long term financial plan 2018-19 to 2027-28 is… · the 2018-19 to 2027-28 long term financial...

Long Term Financial Plan 2018-19 to 2027-28

27 March 2018 Adopted by Council on 12 April 2018 (OM2018/101)

Natural Connected Prosperous

Shire of Augusta Margaret River 41 Wallcliffe Road, Margaret River 6285 | T (08) 9780 5255 | F (08) 9757 2512 | amrshire.wa.gov.au

Alignment with Community Strategic Plan This document relates to Key Result Area 5 Effective Leadership and Governance in the Community Strategic Plan 2036 and specifically the outcome of effective and integrated strategy, planning, financial and asset management.

Key Result Area 1 Valuing, protecting and enhancing the natural environment

Key Result Area 2 Welcoming, inclusive and healthy communities

Key Result Area 3 Ensuring sustainable development

Key Result Area 4 Vibrant and diverse economy

Key Result Area 5 Effective leadership and governance

1 Natural Connected Prosperous


Table of Contents

LTFP Highlights 3

Executive Summary 4

1.0 Introduction 5

2.0 Context 6

3.0 Model Framework 8

4.0 Basis of Forecasts 9 Economic Outlook ......................................................................................................................... 9

Indexes ........................................................................................................................................ 10

Wage Price Index .................................................................................................................... 10

Consumer Price Index ............................................................................................................. 11

Local Government Cost Index ................................................................................................. 11

Enterprise Agreement ................................................................................................................. 11

Property Growth .......................................................................................................................... 12

Visitors ......................................................................................................................................... 12

Workforce .................................................................................................................................... 12

Summary of Forecasts Used in the LTFP ................................................................................... 13

5.0 Operating Revenue Assumptions 14 Rates ........................................................................................................................................... 15

Operating Grants, subsidies and contributions ........................................................................... 15

Fees and charges ........................................................................................................................ 15

Service charges ........................................................................................................................... 15

Interest earnings .......................................................................................................................... 15

Other revenue ............................................................................................................................. 15

6.0 Operating Expenditure Assumptions 16 Once off adjustments to the base ................................................................................................ 16

Recurrent Items for Future Years ................................................................................................ 16

Employee costs ........................................................................................................................... 17

Materials and contracts ............................................................................................................... 18

Utility charges .............................................................................................................................. 18

Depreciation ................................................................................................................................ 18

Interest expenses ........................................................................................................................ 18

Insurance ..................................................................................................................................... 18

Other expenses ........................................................................................................................... 18

7.0 Capital Expenditure Assumptions 19 Roads and Infrastructure ............................................................................................................. 19

Plant and Equipment ................................................................................................................... 20



Buildings ...................................................................................................................................... 20

8.0 Capital Funding Assumptions 21 Grants .......................................................................................................................................... 21

Loans ........................................................................................................................................... 21

Reserves ..................................................................................................................................... 21

Asset Sale Proceeds ................................................................................................................... 23

9.0 Financial Risk Assessment 24

10.0 Result of Base Model 28 Overview and Statements ........................................................................................................... 28

Ratios and Performance .............................................................................................................. 32

Asset Renewal Gap ..................................................................................................................... 36

Comparison with Previous Models .............................................................................................. 37

11.0 Scenarios 40

12.0 Forecast Financial Statements 41



LTFP Highlights For the 10 financial years from 2018-19 to 2027-28 the following are forecast:

What When A balanced financial budget. Every year

Rate yield increase equivalent to the forecast rate of inflation Every year

except 2018-19, 2020-21 and 2027-28

All expenditure and revenue including rates only increased by forecast inflation

Every year from 2019-20

Capital works program of over $110 million. Over 10 years

Loan principal outstanding reduces to $2.5 million with only 3 outstanding loans in the portfolio.

In year 10

$7.3 million for Margaret River main street upgrade. 2018-19

$8 million for the redevelopment of the Cultural Centre. 2018-19

Over $40 million for road related works. Over 10 years

Over $7 million to renew community buildings (including removing asbestos) with capacity to increase this allocation using funds from the Community Facilities reserve.

Over 10 years

Specific building projects such as expanding the Outside School Hours Care area, improving the Scout Hall building and renewing the Margaret River Recreation Centre building.

Various years

Over $18 million for waste management works such as converting Davis Road landfill to a transfer station are 100% Shire funded.

Over 10 years

Profits from caravan park operations are reinvested to upgrade and develop these assets including the construction of additional chalets.

Over 10 years

Continued focus and commitment to environmental works including the environmental management fund.

Over 10 years

Benchmark targets for the majority of financial performance ratios are exceeded.

Over 10 years

Net Assets increases to over $496 million. 2027-28

Total Reserves exceeds Loan Principal Outstanding. Every year



Executive Summary The Long Term Financial Plan (LTFP) is one of the key documents of the Shire’s Integrated Planning and Reporting Framework. The LTFP is reviewed annually and this version will be used as the framework for informing the preparation of the 2018-19 Budget.

This version of the LTFP is a baseline model as information that will critically influence future financial forecasts for the Shire is being updated or has not been fully reviewed from a financial perspective.

The LTFP forecasts operating revenues and operating expenditures for 10 years and uses the 2017-18 budget as the basis for these forecasts. Various assumptions underpin the escalation rates used and these assumptions reference index and statistical data relevant to the local government industry and the Shire.

Future capital works and their funding are based on a forward capital works planning process that endeavours to detail projects and works using asset management and other approved plans. The stages, timing and proposed funding mix for these projects and works are also documented as part of this process. Almost $110 million of capital expenditure have been included in the LTFP.

Balancing forecast expenditure with available funding has required some reprioritisation and changes to the timing of projects and works as well as assuming the availability of non-Council funding sources such as grants. As a final resort rates were increased by greater than the forecast inflation rate to provide enough funding to meet forecast expenditure needs. The objective of this process was to record a balanced budget position for each forecast year and has been achieved.

A risk assessment of the validity and impact of assumptions and forecasts was completed which indicates the level of risk is medium to high but is mitigated to some extent by employing a conservative approach.

