At the recent Bingara community meeting called to discuss the State Government’s Fit for the Future program, Council’s General Manager, Max Eastcott, presented the meeting with the criteria and measures Council need to achieve to be ‘Fit for the Future’.
Operating Performance Ratio
Core measure of financial sustainability – indicates council’s capacity to meet ongoing operating expenditure requirements.
“The first ratio basically says that every Council in New South Wales must be able to operate without relying on any grants,” Mr. Eastcott told the meeting.
“That’s going to be a challenge. Even with the 15% plus 15% rate increase, if that is eventual outcome of what happens with IPART next year, we do partially move to satisfying this, but we are significantly short, so there would still have to be some reduction in the service levels we provide.
“I don’t think there are any rural councils which agree that this is a good ratio, because grants have always been a component of the income of local government. There is a good reason for that.
Across Australia, the Federal government raised 82% of all taxes, the state government raises 15% and local government 3% of all taxes, the lowest return of any OECD countries from federal to local government.
As was pointed out at the Warialda meeting, it is your taxes, you should be telling your politicians that this money should be returned to where the assets are.”
Own Source Revenue Ratio
Councils with higher own source revenue have greater ability to control their own operating performance and financial sustainability.
“We almost make (this benchmark), 59.1% over the last three years, the target is 60%. We probably make this now, because the state government has said we can use the waste management income in that calculation.
Building and Asset renewal ratio
Measures whether a Council’s assets are deteriorating faster than they are being renewed – indicator of whether a council’s infrastructure backlog is likely to increase.
“We have been doing a lot of work on this, making sure our depreciation rates are more accurate than perhaps they were in the past. We have looked at every road in the shire, roads are assets as far as the government is concerned, and we have to depreciate them. In the past, we just depreciated just one length of road.
We have over 2000 km of roads. What we are doing now is breaking those roads down into segments so we can more accurately say exactly what condition that segment is and there is a reduction of some $4 million in our depreciation. There is probably going to be an improvement in that ratio.”
Effective infrastructure and service management
Infrastructure Backlog Ratio
Measures how effectively the council is managing its infrastructure. Increasing backlogs may affect the council’s ability to provide services and remain sustainable.
“This is based on what is known as Special Schedule 7, in the financial statements.”
“Like every Council in NSW this wasn’t really taken seriously, it was never audited. We used to just estimate figures, that has come back to bite us a bit, and without our knowledge of how these things were to be used. Now they have become set in stone, and we don’t meet this benchmark. Once again, we are now doing more work on that, that benchmark should improve.”
Asset Maintenance Ratio
Measures whether the council is spending enough on maintaining its assets to avoid increasing its infrastructure backlog.
“We do fairly well here,” Mr. Eastcott said. “That measures whether the Council is spending enough to maintain its assets to avoid increasing its infrastructure backlog. We have 85.9%, the target is over 100% averaged over three years.
This will have an impact when we start looking at how much work we should be doing on our road system which is linked into our asset management plan.
Debt Service ratio
It indicates whether the council is using debt wisely to share the life-long cost of assets and avoid excessive rate increases.
“We actually meet that ratio,” Mr. Eastcott reported.
Real Operating Expenditure
Indicates how well the council is utilising economies of scale and managing service levels to achieve efficiencies.
Gwydir’s population has reduced in percentage terms greater than all of the surrounding Councils in the northwest,” Mr. Eastcott noted.
“But our operating expenditure divided by the reducing population each year is actually decreasing.
“Before we fill out those seven ratios, we have to go through a process which proves we have scale and capacity,” he said.
Mr. Eastcott said that Garry McDouall has “absolutely hit it on the head, when he said the Government is pretending that the scale and capacity for all councils is exactly the same,” Mr. Eastcott said.
“How can it be the same for us and Woollahra, Fairfield or Liverpool, or any of those Councils.
“It will be interesting to see the government trying to reconcile that when they start to do their assessments.”