balances reserves (projects reserves) for the 10-year forecast period

4

5

6

7

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

($M)

Year

Working Capital ($M)

Available Working Capital

Target Working Capital

‐ 2 4 6 8

10 12 14 16 18

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

($M)

Year

Internal Cash Reserve Balances ($M)

Required Internal Project Reserves Internal Project Reserves

Summary of Borrowings One of the major underlying principles incorporated into Council’s Long Term Financial Plan is the Borrowing and Debt Strategy. As per this Strategy Council considers borrowings as a source of funding for:

Capital projects that deliver long term benefit to the community Building or purchase of assets where a detailed cash flow analysis shows that full funding costs can be recovered over the life of the

asset and economic investments where a new asset or service decreases existing costs or provides new revenue in excess of their funding costs (positive NPV)

Using this strategy, the LTFP identifies a permissible level of borrowing in each year to ensure that the required level of borrowing is below this level. This is a borrowing level that the Plan regards as sustainable, principally because;

sources of debt repayment have been identified and modelled into overall cash flows, and the Debt Service Ratio (DSR) is within the Fit for the Future benchmark of less than 20 %


Maintaining a maximum Debt Service Ratio below the industry benchmark of 20% in any one year is one of the key financial sustainability tests applied by the LTFP. During the current planning period, this test will be satisfied. Council's ability to service its debt remains strong for the entire period of the LTFP. As per Council’s new funding strategy, the outstanding debt is fully discharged by the end of this financial plan from net revenue generated through leasing out Council’s new Administration Building.

The acquisition of the Administration Building in 2012/13 was originally funded by external borrowing with the borrowing to be subsequently discharged by future asset sales. Under the new funding strategy this building will be fully leased out generating enough revenue over the life of the plan to discharge the current outstanding debt over a longer period of time. This principle aligns with the matching concept of ‘inter-generational equity’. The relocation of staff to the new administration building is also deferred for a period of 10 years.

Council’s Debt Service Ratio will remain in the range of 3% to 6% during the life of the plan. The Debt Service Ratio for the next 10 years is provided in the table below:

Borrowings Summary and Debt Service Ratio

$'000 Debt Service RatioFinancial year Proposed

BorrowingsPrincipal

RepaymentsInterest

Component Principal

RepaymentTotal

2015/2016 - 2,225 0.9% 1.9% 2.8%2016/2017 - 4,069 0.9% 3.3% 4.2%2017/2018 - 1,995 0.8% 1.6% 2.4%2018/2019 - 5,630 0.7% 4.4% 5.1%2019/2020 - 7,322 0.5% 5.6% 6.1%2020/2021 - 4,660 0.3% 3.4% 3.7%2021/2022 - 4,808 0.1% 3.4% 3.5%2022/2023 - 408 0.0% 0.3% 0.3%2023/2024 - - 0.0% 0.0% 0.0%2024/2025 - - TOTAL - 31,117

Borrowings


How Council’s Debt is being managed The LTFP includes a dynamic capital management strategy which continuously monitors:

Actual need for loan funds based on actual expenditure occurring within projects designated for loan funding Obtaining loans under terms which not only offer the best interest rate but also offer maximum flexibility for repayment timing and/or

further loan drawdown Updated forecasts of sources of loan repayment Updated reviews of operating budgets, and Quoted interest rates on loans compared to interest being earned on invested funds

Currently no borrowings are proposed beyond 2014/15. The LTFP provides for repayments of debt to occur on either a schedule specified by the terms of individual loans or at a time where funds are available and the overall cost of debt can be reduced by making opportunistic repayments. This results in all loans being discharged by 2023/24. Council will have borrowing capacity available in the future for capital projects. It should be noted that Council does not consider loan borrowing as a sustainable funding source for ongoing infrastructure renewal requirements. As such, the LTFP does not utilise loan borrowing for this purpose. The following charts show Council’s projected outstanding debt and the Net debt service cost for the next 10 years. Total Debt Service Cost includes total interest plus principal repayments.

0%

1%

2%

3%

4%

5%

6%

7%

0

1

2

3

4

5

6

7

8

9

2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025

($M)

Year

How Council's Debt Is Being Managed ($M)

Debt Service Costs Debt Service Ratio

25.422.2 21.1

16.2

9.5

5.1

0.4$0

$5

$10

$15

$20

$25

$30

2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025

($M)

Year

Council's Outstanding Debt ($M)

Loan Balances Outstanding


KEY FINANCIAL INDICATORS The key financial indicators are an industry accepted measures of financial health and sustainability. This section provides the financial ratios for the two sustainable Scenarios presented in this Long Term Financial Plan. Council’s future financial performance and position is measured against the Fit for the Future (FFTF) performance indicators. A summary of these indicators and their benchmarks is provided below.

