DISTRICT COUNCIL OF LOWER EYRE PENINSULA

Transcription

1 DISTRICT COUNCIL OF LOWER EYRE PENINSULA LONG TERM FINANCIAL PLAN 2011/12 TO 2020/21 UPDATE Prepared by DCLEP staff In February 2013

2 PURPOSE OF THE LONG TERM FINANCIAL PLAN The Long Term Financial Plan has been developed in accordance with the requirements of the Local Government Act 1999, and forms part of Council s Strategic planning documents. The purpose of the plan is to measure the Council s capacity to fund the projects and services as set out in the Strategic Plan, and to ensure that the Council is adequately providing for Asset replacement as identified in the Infrastructure and Asset Management Plan. The ten year plan has been set based on the premise that Council wishes to be financially sustainable over the ten year period, achieving at least a break even position over this time frame.

3 ASSUMPTIONS The following assumptions were used in the formulation of the Long Term Financial Plan: - REVENUE General Rates General rate revenue has been increased by 5.5 percent per annum in accordance with the following estimates: - CPI movement 4.0% per annum Growth (New Development) 1.5% per annum The CPI figure used matches the estimated four percent cost increases factored into the plan. Statutory charges, User Charges, Re-imbursement and Other Revenue These revenue streams are linked to a CPI increase of four percent per annum. Operating Grants Roads to Recovery grants of $292,000 have been included for the entire plan. While the current program expires after the 2013/14 year it is anticipated that the program will continue in a similar format. Both the General Purpose and Road Grant components of Financial Assistance Grants have been retained at the current level for the duration of the plan. Investment Income Interest earned on investment has been calculated at an interest rate of 3.5% per annum on average Council deposits in any financial year. EXPENDITURE Operating Expenditure Operating expenditure has been linked to CPI growth of four percent per annum. However it is recognized that over a ten year period estimates on increases in employee costs, contractual charges and other expenses are indicative only. Finance Charges Finance Charges have been estimated based on a borrowing rate of 5.1% per annum from the LGFA. Depreciation Depreciation has been calculated using the Straight Line Method based on the Current Replacement Cost (CRC) of an asset and its expected life. The depreciation amount has been indexed by four percent per annum to reflect movement in the Consumer price index.

4 CAPITAL RENEWAL The Capital Renewal requirements as estimated in the Infrastructure & Asset Management Plan have been reflected in the Long Term Financial Plan. Reserve provisions have been created for various classes of assets, including buildings and infrastructure assets. The Reserves balances have been calculated using the following method annually: - Existing Assets The renewal requirement for all Council assets has been calculated based on the replacement value of the asset divided by the asset s useful life, with this amount representing the annual depreciation amount. The annual allocation to the reserve fund is calculated in line with the following equation: - Add Deduct Deduct Annual depreciation amount Actual expenditure on Asset where no loan borrowings are taken Repayments of Principal on loan borrowings taken to replace the Asset New Assets The annual depreciation calculated on assets acquired during the period of the AIMP has been added to the renewal requirement amount as detailed under Existing Assets above. Repayments of Principal on loan borrowings for newly acquired Assets has been deducted from the annual Reserve allocation as detailed in Existing Assets above. SELF FUNDED ACTIVITIES Worksheets setting out the anticipated income and expenditure for each of the Council business activities and the Community Waste-water Management Schemes have been included in the LTFP document. These worksheets calculate the cash surplus on hand at the end of the ten year period.

5 LOAN BORROWING Council s policy on loan borrowings reflects that Council will endeavour to maintain its annual debt servicing commitment in relation to loans serviced by general rate income at less than 15% of the general rate revenue. Loan borrowing interest rates have been estimated at 5.1% per annum for the purpose of this plan. The borrowings identified in this plan result in peak annual debt servicing as a percentage of general rate revenue of 17.22%. STRATEGIC PLAN UN-QUANTIFIED OBJECTIVES AND STRATEGIES It is recognized that in some circumstances Strategic Plan Objectives and Outcomes are un-quantified, and may require additional operational or capital expenditure. Examples of this include: - Reviews of Waste Management Strategies Provision of Community Transport Services Expansion of Cummins Industrial Area Works identified in Foreshore Vegetation Management Plans Support for Coast-care projects Climate Change mitigation projects eg Coastal Mapping Production of Emergency Management Plans Records Management Upgrade Initiatives Likewise the impact of the sale or disposal of surplus Council assets, as identified as a Strategy remains un-quantified. Council has included the investigation of Shared Services with the City of Port Lincoln and the District Council of Tumby Bay as a Strategy in its Strategic plan. It is anticipated that this will improve the capacity of Council to deliver a wider range of services in a more efficient manner, but is not expected to result in budget savings. ANALYSIS OF LONG TERM FINANCIAL PLAN The development of Infrastructure Reserves to provide for future replacement requirements and Self-funded activity reserves has enabled the Council to assess its cash reserves at the end of the ten year period. The aim is for Council to have on hand a small surplus cash amount at the end of the period after deducting the balance of the reserve funds. However, consideration of the cash surplus should factor in the need to provide for any un-quantified Strategic Plan objectives and to allow for unforeseen needs of the Council. The estimated cash surplus of $1.48m at this time is considered appropriate for this purpose.