A number of scenarios were also considered to test the sensitivity and impact of assumptions. Previous year’s LTFP results were compared to ensure there is some consistency, which in general terms there is apart from changes to the timing of capital works and capital grants. However, it is noticeable operating revenue and operating expenditure forecasts have reduced significantly compared to previous year’s forecasts.

Statutory ratios have been forecast and confirm results for 4 of the 7 statutory ratios exceed benchmark targets. The recording of a net operating deficit due to operating expenditure (including depreciation) exceeding operating revenue, and insufficient funds being available to be allocated to the long term renewal of the Shire’s asset base have resulted in the Operating Surplus, Asset Sustainability and Asset Renewal Funding ratios not achieving benchmark targets.

Overall this LTFP provides a basic financial framework for the next 10 years and will be refined once updated data and information becomes available from informing plans and other strategic documents including the Workfroce Plan, Asset Management Plan, Waste Management Strategy and the Community Strategic Plan 2036.

Although subject to refinement , the plan does highlight the need to continue to focus on the net operating result in order to record an operating surplus and free up funds to reduce the asset renewal gap.



1.0 Introduction The 2018-19 to 2027-28 Long Term Financial Plan (LTFP) is the fifth version of the plan prepared in accordance with the Integrated Planning and Reporting (IPR) framework.

The IPR framework was introduced in Western Australia as part of the State Government’s Local Government Reform Program. All local governments were required to have their first suite of IPR documents in place by 1 July 2013. The documents include:

A Strategic Community Plan;

A Corporate Business Plan;

An Asset Management Plan;

A Workforce Plan;

A Long Term Financial Plan;

Any other issue or area specific plans; and

The Annual Budget.

The first two documents are the minimum requirements of the Plan for the Future of the District as legislated under Section 5.56(1) of the Local Government Act 1995 (the Act).

IPR is a cyclical process and commences with the community visioning that is included in the 10 plus year Strategic Community Plan. The Corporate Business Plan provides details of programs and activities for four years. The Annual Budget is obtained from the first year of the Corporate Business Plan. The Long Term Financial Plan models resourcing implications of alternative strategic scenarios and provides the financial context for the Corporate Business Plan in terms of available resources and the prioritisation necessary to achieve outcomes.



2.0 Context To provide some context the following local government profile information has been obtained from the Australian Bureau of Statistics (ABS) and is based on the 2016 Census.

14,258 people were resident in the Shire. Aboriginal and Torres Strait Islander people made up 1.4% of the population. Females and males are equally represented as they also are in WA. The median age of people in the Shire was 39 years and was the same as the 2011 census.. Children aged 0-14 years made up 21.7% of the population and people aged over 65 years made up 14.4% of the population.

The above charts show that compared to WA the Shire has less people in the 20 to 29 age group but more in the age group from 30 to 69 years. This is similar to the 2011 census although the difference in the 20 to 29 and 60 to 69 age groups are more pronounced.

69.6% of people were born in Australia with the next most common countries of birth being England (7.6%) and New Zealand (3%). 85.3% of people only spoke English at home. Of people aged 15 years and over 49.6% were married, 12.3% were either divorced or separated and 34.1% had never married.

29.5% of people were attending an educational institution. Of these 31% were in primary school, 21.2% in secondary school and 10.8% in a tertiary or technical institution. The proportion of primary



school students was higher than for WA while the proportion of tertiary or technical students was lower and was the same result as the 2011 census.

Of the 3,716 families in the Shire (3,072 families in 2011), 43.2% were couples with children, 42.2% were couples without children and 14% were one parent families. The proportion of couple families without children was higher than that recorded for WA (38.5%) and Australia (37.8%).

Table 1: Employment and related statistics

Statistical Category

Shire 2011

Shire 2016

Shire (%)

WA

Australia

Employment Worked full time 3,068 3,495 48.4% 57.0% 57.7% Worked part time 2,178 2,841 39.3% 30.0% 30.4% Away from work 550 7.6% 5.2% 5.0% Unemployed 250 335 4.6% 7.8% 6.9% Industry Beverage manufacturing 463 428 6.3% 0.1% 0.1% Accommodation 316 333 4.9% 1.0% 1.1% School education 302 Primary education 241 3.6% 2.6% 2.2% Cafes, restaurants, 273 248 3.7% 2.3% 2.4% Supermarkets & grocery 182 2.7% 2.4% 2.4% Fruit and tree nut growing 172 Median Weekly Inc. Personal $593 $671 $724 $662 Family $1,327 $1,524 $1,910 $1,734 Household $1,096 $1,285 $1,595 $1,438 Occupation Technician and trades 1,020 1,185 17.2% 16.2% 13.5% Managers 1,032 1,162 16.9% 12.0% 13.0% Professionals 805 1,095 15.9% 20.5% 22.2% Labourers 841 992 14.4% 9.7% 9.5% Community services 746 10.8% 10.6% 10.8% Sales 640 9.3% 8.8% 9.4% Clerical & administrative 575 626 9.1% 13.0% 13.6%

The above table includes 2011 figures as a comparative and at a broad level shows that:

employment in the Shire has grown, the number of part time workers is higher than WA and Australia, the number of full time workers and unemployment is lower than WA and Australia;

beverage manufacturing continues to be the major employment industry and employment in supermarkets and grocery stores is now greater than employment in fruit and nut growing;

median weekly income has increased but is still lower compared to WA and Australia; and the number of people in each occupation has increased with the most common occupations

being technicians and trades, managers, professionals and labourers. The occupations of community service workers and sales workers were not listed in 2011.

The Local Profile 2016 (updated April 2016) shows the preliminary estimated resident population (ERP) of the Shire was 13,807 in June 2015, an increase of 25% over the 2006 population of 11,052. The ERP is the official measure of the population in Australia and is obtained from the ABS Regional Population Growth statistics. The average annual growth rate between 2011 and 2015 was 3.1%.

Table 2: Estimated permanent resident population change between 1991 and 2015

1991 1996 2001 2006 2011 2015 Shire 6,218 8,106 10,228 11,052 12,228 13,807 Change 1,888 2,122 824 1,176 1,579 Average annual growth rate 5.4% 4.8% 1.6% 2% 3.1%



3.0 Model Framework The financial reporting framework for the LTFP mirrors that of the statutory financial statements with forecast financial information being reported at the Nature or Type level.

