The Shire of Esperance Long Term Financial Plan 2018/19 - 2027/2028 was adopted by Council at the April Ordinary Council Meeting. The Long Term Finanical Plan identifies and analyses financial trends over a ten year period based on a range of assumptions. It provides information allowing the Shire to assess the impacts of current decisions and budgets on future financial sustainability. It is reviewed annually and updated to keep the document responsive to current economic impacts and council priorities.
A copy of the plan is available here.
The report item is included in the April Council Agenda.
An extract from the report is below outlining the major financial assumptions applicable to the Long Term Financial Plan:
Increases in employment expenses have three main elements. These are
- Increases contained in the enterprise agreement
- Increases and movements of levels within the current workforce and;
- Additional positions that are required to meet the strategic direction of the Council and the growth of the community.
Employee costs are estimated to increase by 2.75% for the term of the plan. Note that this increase is reflective of the Shires contribution to employment expenses and does not take into account any increases or decreases in fully funded positions such as Homecare.
Materials and Contracts
Increases in Materials and contracts are in line with the Local Government Cost Index of 2% plus an additional 0.2% to take into account the estimated growth in the Shire of Esperance.
Utility charges have been factored in to increase by 3% for the life of the plan, except in the 2022/23 year where additional costs for the purchase of gas at the BOILC has been taken into account.
Loan Borrowings and Repayments
Loan repayments are calculated on loan schedules that are currently in existence and the estimation of any future loan borrowings. The LTFP has proposed loan borrowings of $4m for a new waste facility, and $2.2m for a future stage of Flinders Estate. It is proposed that any future sales of land within the Flinders Estate will firstly repay debt before any further proceeds are placed into the Land Development Reserve.
Transfer to Reserves are in line with existing reserve calculations that are contained within the 2017/18 budget and increased by 2% to take into account inflation factors. In areas such as the airport or waste management these transfers could change if their net operating results changed. Continual scrutiny and review of the fees being charged in these areas are essential to ensure sufficient money is being captured in the reserves to pay for large capital expenditure in future years. Interest on Reserve holdings has been calculated at 2.5% and is reinvested into the reserve.
Rate yield increases are forecast for 4.5% for 2018/19 and for the following 5 years of the plan until the rates increases reduce to 3% for the remainder of the plan. It is estimated that the additional income that is generated that is higher than normal operational requirements will be spent on closing the asset management gap that the Shire currently has. It is estimated that the asset management gap will be closed within approximately 6 years with the plan having either sufficient expenditure on asset renewal or savings within specific reserves for future asset renewal.
An increase of 2% has been allowed for in the LTFP. Although this funding source is somewhat unknown as political and economic factors can influence any increases that the different levels of government may offer, a small increase has been assumed to cater for general inflation increases.
Fees and Charges
Fees and Charges that Council has discretion over has been increased by 3% for the term of the plan.
Road grants from the Regional Roads Group have been estimated at the existing levels, averaged from the past two years. Regional Road Group is a competitive process and application has to be made each year for specific projects, the allocations can therefore fluctuate significantly. Roads to Recovery grants have been maintained for the life of this plan.
A large number of the capital projects are reliant upon grants from external sources. If the funding from these sources does not eventuate the projects may need to be reviewed or alternate funding sourced.
Capital Expenditure is in line with existing Asset Management Plans and has been increased by 2% in line with expected inflation figures
Road expenditure is in line with existing annual allocations and increased by 2% in line with expected inflation. Additional expenditure is expected to be increased over the life of the plan to help address the asset management gap in the transport area and more specifically rural road re-sheeting. For the 2018-19 year this additional money that is proposed to be spent on rural road re-sheeting amounts to $500,000 compared to the 2017/18 year.
The 10 year capital works program has been developed in two formats showing both a source of funding format and also whether the asset is renewal, upgrade or new. As identified in the capital grants section a number of key infrastructure projects are heavily reliant upon external grant funds. If external funding from these projects does not eventuate to the amounts as indicated in the plan then the scope of each capital project will need to be revisited or the project postponed until further funding is sourced.