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Long Term Financial Plan

Council’s LTFP details Council’s external operating environment and the financial challenges Council faces, the forecast level of revenue available to Council over the following ten (10) years, and Council’s forecast recurrent and capital expenditure over this time period.  The LTFP measures Council’s expected financial performance based on the information above, and provides a forecast income statement, balance sheet, cash flow statement, and asset movement schedule based on this information.  Council’s assumptions are reviewed towards the end of the plan by way of a sensitivity analysis, and the LTFP also discusses rate pegging and the affordability of community wish list items from the Community Strategic Plan (CSP).

The 2012/13 financial plan is Council’s second LTFP and is structured in the same way as the previous report with the following minor changes:

  • All revenue and expenditure forecasts show a comparison between the previous and current forecasts and explain any variances;
  • Capital expenditure adjustments for revotes and trade-ins have been factored into the actual capital program;
  • KPIs have been divided into four separate groupings with high level comments providing analysis of each KPI grouping;
  • Council’s sensitivity analysis section has been reviewed and more emphasis has been placed on the impact of a special rates variation;
  • Progress against Council’s suggested improvements in the previous LTFP has been detailed in the conclusion and way forward section of the plan;
  • A comparison of Council’s overall financial performance between the former and revised plans is also provided in the conclusion and way forward section of the plan;
  • All assumptions have been reviewed for accuracy, and balance sheet items that can not be accurately predicted have been kept constant.

The 2012/13 LTFP forecasts that Council’s revenue will increase from $33.917m in the 2012/13 financial year to $42.241m in 2021/22, which is a 24.5% increase.  In the same time period, Council’s recurrent expenditure has been forecast to increase from $36.845m to $46.104m, which represents a 25.1% increase.  Capital expenditure is forecast to average $9.51m per annum over the life of the plan.

As a result of the 2011/12 LTFP and the recently released TCorp report, Council has made some tough decisions in the 2013/14 budget process which have improved Council’s long term financial sustainability, and Council is now forecast to maintain a steady cash balance of just under $13m over the ten years of the plan. Council’s business arms are now forecast to achieve full cost recovery, and there is even a forecast slight improvement in Council’s underlying operating performance over the ten years as measured by EBITDA. Council’s exposure to debt is also clearly manageable with the debt service ratio well under 10% and forecast to decrease over the life of the plan, with the majority of loans to be paid back by the end of the 2021/22 financial year. All of these changes are a significant improvement over the previous LTFP.

The bad news is that Council’s general fund still has insufficient forecast revenue to safely cover non business arms of Council activities in the long run (post 2020/21). Council is also forecasting increasing operating deficits due to income growth not keeping pace with total expenditure growth (including depreciation), and is still reporting a significant capital backlog over the life of the plan with insufficient funding to address the issue resulting in a forecast decline in asset condition.

Despite recent improvements, assuming no change to the current factors limiting Council’s ability to source funds such as rate pegging, the negative demographic outlook for the region, and increased costs and service expectations faced by Council in its operations, Council still faces significant financial challenges going forward.

TCorp have defined financial sustainability in local government as:

“A local government will be financially sustainable over the long term when it is able to generate sufficient funds to provide the levels of service and infrastructure agreed with its community”

Council’s most important stakeholders are the residents of the Shire, and it is the residents of Warrumbungle Shire that will now need to decide on what level of services Council will be able to provide going forward given Council’s external financial constraints.

Click here to view the Long Term Financial Plan.

Last Updated: 06 Jul 2015