The LTFP uses the 2017-18 Budget as the base for its operating revenue and operating expenditure. These budget allocations are reviewed to remove once off revenue and expenditure items for the year as well as any items which are funded by once off operating grants. The remaining items represent the base year operating revenue and operating expenditure which are escalated to provide 10 year forecasts.

Operating revenue and operating expenditure items are escalated in accordance with the assumptions which are described in greater detail in the next sections.

In addition to removing once off items from the base year, known once off items are added to future years. For example, major expenditures that occur less frequently than annually such as community surveys, property revaluations for rating purposes and fair value asset revaluation costs are added to future years.

Capital expenditure is obtained from a Forward Capital Works Plan (FCWP) which uses as a key input Asset Management Plans for the various asset classes. Details of works to be completed on an individual asset basis such as a road, path or playground are generally not included within the FCWP as the objective is to provide details at a summary level and allow the greater level of detail to be provided in the Annual Budget.

For this version of the LTFP the FCWP has not changed significantly apart from adding another year and refining expenditure forecasts for some large capital projects such as the Cultural Centre redevelopment.

The funding breakdown for capital expenditure including grants, loans, reserves and ratepayer funds are determined and included in the LTFP. The general intention is to maximise funds obtained from external sources, minimise loan borrowings and use reserve funds wherever possible.

Once all expenditure and revenue have been loaded into the LTFP a process of re-prioritisation and re-allocation of capital projects and funding sources is required as available funding in any one year is often insufficient to meet expenditure demands.

For this version of the LTFP the following process was used to more clearly demonstrate the balancing process and additional funding required.

1. An LTFP model forecasting all operating revenue and operating expenditure at a base inflation rate of 2% per annum for the term of the plan was prepared. Generally, forecast operating expenditure and forecast operating revenues are not changed as these represent the base level of operations for the Shire.

2. This LTFP was updated with the revised FCWP, capital grants, expected transfers to and from reserves, loan borrowings and the known percentage changes expected to expenditure. In this case the only increase above the base inflation rate was that employee salaries and wages are expected to increase by 2.5% in 2018-19 as this is the percentage agreed in the Enterprise Agreement. The results of this model are the base model.

3. In order to achieve a balanced outcome rates were increased to fund the shortfall between expenditure (operating and capital) and funding including operating revenue, capital grants, asset sale proceeds and reserve transfers. This is the objective of the rate setting process. The results of this model are the initial balanced model.

Once a base scenario has been balanced, assumptions and growth factors are changed so the impact of alternative scenarios upon expenditure and revenue can be considered.

A series of statutory financial statements and ratios are used to assess and compare the outcome of the base and other scenarios.



4.0 Basis of Forecasts Economic Outlook

The State Government of WA’s 2017-18 Budget Paper No. 3 provides information on the economic and fiscal outlook for the State. This document provides the following summary comments on the economic and fiscal outlook.

“The Western Australian economy is showing signs of recovery, with economic growth (as measured by Gross State Product (GSP)) forecast to lift to 3% in 2017-18, after bottoming at an estimated 0.25% in 2016-17. This reflects continued strong growth in net exports, as well as reduced ‘drag’ from business investment.

The tapering decline in business investment (from an estimated $14.8 billion fall in 2016-17 to a $4.5 billion fall in 2017-18) reflects that the State’s large LNG projects are moving into their final stages of construction and commissioning.

Reflecting trends in investment, the rate at which the domestic economy (as measured by State Final Demand) is contracting is also expected to moderate in 2017-18, after an estimated record decline of 7% in 2016-17.

Recent signs of recovery in the labour market are expected to continue, with employment forecast to start growing again in 2017-18. However, elevated spare capacity in the labour market is expected to keep wage growth contained which, combined with continued weakness in the State’s housing market, is expected to see growth in the Consumer Price Index remain below trend over the forecast period. “

The following table of economic forecasts is also obtained from the Budget papers and in general expect higher rates of growth than the 2017-18 Estimate.

Table 3: Economic Forecasts

2015-16 Actual

2016-17 Estimate

2017-18 Estimate

2018-19 Estimate

2019-20 Estimate

2020-21 Estimate

Gross State Product 1.90% 0.25% 3.0% 3.25% 3.0% 3.0% Household Consumption

1.4%

1.25%

1.25%

2.25%

3.0%

3.25%

Unemployment Rate 6.0% 6.2% 6.0% 6.0% 5.5% 5.5% Population 0.7% 0.7% 1.0% 1.2% 1.5% 1.8% CPI 1.0% 0.6% 1.0% 1.5% 2.0% 2.5% Wage Price Index 1.9% 1.4% 1.5% 1.75% 2.75% 3.0% Median House Price -2.7% -2.8% -1.3% 0.7% 1.5% 2.7%

The equivalent forecasts from the 2016-17 Budget papers were as follows and indicates firstly that actual results for 2015-16 did not achieve forecasts and secondly that the 2017-18 Budget forecasts expect lower rates of growth than the 2016-17 Budget forecasts.

2015-16 Estimate

2016-17 Estimate

2017-18 Estimate

2018-19 Estimate

2019-20 Estimate

Gross State Product 1.0% 1.25% 2.5% 2.5% 3.0% Household Consumption

1.75% 1.75% 2.5% 3.0% 3.0%

Unemployment Rate 6.25% 6.75% 6.5% 6.25% 5.75% Population 1.2% 1.3% 1.5.% 1.7% 1.9% CPI 1.25% 1.75% 2.25% 2.5% 2.5% Wage Price Index 1.75% 1.75% 2.25% 2.75% 3.25% Median House Price -3.5% -0.5% 1.3% 2.7% 1.0%



Being the only available forecast data for the short term, the forward estimates for 2018-19 to 2020-21 will be used as the basis for escalating some expenditure and revenue categories.