Key Financial Indicators Purpose of indicator Benchmark

SUSTAINABILITY

Operating Performance Ratio (Operating revenue excluding capital grants and contributions-

operating expenses divided by Operating revenue excluding capital grants and contributions)

To measure Council's ability to contain operating expenditure within operating revenue

>=break-even average over 3

years

Own Source Revenue Ratio (Total Operating revenue less grants and contributions divided by total Operating revenue)

To assess the degree of Council’s dependence upon grants and contributions

>60% average over 3 years

Building & Infrastructure Renewal Ratio (Asset renewals expenditure divided by depreciation, amortisations & impairment expenses)

To assess the rates at which assets are renewed relative to the rate at which they are depreciated (consumed)

>100% average over 3

years

INFRASTRUCTURE AND SERVICE MANAGEMENT

Infrastructure Backlog Ratio (Estimated cost to bring assets to a satisfactory condition (from Special Schedule 7) divided by total infrastructure assets

To measure the proportion of assets backlog against total value of Council's infrastructure assets

<2%

Asset Maintenance Ratio (Actual maintenance expenditure divided by required annual asset maintenance)

To asses the actual asset maintenance expenditure relative to required asset maintenance

>100% average over 3

years

Debt service ratio (Net debt service cost divided by revenue from continuing operations) To assess the impact of loan principal and interest repayment on the discretionary revenue of Council

<20% average over 3

years

EFFICIENCY

Real Operating Expenditure per capita (Operating expenditure divided by total population) To asses real operational expenditure per capita Decreasing


The projected key financial indicators for each scenario for the next 10 years are presented below. Scenario 1 – Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal Key Performance Indicators - Scenario 1 Description 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 SUSTAINABILITY

Operating Performance Ratio 2.3% 3.5% 4.5% 5.2% 4.9% 4.5% 4.6% 4.8% 5.3% 5.5%

Own Source Revenue 82.6% 81.4% 74.2% 72.4% 71.7% 78.4% 80.7% 82.2% 83.4% 84.1%

Building & Infrastructure Asset Renewal Ratio 106.4% 125.7% 157.3% 136.3% 118.3% 102.9% 103.7% 101.3% 102.0% 102.3%


Infrastructure Backlog Ratio 4.1%* 2.0% 0.5% 0.5% 0.2% 0.2% 0.1% 0.1% 0.0% 0.0% Asset Maintenance Ratio 100.9% 104.7% 105.4% 104.4% 103.1% 102.0% 102.6% 103.0% 104.2% 105.8%

Debt Service Ratio 7.0% 6.8% 3.2% 3.9% 4.5% 4.9% 4.4% 2.5% 1.3% 0.1%

EFFICIENCY

Real Operating Expenditure (per capita) 891 877 864 855 849 840 828 822 816 813

*Council has a new funding strategy to address the current backlog and decrease it in future years as detailed under Scenario 1 in this document. Scenario 1 highlights Council’s strong future financial position and performance as indicated by the financial ratios above. All FFTF Financial indicators are meeting current industry benchmarks in all forecast years, except for the Infrastructure Backlog Ratio in 2015/16. Council adopted a new funding strategy for assets renewal, which will see this ratio significantly decrease in the first two years of the LTFP with further reduction in future years. Council forecasts no Infrastructure backlog by 2021/22. The new funding strategy is discussed in detail under Scenario 1.


Sustainability Ratios: Operating Performance Ratio, Own Source Revenue Ratio and Infrastructure Backlog Ratio Operating Performance Ratio is an important financial indicator for Council. Our long-term financial sustainability is dependent upon ensuring that on average over time this indicator is positive, making sure that Council’s expenses are below its associated revenue. This indicator excludes capital income and gain or loss on sale of assets. Council's current performance ratio is above the benchmark of break even or higher, which means that Council can easily contain operating expenditure (excluding capital grants and contributions) within its operating revenue. The ratio outperforms benchmark for the entire forecast period of the LTFP with an increasing trend starting from 2015/16 onwards. Own Source Revenue Ratio measures fiscal flexibility. It is the degree of reliance on external funding sources such as operating grants and contributions. Council’s Own Source Operating Revenue Ratio remains above the benchmark of ( >60%) in all future years. Council forecasts a sufficient level of fiscal flexibility, in the event of being faced with future unforseen events.

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4%

5%

6%

7%

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Operating Performance Ratio (3 Yr Average)

Below Benchmark Benchmark >=0% Operating Performance Ratio (3 Yr Average)

0%

20%

40%

60%

80%

100%

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Own Source Revenue (3 Yr Average)

Below Benchmark Benchmark >60% Own Source Revenue (3 Yr Average)

Building & Infrastructure Assets Renewal Ratio This indicator assesses Council’s rate at which buildings and infrastructure assets are being renewed against the rate at which they are depreciating. An indicator of 100% indicates that the amount spent on asset renewals equals the amount of depreciation. Council’s ratio stands at 106.4% in 2015/16. Council is continuing to focus on appropriate asset standards for renewal and maintenance.


