Financial overview
Council’s financial position continues to remain sound. A summary of our performance is outlined below. Detailed information relating to Council’s financial performance is included within the Financial Statements and Performance Statement section of the Financial Report.
Council is focused on generating funds to fix ageing community infrastructure and facilities, while maintaining essential services at existing levels, and where possible, making improvements, especially in access and equity of services and the environmental sustainability of operations. Council’s long-term financial strategy confirms this approach.
FAST FACTS 2017–18
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- $35.23 million of capital works completed
- $31.76 million operating surplus
- $373.32 million increase in net assets from $2,178 million to $2,551 million
- $186.31 million revenue with 55.95 per cent coming from rates and charges
- $154.54 million expenditure
- $74.21 million holdings of cash/investments
- $18.3 million of borrowings outstanding.
OPERATING POSITION
Council’s operating position for 2017–18 was a surplus of $31.76 million. The operating result is higher than Council’s 2017–18 budget by $14.55 million. Factors contributing to this include:
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- A non-monetary contribution valued at $5.23m being a land parcel now under Council’s control.
- Higher than anticipated revenue from parking infringements income $2.58 million.
- Higher than budgeted open space fee income $2.85 million.
- Early receipt of the 2018–19 payment from the Victorian Grants Commission. The amount of $1.94 million (50 per cent of the 2018–19 grants) was received for financial assistance and local roads funding during the 2017–18 financial year.
- Lower depreciation and amortisation $1.23 million.
For more information see note 1.1 starting on page 10 of the Financial Report.
INCOME
Council’s total revenue for the 2017–18 financial year was $186.31 million, $14.15 million favourable to budget (8.22 per cent). The main factors contributing to the favourable variance included:
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- statutory fees and fines $2.57 million;
- grants — operating $2.13 million;
- contributions — monetary $2.85 million;
- contributions — non monetary $5.23 million; and
- user fees $723,000.
Rates and charges revenue was in-line with budget in 2017–18. Glen Eira City Council rates and charges continue to be much lower than the average of all inner metropolitan councils (second lowest rates and charges revenue).
Statutory fees and fines were favourable to budget by $2.57 million mainly due to higher than anticipated revenue from parking infringements income, $2.58 million, to emphasise safety around schools and balancing trader and patron parking in activity centres.
Grants — operating were favourable to budget by $2.13 million due to the Commonwealth Government announcement that 50 per cent of Council’s Victorian Grants Commission funding would be prepaid in 2017–18. The amount of $1.94 million (50 per cent of the 2018–19 grants) was received for financial assistance and local roads funding during the 2017–18 financial year.
Monetary contributions were higher due to better than anticipated open space fees exceeding the budget by $2.85 million.
User fees were favourable to budget by $723,000. This was mainly due to an increased quantity of fees received for issue of permits.
Refer to Figure 1.
EXPENSES
Council’s total expenditure for 2017–18 was $154.54 million (0.26 per cent favourable to budget).
Contributing to this favourable variance was: employee costs $760,000; depreciation and amortisation expense $1.23 million; and partly offset by unfavourable variances in other expenses $1.03 million; and share of net loss of joint operations $535,000.
Refer to Figure 2.
FIGURE 1. 2017–18 SOURCES OF INCOME (%)
Figure 2. 2017–18 Categories of Expenditure (%)
CAPITAL INVESTMENT
During 2017–18, $35.23 million was expended on capital. Variance to budget for new capital works was $2.68 million including the following major activities:
Buildings — underspent by $3.19 million due to works at Town Hall; King George Pavilion, Bentleigh East; Koornang Park Pavilion, Carnegie; and public toilet projects continuing in 2018–19.
Open Space — was under budget by $2.41 million due to works not completed by year end that will be carried forward into 2018–19. These include works at Spring Road Reserve, Caulfield South; Princes Park, Caulfield South; Rosanna Street Reserve, Carnegie; EE Gunn Reserve, Ormond; and Duncan Mackinnon Reserve, Murrumbeena.