Interest Rates

The Reserve Bank’s cash reference rate is currently 1.5% and has been at this rate since August 2016. The indication from some economists seems to be that any adjustment to monetary policy setting is some time away as there is concern with household consumption due to increasing indebtedness, low wages growth and the economy is still transitioning away from being mining focused. Market commentary is of the view that interest rate increases are not likely to occur until 2019. The following chart was obtained from the Curve Securities market commentary document for 7th February 2018.

Indexes

To guide the determination of escalation rates for expenditure and revenue categories, the Wage Price Index (WPI), Consumer Price Index (CPI) and the Local Government Cost Index (LGCI) are referred to.

Wage Price Index The WPI is calculated by the Australian Bureau of Statistics and measures the change in wages for the public and private sectors. The trend and seasonally adjusted indexes for Australia both rose 1.9% for the year to 30 June 2017 compared to 2.1% for the year to 30 June 2016. For the public sector the trend and seasonally adjusted indexes rose by 2.4% for the year to 30 June 2017 compared to 2.3% and 2.4% for the year to 30 June 2016.

For the 12 months to December 2017 the seasonally adjusted increase for Australia was 2.1% and for the public sector was 2.4%. Western Australia has the slowest growth in annual terms at 1.5% up from 1.3% for September.

The recent trend for Australia is that annual increases in the WPI are in the order of 2.1% while for WA they are lower.



Consumer Price Index CPI is calculated by the ABS and takes into consideration changes in the cost of a basket of goods for a household. It is often argued that CPI is not reflective of items purchased by local governments and therefore changes in this index are only used as a broad guide for forecasting value changes in revenue and expenditure.

Table 4: Change in Perth CPI by financial year

2012-13 2013-14 2014-15 2015-16 2016-17 Consumer Price Index 2.2% 3.0% 1.8% 0.9% 0.6%

Table 5: Change in Perth CPI by quarter

Quarter ending Percentage change from previous quarter

Percentage change from corresponding quarter of

previous year December 2017 0.4 0.8 September 2017 0.5 0.8 June 2017 0.0 0.7 March 2017 0.0 1.0 December 2016 0.4 0.4 September 2016 0.4 0.5 June 2016 0.3 0.5 March 2016 -0.6 0.7 December 2015 0.5 1.5 September 2015 0.6 1.1 June 2015 0.6 1.2 March 2015 0.1 1.4

Table 4 shows the annual change in the Perth CPI has decreased over the past 3 years. And Table 5 indicates the quarterly change in the Perth CPI is low and showing a slight increasing trend.

Local Government Cost Index (LGCI) The LGCI takes into consideration a number of indexes and components that influence local government expenditure. WALGA’s Local Government Economic Briefing document of 28 August 2017 contains the statement that “WALGA’s forecasts for the LGCI predict the index will rise by 2% in 2017-18 and 2.1% in 2018-19.” These forecasts compare to the actual annual increase in this index for 2016-17 of 1.4%.

Enterprise Agreement

The Shire’s Enterprise Agreement 2016 provides for annual base salary increases of 2.5% for 2016-17, 2017-18 and 2018-19. This increase comes into effect in July for all eligible employees.

In addition to this base increase in labour costs, employees who have achieved agreed performance and development standards and are eligible for a step increase within their wage level receive an increase in October. This step increase is equivalent to a 2% increase in the employee’s base pay rate.

Contract staff and others not party to the Enterprise Agreement and who have achieved agreed performance and development standards typically receive a performance increase in October that is equivalent to the percentage increase of the enterprise agreement.



Property Growth

Growth in the Shire’s properties database results in additional rateable properties and therefore rate revenue. As the property growth rate has a direct relationship with rate revenue it is essential a realistic growth rate be included in the LTFP.

Historical property growth rates are used to inform possible future growth and are represented in the following chart.

The chart shows the annual rate of property growth has improved after reaching its lowest point in 2013-14 and is now about 2%. For the purpose of the LTFP forecasts an annual growth rate of 2%, which is similar to WA Treasury’s population growth forecast, will be used to escalate rate revenue (interim rates).

Visitors

Tourism Research Australia’s national and international visitor surveys provided the following average annual visitor statistics for the Shire.

Table 6: Visitor Numbers

Years ending December 2011/12/13

Years ending December

2014/15

% Change

Estimated average annual visitors 457,200 530,600 16.0% Estimate average annual visitor nights

1,619,900 1,874,200 15.7%

Average length of stay (nights) 3.5 3.5

The estimated average annual visitors for 2014 and 2015 of 530,600 is the equivalent of 1,454 visitors to the Shire each day and is over 10% of the Shire’s estimated population.

Workforce

According to the Shire’s Workforce Plan there has been minimal change in the number of full time equivalent positions (FTEs) since 2013 and this situation is not forecast to change in the short term. The following table shows historic workforce numbers.

2006‐07

2007‐08

2008‐09

2009‐10

2010‐11

2011‐12

2012‐13

2013‐14

2014‐15

2015‐16

2016‐17

2017‐18

% Change 4.6% 6.5% 3.8% 2.1% 3.2% 2.0% 0.8% 0.5% 1.3% 3.1% 1.9% 2.1%

Number of Properties 330 485 299 174 266 170 73 41 119 277 180 200

0

100

200

300

400

500

600

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Number of properties

Annual Increase in Rateable Properties



Table 7: Workforce Summary

12-13 13-14 14-15 15-16 16-17 17-18 Total workforce budget (FTEs) 166.37 168.04 166.34 165.31 167.36 168.13 Grant funded positions (FTEs) 0.50 2.26 1.10 0.50 1.50 1.50 Annual change in number of FTEs 5.58 1.67 -1.70 -1.03 2.05 0.77 Annual percentage change in FTEs 3.5% 1.0% -1.0% -0.6% 1.2% 0.5%

Growth in the workforce will be inevitable as the number of properties, population and demand for services increases. The Workforce Planning document is currently in the process of being updated and its outputs will not be available for inclusion in the 2018-19 version of the LTFP. The update process uses a methodology which considers service levels, changing service demands, organisational risk areas, employee demographics and other factors.

