Central Coast Council has flagged a growing gap between recurring income and expenditure.
In its long-term financial plan, which estimates the growth in income and expenditure for the next 10 years, a deficit kicks in 2026-27.
The size of the deficit changes depending on four different scenarios.
But the one scenario that Council Administrator Rik Hart adopted at the November 28 meeting retains the one-off rate increase of 13 per cent from 2021-22 that is due to expire in 2031.
This would involve another Independent Pricing and Regulatory Tribunal (IPART) determination.
“Whilst the temporary Special Rate Variation (SRV) has enabled Council’s financial recovery, the SRV was approved within the context of financial recovery, rather than being based on an analysis of financial settings required to achieve financial sustainability,” Council says.
“It is further noted that upon its expiry in 2031 Council’s revenue will drop significantly and to a point where minimum service levels will not be able to be sustained.”
Council says that it is financially stable due to the successful execution of the financial recovery plan, put in place in October 2020, but that like most councils in NSW, it now needs to review its financial settings to ensure it can remain financially sustainable over the long-term.
It says significant productivity improvements have already been implemented and processes are continually being reviewed but current financial settings will need more significant adjustments to secure ongoing financial sustainability.
Cost shifting from the State Government costs Council about $45M per year.
“Examples of cost shifting include contributions to the NSW Fire and Rescue, NSW Rural Fire Services and NSW State Emergency Service, lack of adequate funding for public libraries and the failure to fully reimburse councils for mandatory pensioner rebates,” Council says.
The long-term financial plan details ways of cutting costs.
These include investigating the divestment of discretionary and business activities that are not generating a benefit, financial or otherwise to the wider community.
The plan also talks about “recycling assets”.
“Through the review of Asset Management Plans and Asset Management Strategy, Council is likely to be presented with opportunities to recycle under-utilised assets (eg; buildings and land) to obtain better utilisation and improve overall sustainability by reducing the cost of under-utilised assets and achieving commercial returns through asset recycling,” Council says.
Council embarked on a $60M sale of assets during the financial recovery.
It still has the former Gosford Council building on its list of assets but is hoping to sell that to the State Government as part of the TAFE precinct – a plan announced by the former State Government but with no deal yet finalised.
The Council report outlined four scenarios with number one being business as usual, which would see deficits that would not allow Council to continue to deliver services and works to the community.
Business as usual would see the removal of $29.6M in 2031-32 reflecting the expiry of the temporary increase in rating income, implemented in 2021-22.
This was the one off 13 per cent rate increase IPART allowed Council to dig itself out of its financial crisis.
At the time, Administrator Rik Hart, in his capacity as acting CEO, said it was needed, in part, to finance the repayment of the $150M in emergency loans the Council acquired in December 2020.
The Council is preparing to pay off $100m at the end of this year.
IPART determined the increase should stay for three years in its first determination but Council went back and successfully argued it needed the increase to stay for 10 years.
Scenario two would see Council increase operating revenue by $1M and increase productivity but this would still give Council a deficit by 2026-27, though it would be a slightly smaller deficit than in scenario one.
The third scenario builds in the savings from scenario two but doesn’t lose the income outlined in scenario one.
The deficits would still kick in in 2026-27 but the underlying cash position would not go into the negative if a combination of the additional revenue and increased efficiencies were implemented.
Under scenario four, Council would keep the rates increases from scenario three but it would spend an extra $10M on maintenance.
“Under this scenario operating deficits are projected earlier than in scenario three due to the increased asset maintenance expenditure,” Council says.
“The timing of the projected operating deficits allows limited time for Council to undertake the necessary actions to address the gap and maintain a positive operating result over the 10 years of the Long Term Financial Plan.
“Like scenario three, under this scenario projected deficits can be addressed through a combination of aiming for additional revenue and increased efficiencies through the implementation of the Strategy.
“Service levels could also be reviewed, and priorities established in consultation with the community.
“However, the magnitude of the projected operating deficits and the associated timing will require the required actions to commence as soon as possible.’’
Council will now use scenario three as the basis for the 2024-25 Operational Plan and Budget.
“Each year Council will continue to implement actions identified in the Strategy to build capacity to increase its investment in asset maintenance as shown in Scenario 4,” Council said.
Merilyn Vale
Maybe we need a few redundancies received my water bill along with a glossy pamphlet explaining things which I dont need to know I would imagine a couple of graphic artists worked on this for a few months Non productive add on wage costs I turn on the tap if there is water the council has done its job.Too much self back patting