BUDGET INFLUENCES
This section sets out the key budget influences arising from the internal and external environment within which the Council operates.
1. External Influences
In preparing the 2015-2016 Budget, a number of external influences have been taken into consideration, because they are likely to impact significantly on the services delivered by Council in the budget period. These include:
· Consumer Price Index (CPI) increases on goods and services of 1.7% through the year to December quarter 2014 (ABS release 28 January 2015). CPI is forecast to be 2.5% for the 2015-2016 year.
· The Budget needs to take into account the forecast Local Government Cost Index (LGCI) 3.4% 2014-2015, which is higher than Consumer Price Index (CPI) forecast at 2.5%. The CPI is reflective of household consumption, whereas the LG Cost Index reflects the costs Council incurs in delivering services and infrastructure to the community.
· The Victorian State Government has announced that Local Government rates will be capped from 2016-2017. Depending on the level at which rates are capped council will need to undertake a review of services that are provided to the community with the aim of reducing the level of rate payer subsidy for services undertaken by Local Government on behalf of the State and Federal Government.
· Reduction of $0.34M in Victorian Grants Commission funding compared to the prior year
· A 3% increase in the State Government landfill levy. The levy is payable on the disposal of all waste into landfill and has increased from $9/tonne 2009-2010 to $60.52/tonne in 2015-2016. The annual cost is forecast at $5.3M in 2015-2016.
· Additional Roads to Recovery funding was announced in 2014 providing one off increase to $3.0M for 2015-2016 (Previously $1.5M in 2014-2015).
· The carbon price repeal legislation received Royal Assent 0n 17 July 2014, effective from 1 July 2014. Council has accumulated $0.88M as a carbon tax liability which is either to be allocated as a refund or for future carbon abatement projects. No provision has been made for clearing these funds in the 2015-2016 budget pending a Council report and decision.
· The Fire Services property levy will continue to be collected by council on behalf of the State Government. Council will be reimbursed $0.12M for some expenses associated with this legislative imposition on Local Government.
· The Reserve Bank decision of 4 February 2015 to lower the cash rate by 0.25% and the recent decision of 5May 2015 to lower the cash rate further to 2.0%. This impacts on Council’s available borrowing interest rates and also deposit rates on sums invested.
· Wages growth in Victoria is projected to be 3.5% in 2015-2016.
· State Government funding available for community facilities in 2015-2016 is forecast at $12.4M and includes $7.0M for Geelong Library & Heritage Centre, $1.5M for Leopold FC&N clubroom upgrade and $1.8M for Shell Rd Reserve pavilion.
· Federal Government funding available for community facilities in 2015-2016 includes $3.0M for Leopold Community Hub stage 2 and $3.0M for Federal Roads program.
· Projects dependant on funding to commence includes Leopold Community Hub, Leopold FC&N clubroom upgrade and Geelong soccer club facilities upgrade.
2. Internal Influences
As well as external influences, there were a number of internal influences arising from the 2014-2015 year that significantly impacted on budget development. Some of these influences include:
· Financial sustainability objectives - Recurrent result (>1% of Turnover), Liquidity (Current Asset/Liabilities >1), Indebtedness (< 60% of rate revenue), Capital Renewal/Upgrade ratio to Depreciation.
· Wage increases for year 2 of the enterprise agreement, resulting in additional ongoing employee costs per annum.
· Budgeted Property sales from 2014-2015 not achieved with $1.9M sales withdrawn and other sales pending.
· Responding to growth in assets and maintenance obligations by asset category.
· New Green Waste processes (composting site set up) and other operational changes.
· Resolution of Drysdale Landfill Cell Creation issues which resulted in diversion of waste to Wyndham.
· Assessment of Capital carryover projects from 2014-2015 estimated at $28M.
· Council has identified a number of Community Concept projects through engagement with the community as part of the budget process.