Rather than include a notional future workforce growth percentage as was the case in previous LTFPs, the 2018-19 version of the LTFP does not include any workforce growth. This position has been adopted on the assumption the updated workforce plan will provide improved information for future LTFPs. The implication of this approach is that any future workforce growth will need to be funded by expenditure decreases or revenue increases, including property rates.

Summary of Forecasts Used in the LTFP

Having considered the available data, the following forecasts have been used in the base LTFP. Also shown in the table are the index forecasts used to inform the escalation rates.

Table 8: Summary of LTFP Forecasts

Category 2017-18 2018-19 2019-20 2020-21 2021-22 on CPI forecast 1% 1.5% 2% 2.5% n/a LGCI forecast 2% 2.1% WPI forecast 1.5% 1.75% 2.75% 3% n/a Enterprise Agmt 2.50% 2.50% Rates yield 3% 2% / 3% 2% 2% / 2.75% 2% Property growth 2% 2% 2% 2% 2% Fees and Charges 3% 2% 2% 2% 2% Employee Costs (base change)

2.50% 2.50% 2% 2% 2%

Employee Costs (performance)

2% 2% 2% 2% 2%

Superannuation 9.5% 9.5% 9.5% 9.5% 10%-12%1 Workforce growth 1% 0% 0% 0% 0% Materials 2% 2% 2% 2% Insurance 2% 2% 2% 2% Utilities 2% 2% 2% 2% Interest payable 3.6% Interest earned 2.50% 2.5% 2.5% 2.5% 2.5% Base Inflation rate 2% 2% 2% 2% 2%

1 Superannuation will increase in 0.5% increments from July 2021 until it reaches 12% in 2025-26.



5.0 Major Assumptions/Qualifications The following are major assumptions or qualifications which underpin this version of the LTFP.

No change in the type and level of services provided to the community is assumed which in effect means that recurrent expenditure budgeted for 2017-18 is the Shire’s base operating expenditure.

The financial impact of the Community Strategic Plan 2036 that was adopted by Council on 27 September 2017 has not been fully determined and therefore specific strategies to deliver outcomes for the five key result areas may not be included.

As an updated Workforce Plan is currently being developed no change to the current workforce has been included for the term of this LTFP.

Consultants were engaged in February 2018 to prepare a waste management strategy for the Shire which will determine future processes for waste collection and waste processing. The strategy will have an impact upon future fees and charges, capital and operating expenditures. As this information is unknown at this time the LTFP assumes the continuation of current practices and past forecasts for capital works.

Construction costs have not been finalised for major grant funded projects such as the Cultural Centre redevelopment and Margaret River main street redevelopment and therefore the cost estimates included in the LTFP are best estimates.

As Asset Management Plans for assets such as buildings are being updated to determine and justify the annual amount required to be allocated for the renewal of this asset type, the amounts included in the FCWP are estimates.

The expenditure and funding details included in the FCWP are best estimates and subject to refinement as project plans, designs, approvals and procurement progress.

Waste management is treated in the LTFP as a self funded business unit which means any excess income is transferred to the Waste Management reserve after all operating expenditure, capital expenditure and the return to the organisation to fund administrative costs have been deducted.

Caravan Parks are treated in the LTFP in the same way as Waste Management. Funds are transferred to the Community Facilities reserve to replenish this reserve and

provide for future asset renewal. All interest earned on reserves is returned to reserves. Roads to Recovery grants are assumed to continue from 2019-20.

Overall, changes to this LTFP are relatively minor when compared to the previous version and there is also increased reliance upon using the estimated inflation factor as a forecasting basis rather than using a variety of forecasting percentages for the different revenue and expenditure categories.



6.0 Operating Revenue Assumptions Rates

Rates have been increased by 1% above the base inflation factor of 2% to achieve an annual rate yield increase of 3% in 2018-19. This increase is the minimum required to fund the forecast deficit between expenditure and revenue in this year that would result from a rate increase equal to the 2% inflation factor.

$85,000 has been added to the base amount of interim rates of $100,000 to allow for rates resulting from growth in the property database and the development of properties on vacant land. This amount of interim rates has also been increased by 1% above the base inflation factor.

Rate increases greater than forecast inflation are also required in 2020-21 and 2027-28 as funding from all sources is insufficient to meet the demand for expenditure in these years.

Operating Grants, subsidies and contributions

Once off grants budgeted for 2017-18 have been removed.

Ongoing operating grants for the emergency services area have been retained and these grants are forecast to escalate at the same rate as base inflation. Financial Assistance Grants are forecast to escalate at the base inflation factor as the Shire is a minimum grant local government and the General Purpose Grant component is paid on a per capita basis. All other operating grants and contributions have been escalated to increase by the base inflation factor using the 2018-19 budget amount as the base.

Fees and charges

Fees and charges have been increased by the base inflation factor. This conservative approach allows for a level of cost recovery that is consistent with the forecasts used to increase materials and contracts expenditure.

Service charges

A service charge of $333.33 per property is being imposed on properties in Cowaramup between Peake Street and 30 metres south of Bottrill Street to recover the cost of undergrounding of electricity. The charge is being imposed for 10 years and ends in 2020-21.

Interest earnings

Interest is earned on the balance of reserves and any surplus cash. The default interest rate for investments is 2.5% for the term of the LTFP and is equivalent to the average rate of interest currently earned on term deposits. This rate is conservative and possibly pessimistic for the long term with some market analysts speculating that interest rates may increase next year.

For simplicity the interest budgeted to be earned on the WA Treasury Corporation (WATC) Overnight Cash Deposit Facility (OCDF) for the Margaret River main street project has been removed from the base year as although interest will be earned in 2018-19 it will all be transferred to the Margaret River CBD Redevelopment reserve and therefore there is no impact upon the LTFP.

Other revenue

The base rate of inflation of 2% has been applied to this category which has a total revenue of $26,500 in the base year.



7.0 Operating Expenditure Assumptions Once off adjustments to the base

Expenditure carried over from the 2016-17 financial year that was included in the 2017-18 budget has been removed from the base year of the LTFP. Additionally, a number of once off items included in the 2017-18 budget have also been removed. As a number of these items were grant funded the grant has also removed. The following table provides some detail of the items removed or changed.