Computers and telecommunications — under budget by $1.15m due to the Corporate Performance Reporting System, Project Management System, online forms enhancements and website redevelopments which were unable to be completed during the current year and will be carried forward to 2018–19 ($966,000). Also contributing are savings relating to the Human Resources Information System as the project did not proceed during 2017–18 ($200,000).
These underspends are offset by:
Land — unbudgeted spend of $3.64 million due to the acquisition of land at
296–298 Neerim Road, Carnegie.
Refer to Figure 3.
ASSET EXPENDITURE CATEGORIES
The major asset expenditure categories of capital works were:
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- land $3.64 million;
- buildings $2.65 million;
- plant and equipment $3.92 million;
- roads $7.53 million;
- footpaths $2.6 million;
- drainage $3.95 million;
- open space and recreation $6.44 million;
- car parks $483,000;
- streetscape works $198,000; and
- carried forward projects from 2016–17 $3.82 million.
For more information see note 1.2 starting on page 13 of the Financial Report.
The $35.23 million comprised: renewal 46.21 per cent ($16.28 million); upgrade 29.09 per cent ($10.25 million); expansion 4.91 per cent ($1.73 million) and 19.79 per cent ($6.97 million) new expenditure.
Refer to Figure 4.
FIGURE 3. CAPITAL WORKS EXPENDITURE 2007–08 TO 2017–18 ($M)
Figure 4. 2017–18 Capital Works expenditure — by type (%)
ASSET RENEWAL
To bridge the infrastructure gap, Council invested $35.23 million in renewing, upgrading and expanding assets during the 2017–18 year. This was funded from operations.
Council’s asset renewal ratio, which is measured by comparing asset renewal and upgrade expenditure to depreciation, was 122 per cent. Renewal expenditure was $16.28 million and upgrade expenditure $10.25 million.
Refer to Figure 5.
ASSETS
Council’s asset base increased from $2,261 million to $2,634 million, mostly due to the increased value of Council’s fixed assets — up from $2,184 million to $2,543 million.
Consistent with the historical trend, property, infrastructure, plant and equipment has increased due to the impact of Council’s revaluation of assets, the net result of the capital works program, depreciation of assets and the sale of property, plant and equipment.
Refer to Figure 6.
LIQUIDITY
Working capital is the excess of current assets above current liabilities. This calculation recognises that although Council has current assets, some of those assets are already committed to the future settlement of liabilities in the following 12 months, and are therefore not available for discretionary spending.
Cash and cash equivalents (including financial assets) was $74.21 million as at 30 June 2018. This cash balance is sufficient to cover Council’s short-term restricted assets including: trust funds and aged care deposits $32.35 million; and funding for the Public Open Space Reserve $13.79 million.
Council needs to ensure working capital is maintained and that sufficient cash reserves are available to meet normal cash flow requirements. Council will continue to have a large investment in capital works projects. The liquidity ratio expresses the level of current assets Council has available to meet current liabilities.
Council should hold sufficient cash to cover ‘restricted assets’ such as: Residential Aged Care deposits; Public Open Space Reserve; contract deposits; and Fire Services Property Levy.
Refer to Figure 7.
FIGURE 5. ASSET RENEWAL RATIO (INCLUDING UPGRADE) (%)
FIGURE 6. PROPERTY, INFRASTRUCTURE, PLANT AND EQUIPMENT AND INTANGIBLES ($M)
FIGURE 7. LIQUIDITY RATIO (WORKING CAPITAL) (%)
PUBLIC OPEN SPACE STRATEGY
Contributions to the Public Open Space Reserve during the financial year relate to contributions received as public open space levies pursuant to the provisions of Section 18 of the Subdivision Act 1988.
Expenditure on Open Space projects for 2017–18 totalled $251,000 and related to the completion of Booran Reserve, corner Booran and Glenhuntly Roads, Glen Huntly and provisional works for 6 Aileen Avenue, Caulfield South.
MAJOR INITIATIVES
Council has a requirement to report on major initiatives pursuant to section 127 of the Local Government Act 1989. The progress of the major initiatives for 2017–18 as at 30 June 2018 were:
Theme 1: Liveable and well designed — A well planned City that is a great place to live.