0%20%40%60%80%

100%120%140%160%180%200%

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Building & Infrastructure Asset Renewal Ratio (3 Yr Average)

Below Benchmark Benchmark >100% Building & Infrastructure Asset Renewal Ratio (3 Yr Average)

Infrastructure and Service Management: Infrastructure Backlog Ratio, Assets Maintenance Ratio and Debt Service Ratio The Infrastructure Assets Ratios measure Council’s ability to renew and maintain its asset base to decrease the infrastructure asset backlog in future years. Asset Ratios have been incorporated into Council’s Asset Management Strategy and Asset Management Plans and are monitored within Council's Long Term Financial Plan. Council continues its commitment to maintain financial sustainability and decrease the infrastructure backlog. Infrastructure Backlog Ratio measures what proportion the backlog is against the total value of Council’s infrastructure. Council’s Infrastructure Backlog Ratio has a positive downward trend in the first 3 years, recording a decrease of 3.6% from 4.1% in 2015/16 to 0.5% in 2017/18. The infrastructure backlog will achieve the benchmark of 2% by 2016/17.

Council’s Asset Maintenance Ratio is above benchmark at 100.9%. An indicator above 100% indicates Council is investing enough funds to stop the Infrastructure Backlog from growing. Council is committed to increase expenditure on asset maintenance in future to stop the increase in infrastructure backlog.


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‐2%

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4%

6%

8%

10%

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Infrastructure Backlog Ratio

Below Benchmark Benchmark <2% Infrastructure Backlog Ratio

60%

70%

80%

90%

100%

110%

120%

130%

140%

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Asset Maintenance Ratio (3 Yr Average)

Below Benchmark Benchmark >100% Asset Maintenance Ratio (3 Yr Average)

Debt Service Ratio: The purpose of the Debt Service Ratio is to assess the impact of loan principal and interest repayments on the discretionary revenue of Council. In accordance with Council's Long Term Financial Plan, borrowing is only undertaken in accordance with Council's borrowing principles outlined in this document. Council's ability to service its debt remains strong for the entire period of the LTFP. As per Council’s new funding strategy, the outstanding debt is fully discharged by the end of this financial plan from net revenue generated through leasing out Council’s new administration building for 10 years. The level of Council’s borrowing is discussed in more detail under Summary of Borrowing section of this document.

‐10%

‐5%

0%

5%

10%

15%

20%

25%

30%

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Debt Service Ratio (3 yr average)

Below Benchmark Benchmark >0% and <=20% Debt Service Ratio (3 yr average)


Efficiency Ratio: Real Operating Expenditure per Capita This indicator compares operational expenditure to population and is a ratio that measures efficiency. Council forecasts a downward trend in all future years of the financial plan. A decrease in the operating expenditure per capita of approximately 1% per year will be achieved while maintaining the same level of service. It is worth mentioning that this can be achieved while maintaining a strong operating surplus in all future years after funding depreciation on infrastructure assets.

750

800

850

900

950

1,000

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Real Operating Expenditure Per Capita

Benchmark ‐ Decreasing Below Benchmark Real Operating Expenditure Per Capita

Scenario 2 - Scenario without additional funding for infrastructure renewal - Key Performance Indicators Overall, financial indicators under Scenario 2 will deteriorate, even though most indicators will still meet or outperform benchmark. The main ratios impacted are Building & Infrastructure Renewal ratio and Infrastructure Backlog Ratio. Both these ratios deteriorate due to reduced funding for assets renewal. The Building & Infrastructure Renewal Ratio is expected to drop to below benchmark levels at 89.4% in 2015/16 and 92.8% in the following year. This means that assets infrastructure renewal expenditure will not keep pace with the depreciation of assets. This will contribute to a higher backlog in future years of the LTFP as shown below. The Infrastructure Backlog Ratio remains above benchmark in the first 4 years of the LTFP peaking at 5.9% in 2015/16. Under this Scenario it will take longer to reduce the backlog as there is a shortfall in assets renewal funding. .