Table 9: Adjustments to the base year

Description of Adjustment Amount Public relations carryover 7,500 Communty Infrastructure Report carryover 30,000 Organisational development carryover 20,000 OSH initiatives carryover 10,800 Special projects for ICT carryover 6,500 Sustainability initiatives carryover 12,000 Developer contributions study carryover 15,000 Witchcliffe wastewater treatment study carryover 20,000 Various sport and recreation consultants carryover 29,500 Kidsport grant funded expenditure carryover 10,000 Asset Management System implementation carryover 45,000 Path and trails planning carryover 63,500 Management plans for reserves carryover 12,600 Vegetation condition assessment carryover 30,000 Site survey for amalgamating reserves carryover 10,000 Plant/workshop consultant carryover 20,000 Remove GRV Revaluation 150,000 Remove postal election costs 45,000 Remove FM Reg 5(2)(c)review 12,000 Remove Cultural Centre QS & Business Planning 15,000 Remove LGCOG Conference expenditure 40,000 Remove LGCOG Conference revenue -40,000 Reduce legal fees as SAT appeal defence concluded 20,000 Reduce value of Special Projects for ICT 30,000 Remove Bushfire Risk Management Officer expenditure 41,392 Remove Bushfire Risk Management Officer grant -41,392 Remove software development for Ranger tablets 20,000 Remove grant funded expenditure for trails planning 25,000 Remove grant for trails planning -25,000 Remove interest earned on OCDF -78,000 Removed insurance payment received for bowling greens -233,500

Subtotal 277,900 Increase General Purpose & Local Roads Grant to include advance payment 677,329 Increase base rate revenue to include interim rates raised during 2017-18 100,000 Total of Adjustments to Base Year 1,055,229

Recurrent Items for Future Years

Some expenditure items are incurred on a regular basis but do not occur every year. These items may be cyclic in nature and are often of high value. LTFP forecast years have been increased to include the following items.



Table 10: Adjustments for future year’s items

Description of expenditure item Amount Years Included Gross Rental Value (GRV) property revaluation is required every 3 years with the last review in 2017-18.

165,000 to175,000

2020-21, 2023-24, 2026-27

Local government elections are conducted every 2 years and are assumed to be by postal vote.

47,000 to 55,000

2019-20, 2021-22, 2023-24, 2025-26, etc

Customer survey is commissioned every 3 years with the last survey completed in 2015-16.

25,000 to 28,000

2018-19, 2021-22, 2024-25, 2027-28

The review of the appropriateness and effectiveness of financial systems (LGFM Reg 5(2)(c) is conducted every 2 years with the last review in 2017-18.

15,000 2019-20, 2021-22, 2023-24, 2025-26, 2027-28

The review of the appropriateness and effectiveness of risk management, internal controls and legislative compliance (LG Audit Reg 17) is conducted every 2 years with the last review in 2016-17.

15,000 2018-19, 2020-21, 2022-23, 2024-25, 2026-27

Updated fair value valuations are provided for plant and equipment (P&E), land and buildings (L&B), and infrastructure on a 3 year’s cycle. The cost varies by asset class. The latest fair value revaluation of infrastructure is being conducted in 2017-18.

20,000

30,000

50,000

P&E - every 3 years from 2018-19 L&B – every 3 years from 2019-20 Infrastructure every 3 years from 2020-21

Contribution to Busselton Margaret River Regional Airport ($25,000 for 5 years, $15,000 from CAPEROC annual budget)

10,000 2018-19 to 2022-23

Increase interim rates in 2018-19 to better reflect possible annual property growth change of 2%.

85,000 2018-19

Employee costs

Salaries and superannuation expenses have been increased by 1.5% above the base inflation factor of 2% for the first year of the plan to accommodate the enterprise agreement increase of 2.5% and the annual performance increase of 2% for eligible employees (it is estimated 50% of employees would receive this step increase subject to their satisfactory performance).

For year 2 onwards the increase is 1% above base inflation to accommodate the annual performance increase for eligible employees. No increase in the enterprise agreement above the assumed inflation rate of 2% has been included. There is also no increase in workforce growth as this will be included in the next version of the LTFP after the Workforce Plan has been updated.

Superannuation from year 4 (2021-22) has been increased by an additional 0.5% per annum until it achieves the 12% target for the Superannuation Guarantee Charge (SGC) rate in 2025-26. This increase is in accordance with legislative changes and results in the SGC increasing as follows:

Year Annual Increase Cumulative Increase Superannuation Guarantee Charge

2021-22 0.5% 0.5% 10.0% 2022-23 0.5% 1.0% 10.5% 2023-24 0.5% 1.5% 11.0% 2024-25 0.5% 2.0% 11.5% 2025-26 0.5% 2.5% 12.0%



The combined impact of annual salary increases, annual performance increases and the increase in the SGC is to increase annual superannuation expenditure by an average of almost $0.250 million per annum for the 10 years from 2018-19 to 2027-28 with total superannuation increasing from $1.067 million in 2018-19 to $1.571 million in 2027-28.

All other employee costs such as training, worker’s compensation, protective clothing, uniforms, fringe benefits tax and recruitment expenses are increased by the base inflation factor of 2%.

Materials and contracts

Expenditure has been escalated by the base inflation factor of 2%. Previous plans have applied and increase greater than forecast inflation in order to take into consideration items at greater risk of higher costs increases such as road maintenance, reserves maintenance and building maintenance.

Utility charges

Expenditure has been escalated by the base inflation factor of 2%.

Depreciation

The allocation of depreciation is based on historical asset values that are revalued for fair value purposes by the inflation factor and also increased to include capital expenditure projections. The rate of depreciation is the average rate of depreciation for each asset class. Due to this methodology depreciation is at risk of being overstated.

Interest expenses

The forecast interest rate for new loans is 3.6% and has been used to calculate interest expense for the loan expected to be drawn down during 2018-19. For all existing loans at 30 June 2018 interest is calculated using their actual interest rate.

Insurance

Costs have been escalated by the base inflation factor of 2%.