We will deliver detailed Structure Plans for Bentleigh, Carnegie and Elsternwick, which address development, open space, business and transport, and an Activity Centre Strategy for all our centres.
Outcome: Structure Plans which address development, open space, business and transport for Bentleigh, Carnegie and Elsternwick were adopted by Council 27 February 2018.
Outcome: The revised Activity Centre, Housing and Local Economy Strategy was adopted by Council on 25 July 2017.
We will invest a minimum of $30 million annually through Council’s capital works program.
Outcome: Actual spend as at 30 June 2018 is $35.23 million.
Theme 2: Accessible and well connected — A City that is easy to move around, full of safe travel options and walkable neighbourhoods.
We will develop a new Integrated Transport Strategy, which identifies and sets the City’s goals for various transport modes, with a focus on creating safer and walkable neighbourhoods.
Outcome: The Integrated Transport Strategy 2018–2023 was adopted by Council on 12 June 2018.
We will complete a municipal-wide Car Parking Strategy.
Outcome: The Car Parking Strategy could not be completed until the Integrated Transport Strategy was adopted. This is now expected to be finalised in November 2018.
LOOKING AHEAD
Council has prepared a 2018–19 Annual Budget which is aligned to the vision in the Council and Community Plan 2017–2021. It seeks to maintain and improve services and infrastructure as well as deliver projects and services that are valued by our community, and to do this within the rate increase mandated by the State Government. The strategy adopted in the 2018–19 Budget is to:
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- manage finances appropriately within the constraints set by the State Government’s rate capping regime;
- maintain essential services at not less than current levels;
- set fee increases that are manageable and sustainable;
- invest in continuous improvement, technology and other enablers to efficiency and embrace customer outcomes; and
- keep day-to-day costs and rates below our peers.
The 2018–19 Budget is based on a rate increase of 2.25 per cent. This is in-line with the Fair Go Rates System (FGRS) which has capped rate increases by Victorian councils to the forecast movement in the Consumer Price Index (CPI) and Wage Price Index.
Our focus for the 2018–19 year is to continue to deliver on the projects and services that make our City a great place to live and to respond to the challenges we are currently facing. These challenges include:
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- Providing top-up funding for services we provide on behalf of the State and Federal Government to the local community (such as school crossing supervision and Home and Community Care). Over time the funds received by Local Governments have not increased in-line with real cost increases, leaving a gap.
- Increasing investment in the maintenance of our ageing community and infrastructure assets.
- Responding to growth and increasing diversity in the population within the municipality.
To support Council’s $2.54 billion of community assets, new capital expenditure is projected at $39 million for asset renewals, upgrades and expansions. Highlights of the capital works program include:
Major projects — this includes; design works for Lord Reserve, Carnegie Swim Centre and Koornang Park precinct; pavilion forward design work for Murrumbeena Park, Murrumbeena and pavilion construction at King George VI Reserve, Bentleigh East ($2.76 million).
Strategic projects — Activity Centre streetscape works, Structure Plan designs at Elsternwick, Bentleigh and Carnegie and Integrated Transport Strategy implementation design ($2.87 million).
Community facilities — comprises buildings and building improvements, upgrade and renewal of community facilities; Council offices; sports facilities; and pavilions ($2.68 million).
Community safety — this includes safety projects: cross intersection, pedestrian and safer speed limits; school safety; shopping centres; sustainable transport; disabled parking upgrades; and new footpaths ($965,000).
Recreation and open space — this includes open space initiatives; parks; playing surfaces; and playground equipment ($6.02 million).
Sustainability — street lighting upgrade, installation of LED lights; park lighting energy efficiency upgrade; and photovoltaic systems on Council assets to generate renewable energy ($2.56 million).
Renewal projects — this includes the renewal and upgrade of Council’s major infrastructure assets, such as: road reconstruction; drainage improvement; footpaths; local road resurfacing and carparks. Other renewals include: plant and machinery; furniture and equipment; information technology and telecommunications; and library collections ($21.15 million).
The Budget was developed through a rigorous process of consultation and review and Council endorses it as financially responsible.
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