Key Performance Indicators – Scenario 2 Description 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

SUSTAINABILITY

Operating Performance Ratio 2.4% 3.2% 3.9% 4.2% 3.8% 3.2% 3.0% 3.1% 3.4% 3.4%

Own Source Revenue 82.6% 81.3% 73.9% 72.0% 71.3% 78.0% 80.4% 81.9% 83.0% 83.8%

Building & Infrastructure Asset Renewal Ratio 89.4% 92.8% 123.0% 122.7% 127.4% 116.6% 117.6% 112.2% 116.1% 125.0%


Infrastructure Backlog Ratio 5.9% 5.3% 3.2% 2.8% 1.9% 1.5% 1.1% 0.7% 0.1% 0.0%

Asset Maintenance Ratio

100.9% 104.6% 105.3% 104.4% 103.3% 102.3% 102.8% 103.3% 104.5% 106.1%

Debt Service Ratio 9.5% 11.7% 7.6% 4.5% 0.8% 0.6% 0.4% 0.3% 0.2% 0.1%

EFFICIENCY

Real Operating expenditure (per capita) 891 870 853 846 842 835 824 819 813 810


The impact on Building & Infrastructure Ratio and infrastructure Backlog Ratio under Scenario 2 is demonstrated below. Both ratios do not meet benchmark in earlier years of the LTFP, however are improving in the later years. The Infrastructure Backlog Ratio is on a downward trend and forecast to meet benchmark of 2% by 2019/20 from 6% in 2015/16. It will take approximately 4 years to reduce the backlog under this scenario due insufficient funds for assets renewal in the first years of LTFP.

0%

20%40%60%80%100%120%140%160%180%200%

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Building & Infrastructure Asset Renewal Ratio (3 Yr Average)

Below Benchmark Benchmark >100% Building & Infrastructure Asset Renewal Ratio (3 Yr Average)

‐4%

‐2%

0%

2%

4%

6%

8%

10%

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Infrastructure Backlog Ratio

Below Benchmark Benchmark <2% Infrastructure Backlog Ratio


CONCLUSION Council’s Long Term Financial Plan ensures financial sustainability, whilst maintaining service delivery to the community, renewing ageing assets, and providing for new facilities. As part of the long term planning, Council has developed strategic asset management plans and is continuously reviewing and quantifying the renewal gap for infrastructure assets, identifying opportunities to broaden the revenue base, and reviewing its borrowing strategies.

The LTFP (Scenario 1) provides for the following:

meets all Fit for the Future KPIs by the target year 2016/17

operating surpluses in all years

affordable loan borrowing

fully catching up on the infrastructure assets backlog and provision of ongoing renewal expenditure to match depreciation

capital expenditure to provide new open space and community facilities for our growing community.


APPENDICES Appendix A - LTFP Forecasts and Assumptions Projected 2015/16

Projected 2016/17

Projected 2017/18

Projected 2018/19

Projected 2019/20

Projected 2020/21

Projected 2021/22

Projected 2022/23

Projected 2023/24

Projected 2024/25

FORECASTS - ACCESS ECONOMICS

Consumer Price Index ( CPI) 2.9% 2.9% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%

Average Weekly Ord Time Earnings 2.5% 3.4% 3.6% 3.6% 3.6% 3.6% 3.6% 3.6% 3.6% 3.6%

BBSW - 90 Day 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%

INCOME ASSUMPTIONS

Rates

Rates Pegging Forecast 2.4% 3.8% 3.8% 3.2% 3.3% 3.3% 3.3% 3.3% 3.2% 3.3%

Rates Growth 0.8% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7%

Total Rates Change 3.2% 4.5% 4.5% 3.9% 4.0% 4.0% 4.0% 4.0% 3.9% 4.0%Fees and Charges 2.9% 3.0% 3.0% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%

Domestic Waste Price Increase 8.5% 2.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Pensioner Rebate Growth 1.7% 1.7% 1.6% 1.6% 1.6% 1.6% 1.6% 1.5% 1.5% 1.5%

Stormwater Management Charge (rates growth only) 0.7% 0.7% 0.6% 0.6% 0.6% 0.6% 0.6% 0.5% 0.5% 0.5%

Trade Waste - Annual Charges (DWM increase rate) 8.5% 2.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Interest Income

Interest Income - Rate 3.2% 4.1% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3%

Grants Income

Recurrent Grants (CPI) 2.9% 2.9% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%

Capital Grants (CPI) 2.9% 2.9% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%Proceeds from Assets Sales Asset Sales 11,587 10,189 8,781 7,438 2,237 4,148 0 0 0 0

EXPENDITURE ASSUMPTIONS

Labour Costs 3.2% 3.3% 3.8% 3.8% 3.7% 3.7% 3.8% 3.8% 3.7% 3.7%Super - new scheme compulsory increase phased in. [Old Scheme employees at set rates] 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% 10.0% 10.5% 11.0% 11.5%

Material & Contracts - Operational ExpenditureOperating Expenses (CPI ) 2.9% 2.9% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%Street Lighting Charges (IPART Decision) 2.9% 2.9% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%Building Electricity Charges (IPART) 2.9% 2.9% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%Water Charges (IPART Determination) 2.9% 2.9% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%Fire Levy (CPI) 2.9% 2.9% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%Planning Levy (CPI ) 2.9% 2.9% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%