Other expenses

The base rate of inflation has been applied to this category which has a total expenditure of $469,472 in the base year. This category includes Members of Council sitting fees, allowances and travel expenses, Corporate and Community Services contributions, Landcare contributions and Members of Council donations and projects.



8.0 Capital Expenditure Assumptions A detailed Forward Capital Works Plan (FCWP) has been prepared listing capital projects for the next 10 years. The FCWP consists of a programme and supporting details for each asset class or category. This supporting information describes each item in greater detail and identifies planned expenditure and funding by year, project responsibility, approvals, level of community consultation and risk assessment. For the majority of items, the level of detail is at a high level so a reference to supporting asset management information is provided which lists each individual project and an assessment of factors such as condition, risk and level of use to allow a priority rating and preferred timeframe to be determined. Various assumptions are necessary to allow this assessment to be prepared.

The FCWP provides summary information for 13 asset classes and 21 asset categories including plant and equipment, major projects, depot improvements, bridges, playground equipment, furniture and equipment, public open space, tree planting, cemetery works, waste water recycling system, specific parks and ovals projects, road works, caravan parks, buildings, waste management, carparks, airstrips, boat ramps and other infrastructure.

$109.625 million is identified as being required for the 10 years with $47.390 million (43%) funded from general revenue, $28.879 million (26%) from grants and contributions, $29.690 million (27%) from reserves and $3.167 million (3%) from asset sale proceeds with the majority resulting from the sale of plant and equipment. Only one additional loan has been included which is $0.500 million for the Cultural Centre redevelopment project.

Roads and Infrastructure

Individual roads are not listed in the FCWP as this would make the programme unwieldy. This level of detail is included with the Asset Management Plan’s road works programmes. The following table summarises expenditure and funding for the road works categories in the FCWP and shows the proportion which is being funded from general revenue.

Table 11: Road Works 10 Year Allocation and Funding Mix

10 Year Allocation

($’000)

Grant Funding ($’000)

General Revenue ($’000)

General Revenue

% Road Reconstruction 14,805 9,870 4,935 33% Road Resurfacing 6,800 4,095 2,705 40% Kerbs 750 0 750 100% Gravel Road Resheeting 5,100 2,300 2,800 55% Sealed Road Reshouldering 1,500 0 1,500 100% Drainage 3,300 0 3,300 100% Road Bridges 1,447 1,447 0 0% Special Projects (Main St, etc) 8,300 8,300 0 0% 42,002 26,012 15,990 38%

Due to the 2018-19 Roads to Recovery grant allocation being brought forward to 2016-17, total forecast costs for road reconstruction, resurfacing, kerbs, resheeting and reshouldering for 2018-19 have been reduced by $0.395 million to $2.480 million. With the hoped for recommencement of this grant allocation from 2019-20, the expenditure forecast for these road works has increased to $2.875 million per annum from 2019-20 to 2021-22 and then to $2.975 million per annum from 2022-23.

Forecast expenditure for gravel resheeting of $0.450 million for 2018-19 is consistent with the 2017-18 Budget and increases to $0.550 million per annum from 2022-23.

The LTFP forecasts that $1.380 million of Council funds will be required to fund road reconstruction, resurfacing, kerbs, resheeting and reshouldering in 2018-19 as additional funds are required to make up for the Roads to Recovery grant allocation. For 2019-20 to 2021-22 the amount allocated from



Council funds is $1.190 million and this increases to $1.290 million per annum from 2022-23. When compared historically the amount forecast to be funded by Council exceeds past funding levels.

Plant and Equipment

A Plant Replacement Program details each vehicle and item of mobile plant, their expected replacement year, estimated replacement cost and estimated disposal value. These values are escalated by the inflation factor of 2% per annum.

The cost and purchase/replacement year of major items of equipment identified as being required, such as equipment for the Aquatic Centre and Recreation Centre are included in the FCWP.

A Playground Equipment programme identifies when playground equipment needs to be renewed or replaced based on factors including condition, demand, risk and community impact.

Buildings

Major discrete building projects such as the Cultural Centre redevelopment, Turner Caravan Park chalets, Scout Hall, Margaret River Recreation Centre and the Outside School Hours Care area are individually identified in the FCWP.

An asbestos replacement and reinstatment program builds upon the works in progress for 2018-19 and allows for $1 million of works over the 10 years of the LTFP. When added to the loan funded allocation of $1 million in 2018-19 this will allow 91% of the expected $2.2 million required over the 15 year timeframe to be replaced.

An annual allowance for building renewal works is included in the programme and commences with an allocation of $0.415 million in 2018-19 which is increased by at least 10% per annum where funding permits. Over the 10 years $6.165 million is allocated to building renewal. This allocation will ultimately be supported by an asset management program for building renewals.



9.0 Capital Funding Assumptions Grants

Grants have been used to fund specific capital projects wherever possible. $30.879 million of capital grants have been included over the term of the LTFP. These include approved grants for the Cultural Centre Redevelopment project totalling $6.250 million (plus $0.500 million received in 2016-17).

Other forecast grants $1.447 million for bridge projects, $0.539 million for footpath expansion projects, $0.500 million for works on pedestrian structures, $0.500 million for the possible expansion of the Outside School Hours Care area, $0.489 million million of possible grants for works to the Margaret River Recreation Centre, $0.525 million of possible coastal adaptation grants for Prevelly/Gnarabup coastal works, $0.500 million of possible grants for the Wadandi track and $0.100 million for possible works to the Scout Hall. Possible grant funding has also been included for the implementation of the Cape Leeuwin Tourism Precinct project and Rivermouth to Gas Bay plan as these projects are difficult to fund from general revenue.

Road works are expected to be partly funded by $13.965 million of Roads to Recovery and Regional Road Group grants and $2.300 million from the Main Roads WA Direct Grant. Roads to Recovery funding of $0.455 million per annum is assumed to continue from 2019-20 in expectation the Federal Government’s commitment to allocate funds to this program will continue. No Roads to Recovery funding has been allocated for 2018-19 as this allocation was brought forward to 2016-17.

Loans

One new loan is proposed to be drawn down in 2018-19 as follows:

$0.500 million for the Cultural Centre redevelopment is assumed to be drawn down on

16/10/18 for a term of 15 years at a fixed interest rate of 3.6%.