Additionally, a number of Council decisions during 2014-2015 related to funding implications for the 2015-2016 Budget. Some of these include:
· Land Sales not approved by Council including Draper St, Ocean Grove; Townsend Rd, Whittington & Peninsula Drive, Drysdale impacting on funding for the approved Capital program.
· GREP land development project requiring $1.55M funding in 2014-2015 to enable land sales in Success way.
· 2014-2015 Sport & Recreation Victoria Funding program submissions including Beginner Mountain Bike Course $0.1M, Jetty Rd Sub-Regional Playground Redevelopment $0.1M, Hume Reserve Pitch #1 Lighting $0.1M and Recreation & Leisure Strategy $0.03M
· Projects commenced in 2014-2015 requiring additional funding in 2015-2016 including Geelong Library & Heritage Centre $7.0M, Central Geelong Action Plan $3M, Leopold Community Hub stage 2 $6M, and Leopold FC&N clubroom upgrade $1.5M.
3. Community Engagement
Council engaged with the Community via community concepts being submitted and considered as part of the 2015-2016 Annual Budget Process. Council received 90 Community Concept requests which were reviewed by Officers and Councillors. The Annual Budget includes 15 of these requests for a total of $2.73M:
Net Expenditure $Open4 (Geelong Civic Centre Car Park Summer Season Rooftop Cinema) / 10,000
Landy Field – New Electronic Timing Display Screen / 12,500
Community Arts Hub for Barwon Heads – Feasibility Study (Year 2) / 15,000
Geelong Softball Association – New Safety Fence / 25,000
Eastern Park – Ladies Kiosk Restoration / 30,000
Breakwater Tennis Court / 45,000
Norlane Bowling Club – Replacement of Bowling Surface / 50,000
Bakers Oval Lighting Upgrade / 100,000
Windsor Park, Norlane – Resurfacing, Irrigation & Lighting of 2nd Sports Oval / 100,000
Manifold Heights Cricket Club – Cricket Oval Renovation / 150,000
Geelong Soccer Club – Club Rooms & Change Rooms / 250,000
North Geelong Football & Netball Club – Club Rooms Upgrade / 366,000
Grovedale Tennis Club Room & Amenities Upgrade / 500,000
Geelong Amateurs Football Netball Club – changeroom Refurbishment & Upgrade / 380,000
Anakie Reserve – Upgrade Club Facilities (year 1 $70K, year 2 $630K) / 700,000
Total / $2,733,500
4. Budget Principles
In response to these influences, guidelines were prepared and distributed to all Council officers with budget responsibilities. The guidelines set out the key budget principles upon which the officers were to prepare their budgets. The principles included:
· The Long Term Financial Plan provides a guide to capture strategic priorities within the context of an affordability framework to comply with sustainability measures. The plan is principally focused on a capital works program to capture priorities of Council, development capital plans, core capital works, Infrastructure renewal increases, landfill rehabilitation and new program requests.
· The Budget is developed in constant dollars and in general no uplift factors are included, other than requests for additional funding via project proposals.
· New initiatives or new employee proposals that are not cost neutral to be justified through a project proposal.
· Grants to be based on confirmed funding levels or where a reasonable expectation of receipt is possible.
· Salary & Wages have been developed on the basis of current budget EFT’s plus specific increments identified in the authorised budget proposal or when alternative funding (Government Grants or Fees & Charges) is being provided.
· New Loan borrowings are linked to specific funding priorities within the capital works program.
· Existing fees and charges to be increased in line with cost increases or market levels, changes in supply and demand for services and the user pays principle.
· Non cash item depreciation will contribute to fund the net capital expenditure program.
· Operating revenues and expenses arising from completed 2014-2015 capital projects to be identified via funding proposals.
5. Long Term Strategies
The Budget includes consideration of a number of long term strategies to assist Council in preparing the Budget in a proper financial management context. These include a Strategic Resource Plan for the budget year 20152016 through to 2018-2019, Rating Strategy and Other Long Term Strategies including borrowings, infrastructure and service delivery.
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2015-2016 Budget - City of Greater Geelong