Materials & Contracts - Capital Expenditure 2.9% 3.0% 2.7% 2.7% 2.6% 2.6% 2.7% 2.7% 2.6% 2.6%Borrowing Costs

Loan Rate (200 bps over 90 BBSW) 3.9% 4.8% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%


Appendix B Scenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal 10 Year Financial Plan for the Years ending 30 June 2025

Projected Income StatementScenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal

Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected$'000 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Income from Continuing OperationsRates & Annual Charges 78,387 81,683 84,589 87,227 90,025 92,925 95,929 98,856 101,963 105,414User Charges & Fees 16,938 17,794 18,556 19,080 19,354 19,831 20,321 20,823 21,321 21,868Interest & Investment Revenue 4,182 4,110 3,527 3,446 3,637 3,319 3,459 4,058 4,858 5,371Other Revenues 10,723 13,188 13,898 14,285 13,801 14,203 14,624 15,050 15,497 15,958Grants & Contributions for Operating Purposes 7,566 7,188 6,733 6,370 6,931 7,075 7,219 7,399 7,527 7,684Grants & Contributions for Capital Purposes 18,162 20,039 63,240 26,085 24,489 20,087 21,189 20,091 19,616 18,974Other Income:Net gains from the disposal of assets 5,587 5,422 8,781 7,438 2,237 4,148 - - - -Total Income from Continuing Operations 141,545 149,424 199,324 163,931 160,474 161,588 162,741 166,277 170,782 175,269 Total Income excluding Proceeds from Asset Sales & Capital Income 117,796 123,963 127,303 130,408 133,748 137,353 141,552 146,186 151,166 156,295

Expenses from Continuing OperationsEmployee Benefits & On-Costs 37,534 38,770 40,232 41,750 43,285 44,876 46,725 48,767 51,065 53,640Borrowing Costs 1,093 1,127 1,053 905 620 350 133 10 - -Materials & Contracts 35,617 32,620 33,484 33,395 35,252 36,156 37,114 38,066 39,043 40,045Depreciation & Amortisation 19,155 19,349 19,863 22,017 22,252 22,802 23,227 23,564 23,637 23,796Other Expenses 16,302 20,654 21,175 21,573 22,117 22,675 23,248 23,834 24,407 24,992Other Operational Projects Expenses 4,628 5,120 4,609 4,264 4,305 4,678 4,039 4,305 4,440 4,893

Total Expenses from Continuing Operations 114,329 117,640 120,416 123,904 127,831 131,537 134,486 138,546 142,592 147,366

Net Operating Result for the Year 27,216 31,784 78,908 40,027 32,643 30,051 28,255 27,731 28,190 27,903 Net Operating Result for the year before Grants & Contributions provided for Capital Purposes 9,054 11,745 15,668 13,942 8,154 9,964 7,066 7,640 8,574 8,929


10 Year Financial Plan for the Years ending 30 June 2025

Projected Balance SheetScenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal

Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected$ '000 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

ASSETSCurrent AssetsCash & Cash Equivalents 11,913 6,303 - 4,117 - - 0 23,904 38,724 49,622Investments 58,251 58,251 32,500 58,251 47,870 51,055 56,220 56,220 56,220 56,220Receivables 9,845 10,562 16,322 11,632 11,579 11,186 11,575 11,742 12,017 12,256Inventories 121 111 114 114 120 123 126 129 133 136Other 1,414 1,460 1,482 1,481 1,542 1,588 1,610 1,655 1,697 1,748Non-Current Assets Held for Sale 7,500 1,200 2,500 550 1,500 - - - - -Total Current Assets 89,044 77,887 52,917 76,145 62,611 63,951 69,531 93,651 108,791 119,982

Non-Current AssetsInvestments 34,211 34,211 34,211 34,211 34,211 34,211 34,211 34,211 34,211 34,211Receivables 226 235 244 251 259 268 276 285 294 304Infrastructure, Property, Plant & Equipment 1,001,873 1,043,815 1,149,724 1,161,513 1,203,274 1,228,789 1,247,901 1,252,092 1,266,560 1,284,631Intangible Assets 805 732 743 657 589 534 491 456 428 429Total Non-Current Assets 1,037,115 1,078,993 1,184,922 1,196,632 1,238,333 1,263,802 1,282,879 1,287,044 1,301,493 1,319,575TOTAL ASSETS 1,126,159 1,156,880 1,237,838 1,272,777 1,300,944 1,327,753 1,352,411 1,380,695 1,410,284 1,439,557

LIABILITIESCurrent LiabilitiesPayables 13,650 14,282 15,931 14,231 15,281 15,355 15,589 15,744 16,297 16,778Borrowings 1,559 1,070 1,030 672 360 360 408 - - -Provisions 11,691 12,276 12,890 13,534 14,211 14,922 15,668 16,451 17,274 18,137Total Current Liabilities 26,900 27,628 29,851 28,438 29,852 30,636 31,664 32,195 33,571 34,915

Non-Current LiabilitiesPayables - - - - - - - - - -Borrowings 26,306 24,499 24,309 20,615 14,705 10,657 6,011 6,011 6,011 6,011Provisions 333 350 367 386 405 425 447 469 492 517Total Non-Current Liabilities 26,640 24,849 24,676 21,001 15,110 11,083 6,458 6,480 6,503 6,528

TOTAL LIABILITIES 53,540 52,477 54,527 49,438 44,962 41,719 38,122 38,675 40,074 41,443

Net Assets 1,072,619 1,104,403 1,183,312 1,223,339 1,255,982 1,286,034 1,314,289 1,342,020 1,370,210 1,398,113

EQUITYRetained Earnings 755,131 786,915 865,824 905,851 938,494 968,546 996,801 1,024,532 1,052,722 1,080,625Revaluation Reserves 317,488 317,488 317,488 317,488 317,488 317,488 317,488 317,488 317,488 317,488Council Equity Interest 1,072,619 1,104,403 1,183,312 1,223,339 1,255,982 1,286,034 1,314,289 1,342,020 1,370,210 1,398,113

Total Equity 1,072,619 1,104,403 1,183,312 1,223,339 1,255,982 1,286,034 1,314,289 1,342,020 1,370,210 1,398,113



Projected Cash Flow StatementScenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal


Cash Flows from Operating ActivitiesReceipts:Rates & Annual Charges 77,472 80,957 78,821 91,909 90,070 93,310 95,531 98,680 101,679 105,165User Charges & Fees 16,938 17,794 18,556 19,080 19,354 19,831 20,321 20,823 21,321 21,868Investment & Interest Revenue Received 4,182 4,110 29,279 - 22,306 14,019 134 - 1,706 4,058 4,858 5,371Grants & Contributions 25,728 27,227 69,973 32,455 31,420 27,162 28,408 27,490 27,143 26,658Bonds, Deposits, Retention amounts received - - - - - - - - - -Other 10,744 13,152 13,873 14,286 13,734 14,154 14,598 15,002 15,452 15,904Payments:Employee Benefits & On-Costs - 36,853 - 38,169 - 39,600 - 41,086 - 42,589 - 44,144 - 45,959 - 47,960 - 50,219 - 52,751Materials & Contracts - 35,174 - 31,988 - 31,835 - 35,095 - 34,202 - 36,082 - 36,880 - 37,912 - 38,490 - 39,564Borrowing Costs - 355 - 241 - 171 - 116 - 70 - 44 - 28 - 10 - -Bonds, Deposits, Retention amounts refunded - - - - - - - - - -Other - 20,930 - 25,774 - 25,784 - 25,837 - 26,422 - 27,353 - 27,287 - 28,139 - 28,847 - 29,885Net Cash provided (or used) in Operating Activities 41,751 47,069 113,112 33,290 65,313 46,968 46,999 52,032 52,897 52,766

Cash Flows from Investing ActivitiesReceipts:Sale of Infrastructure, Property, Plant & Equipment 11,587 12,922 9,981 9,938 2,787 5,648 - - - -Payments:Purchase of Infrastructure, Property, Plant & Equipment - 47,669 - 62,418 - 128,283 - 34,270 - 65,445 - 48,262 - 42,296 - 27,720 - 38,077 - 41,868Net Cash provided in Investing Activities - 36,082 - 49,496 - 118,302 - 24,332 - 62,658 - 42,614 - 42,296 - 27,720 - 38,077 - 41,868

Cash Flows from Financing ActivitiesReceipts:Proceeds from Borrowings & Advances - - - - - - - - - -Payments:Repayments of Borrowings & Advances - 1,487 - 3,183 - 1,113 - 4,841 - 6,772 - 4,354 - 4,703 - 408 - -Net Cash provided in Financing Activities - 1,487 - 3,183 - 1,113 - 4,841 - 6,772 - 4,354 - 4,703 - 408 - -

Net Increase/(Decrease) in Cash & Cash Equivalents 4,182 - 5,610 - 6,303 4,117 - 4,117 - - 23,904 14,820 10,898Plus: Cash & Cash Equivalents - beginning of year 7,730 11,913 6,303 - 4,117 - - - 23,904 38,724Cash & Cash Equivalents - end of year 11,913 6,303 - 4,117 - - - 23,904 38,724 49,622Plus: Investments on hand - end of year 92,462 92,462 66,710 92,462 82,081 85,266 90,431 90,431 90,431 90,431

Total Cash, Cash Equivalents & Investments 104,375 98,765 66,710 96,580 82,081 85,266 90,431 114,335 129,155 140,053


Appendix C Scenario 2 – Scenario without additional funding for Infrastructure renewal 10 Year Financial Plan for the Years ending 30 June 2025

Projected Income StatementScenario 2 - Scenario without additional funding for infrastructure renewal

Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected$'000 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Income from Continuing OperationsRates & Annual Charges 78,387 81,683 84,589 87,227 90,025 92,925 95,929 98,856 101,963 105,414User Charges & Fees 16,938 17,794 18,556 19,080 19,354 19,831 20,321 20,823 21,321 21,868Interest & Investment Revenue 4,162 4,059 3,462 3,382 3,577 3,254 3,375 3,847 4,370 4,472Other Revenues 10,763 10,909 11,242 11,524 10,939 11,235 11,546 11,859 12,188 12,527Grants & Contributions for Operating Purposes 7,566 7,188 6,733 6,370 6,931 7,075 7,219 7,399 7,527 7,684Grants & Contributions for Capital Purposes 18,162 20,039 63,240 26,085 24,489 20,087 21,189 20,091 19,616 18,974Other Income:Net gains from the disposal of assets 5,587 5,422 8,781 7,438 2,237 4,148 - - - -Total Income from Continuing Operations 141,565 147,094 196,603 161,106 157,552 158,555 159,579 162,875 166,985 170,939 Total Income excluding Proceeds from Asset Sales & Capital Income 117,816 121,633 124,582 127,583 130,826 134,320 138,390 142,784 147,369 151,965

Expenses from Continuing OperationsEmployee Benefits & On-Costs 37,534 38,770 40,232 41,750 43,285 44,876 46,725 48,767 51,065 53,640Borrowing Costs 1,096 649 170 116 70 44 28 10 - -Materials & Contracts 35,617 32,620 33,484 33,395 35,252 36,156 37,114 38,066 39,043 40,045Depreciation & Amortisation 19,155 19,368 19,854 21,979 22,214 22,763 23,188 23,525 23,598 23,758Other Expenses 16,302 20,133 20,642 21,164 21,698 22,246 22,808 23,384 23,946 24,520Other Operational Projects Expenses 4,628 5,120 4,609 4,264 4,305 4,678 4,039 4,305 4,440 4,893

Total Expenses from Continuing Operations 114,332 116,660 118,991 122,668 126,824 130,763 133,902 138,057 142,092 146,856

Net Operating Result for the Year 27,233 30,434 77,612 38,438 30,728 27,792 25,677 24,818 24,893 24,083 Net Operating Result for the year before Grants & Contributions provided for Capital Purposes 9,071 10,395 14,372 12,353 6,239 7,705 4,488 4,727 5,277 5,109



Projected Balance SheetScenario 2 - Scenario without additional funding for infrastructure renewal


ASSETSCurrent AssetsCash & Cash Equivalents 10,810 4,367 - 3,528 - - - 0 17,270 24,727 24,052Investments 58,251 58,251 29,810 55,562 44,134 46,697 51,232 52,484 52,484 52,484Receivables 9,848 10,259 15,968 11,264 11,199 10,791 11,164 11,300 11,524 11,693Inventories 121 111 114 114 120 123 126 129 133 136Other 1,414 1,447 1,468 1,471 1,531 1,577 1,599 1,644 1,686 1,736Non-Current Assets Held for Sale 7,500 1,200 2,500 550 1,500 - - - - -Total Current Assets 87,944 75,635 49,860 72,488 58,484 59,188 64,120 82,827 90,553 90,102

Non-Current AssetsInvestments 34,211 34,211 34,211 34,211 34,211 34,211 34,211 34,211 34,211 34,211Receivables 226 235 244 251 259 268 276 285 294 304Infrastructure, Property, Plant & Equipment 994,076 1,025,671 1,130,390 1,144,291 1,190,186 1,217,729 1,239,151 1,245,841 1,264,448 1,290,394Intangible Assets 805 732 743 657 589 534 491 456 428 429Total Non-Current Assets 1,029,318 1,060,849 1,165,588 1,179,410 1,225,245 1,252,742 1,274,129 1,280,793 1,299,381 1,325,338TOTAL ASSETS 1,117,262 1,136,484 1,215,448 1,251,898 1,283,729 1,311,930 1,338,250 1,363,620 1,389,933 1,415,439

LIABILITIESCurrent LiabilitiesPayables 13,525 13,984 15,774 14,153 15,232 15,270 15,505 15,659 16,233 16,768Borrowings 1,559 1,070 1,030 672 360 360 408 - - -Provisions 11,691 12,276 12,890 13,534 14,211 14,922 15,668 16,451 17,274 18,137Total Current Liabilities 26,776 27,330 29,693 28,360 29,803 30,551 31,580 32,110 33,507 34,905

Non-Current LiabilitiesPayables - - - - - - - - - -Borrowings 17,517 5,734 4,704 4,032 3,672 3,312 2,904 2,904 2,904 2,904Provisions 333 350 367 386 405 425 447 469 492 517Total Non-Current Liabilities 17,850 6,084 5,072 4,418 4,077 3,737 3,351 3,373 3,396 3,421

TOTAL LIABILITIES 44,626 33,414 34,765 32,777 33,880 34,289 34,931 35,483 36,903 38,326

Net Assets 1,072,636 1,103,070 1,180,683 1,219,121 1,249,849 1,277,641 1,303,319 1,328,137 1,353,030 1,377,113

EQUITYRetained Earnings 755,148 785,582 863,195 901,633 932,361 960,153 985,831 1,010,649 1,035,542 1,059,625Revaluation Reserves 317,488 317,488 317,488 317,488 317,488 317,488 317,488 317,488 317,488 317,488Council Equity Interest 1,072,636 1,103,070 1,180,683 1,219,121 1,249,849 1,277,641 1,303,319 1,328,137 1,353,030 1,377,113

TOTAL EQUITY 1,072,636 1,103,070 1,180,683 1,219,121 1,249,849 1,277,641 1,303,319 1,328,137 1,353,030 1,377,113



Projected Cash Flow StatementScenario 2 - Scenario without additional funding for infrastructure renewal


Cash Flows from Operating ActivitiesReceipts:Rates & Annual Charges 77,469 81,262 78,871 91,923 90,082 93,324 95,548 98,711 101,730 105,235User Charges & Fees 16,938 17,794 18,556 19,080 19,354 19,831 20,321 20,823 21,321 21,868Investment & Interest Revenue Received 4,162 4,059 31,903 - 22,370 15,005 691 - 1,160 2,595 4,370 4,472Grants & Contributions 25,728 27,227 69,973 32,455 31,420 27,162 28,408 27,490 27,143 26,658Bonds, Deposits, Retention amounts received - - - - - - - - - -Other 10,784 10,886 11,218 11,522 10,872 11,186 11,521 11,811 12,143 12,473Payments:Employee Benefits & On-Costs - 36,853 - 38,168 - 39,600 - 41,086 - 42,589 - 44,145 - 45,957 - 47,960 - 50,218 - 52,752Materials & Contracts - 35,299 - 32,161 - 31,694 - 35,016 - 34,173 - 36,118 - 36,879 - 37,913 - 38,469 - 39,511Borrowing Costs - 355 - 241 - 170 - 116 - 70 - 44 - 28 - 10 - -Bonds, Deposits, Retention amounts refunded - - - - - - - - - -Other - 20,930 - 25,253 - 25,251 - 25,428 - 26,003 - 26,924 - 26,847 - 27,689 - 28,386 - 29,413Net Cash provided (or used) in Operating Activities 41,644 45,406 113,806 30,964 63,898 44,963 44,927 47,858 49,634 49,030

Cash Flows from Investing ActivitiesReceipts:Sale of Infrastructure, Property, Plant & Equipment 11,587 12,922 9,981 9,938 2,787 5,648 - - - -Payments:Purchase of Infrastructure, Property, Plant & Equipment - 39,872 - 52,090 - 127,084 - 36,344 - 69,541 - 50,251 - 44,567 - 30,180 - 42,177 - 49,705Net Cash provided in Investing Activities - 28,285 - 39,168 - 117,103 - 26,406 - 66,754 - 44,603 - 44,567 - 30,180 - 42,177 - 49,705

Cash Flows from Financing ActivitiesReceipts:Proceeds from Borrowings & Advances - - - - - - - - - -Payments:Repayments of Borrowings & Advances - 10,279 - 12,681 - 1,070 - 1,030 - 672 - 360 - 360 - 408 - -Net Cash provided in Financing Activities - 10,279 - 12,681 - 1,070 - 1,030 - 672 - 360 - 360 - 408 - -

Net Increase/(Decrease) in Cash & Cash Equivalents 3,080 - 6,443 - 4,367 3,528 - 3,528 - 0 0 17,270 7,457 - 675Plus: Cash & Cash Equivalents - beginning of year 7,730 10,810 4,367 - 3,528 - - - 0 17,270 24,727Cash & Cash Equivalents - end of year 10,810 4,367 - 3,528 - - 0 17,270 24,727 24,052Plus: Investments on hand - end of year 92,462 92,462 64,021 89,773 78,345 80,908 85,443 86,695 86,695 86,695Total Cash, Cash Equivalents & Investments 103,272 96,829 64,021 93,301 78,345 80,908 85,443 103,964 111,422 110,747

April 2015

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