Reserves

$29.690 million is assumed to be required to be drawn from reserves to fund specific capital projects. An additional $1.356 million is assumed to be drawn from the Developer Contributions reserve to fund the repayment of loan principal and interest for the loans drawn down for the Cultural Centre redevelopment and Margaret River Youth Precinct projects.

The main transfers from reserves include:

$18.219 million from the Waste Management reserve, however, this is subject to review

following the completion of the Waste Management Strategy;

$6.800 million in 2018-19 for the Margaret River Main Street redevelopment from the

Margaret River CBD Redevelopment reserve;

$0.700 million from the Caravan Park Upgrade reserve for the development of chalets;

$2.286 million from the Community Facility reserve to assist funding of projects including the

Cultural Centre redevelopment ($1.186 million), Rapids Landing Primary School shared use

oval and public open space ($0.500 million), upgrade works for the Scout Hall ($0.100 million)

and works to upgrade the Margaret River Recreation Centre including the Outside School

Hours Care area ($0.500 million);

$1.381 million from the Developer Contributions reserve to fund loan principal and interest

repayments for the Cultural Centre and Margaret River Youth Precinct projects as well as

$0.025 million for Gloucester Park signage in 2021-22. $0.100 million in 2022-23 for the



Gloucester Park landscaping project should also be funded from this reserve but needs to

be confirmed; and

$1.350 million from the Plant reserve to assist purchase of plant.

A major assumption applies to Waste Services in that all operating revenue less operating expenditure is transferred to the Waste Management reserve and all waste services capital expenditure is transferred from the reserve. This approach allows this reserve to be built up over time in order to fund possible major expenditures during the latter years of the plan.

$25.719 million is assumed to be transferred to reserves and includes interest earned on the investments which cash back the reserves.

The main transfers to reserves include:

Surplus waste services revenue of $15.674 million over the 10 years are forecast to be

transferred to the Waste Management reserve;

Caravan park operations profits of $2.024 million over the 10 years are forecast to be

transferred to the Caravan Park Upgrade reserve;

Anticipated Developer Plan Contributions of $0.200 million per annum are forecast to be

transferred to the Developer Contributions reserve;

Contributions totalling $1.564 million are forecast to be transferred to the Community

Facilities reserve; and

Plant reserve contributions of $0.447 million over the 10 years are forecast to be transferred

to the Plant Replacement reserve.

By 2027-28 the balance of reserves is forecast to be $17.565 million. The reserves with the largest

balances are as follows.

Table 12: Reserve Balances

Opening Balance ($’000)

2018-19 Balance ($’000)

2023-24 Balance ($’000)

2027-28 Balance

% Employee Leave 405 415 458 518 Margaret River CBD Redevelopment 6,801 171 189 214 Caravan Park Upgrade 469 72 950 2,021 Waste Management 8,142 9,233 9,559 7,622 Infrastructure Asset 1,515 1,553 1,589 1,808 Community Facility 2,140 511 580 1,254 Plant Replacement 1,022 627 99 368 Developer Contributions 743 824 1,143 1,642 Total of all reserves 22,891 15,103 16,449 17,565

While the table does not show all the reserves it does highlight that:

additional funds are available in the Margaret River CBD Redevelopment reserve if required;

the Caravan Park, Waste Management and Community Facility reserves are being used and

replenished;



the Developer Contributions reserve is able to increase at a steady rate provided growth in

properties continues;

the greatest area of concern is the declining balance of the Plant Replacement reserve which

will need to be rectified with additional transfers; and

funds within the Infrastructure Asset reserve are available to be used for specific projects in

accordance with the conditions associated with the contribution that was provided.

Asset Sale Proceeds

Proceeds from asset sales include the following.

The possible sale price of vehicles when they are replaced with $2.427 million included for

the 10 years. It is assumed the estimated disposal value is 30% of the original cost of the

vehicle or plant item.

Proceeds from the sale of vacant land in the Margaret River CBD are required to fund the

Shire’s contribution of $2 million for the main street redevelopment project in 2018-19.

Proceeds from the sale of vacant residential land are required to fund the Shire’s contribution

to the development of the shared use oval at the Rapids Landing Primary School. The

second instalment of this contribution is to be paid in 2018-19.



10.0 Financial Risk Assessment As the LTFP uses assumptions as the basis for expenditure and revenue forecasts there is a high level of risk the outcomes forecast by the model will not be achieved. Specific areas of risk include but are not limited to those in the following table.

Table 13: Risk Assessment

Inflation The base rate of inflation of 2% is too low as a forecast escalation rate. The risk of this rate being exceeded is not mitigated as higher escalation rates for employee expenses, materials and insurance have not been included. Likelihood: Medium Consequence: Medium Risk Rating: Medium State Government Decisions Possibility the State Government do not honour Royalties for Regions funding for major projects. As the grant for the main street project has been received and the majority of the grant for the Cultural Centre is expected to be received this year, the risk has been mitigated. Likelihood: Low Consequence: High Risk Rating: Low State Government Cost Shifting The impact of State Government financial decisions which shift costs to local government, has not been included and may result in expenditure exceeding forecasts. Risk could be partly mitigated by the use of higher escalation rates for some materials and contracts items. Likelihood: High Consequence: Low Risk Rating: Medium Property Growth Property growth rates impact revenue for rates, fees and charges and developer contributions. If growth rates do not achieve projections, forecast revenues will not be achieved. As increases are in accordance with the forecast inflation rate, revenue forecasts could be considred to be conservative. Likelihood: Medium Consequence: Medium Risk Rating: Medium Capital Works Forecasts Capital works expenditure and funding forecasts are broad estimates based on the current cost of these projects. Cost escalation will have an impact on future years. This risk can be mitigated by preparing more detailed capital works proposals and business cases so that more accurate cost estimates can be included in the FCWP and LTFP. Likelihood: High Consequence: High Risk Rating: High Capital Works Funding Assumptions To balance the LTFP assumptions relating to the timing and funding (use of grants and reserves) of projects have been made. If the timing and funding mix of specific projects change, pressure will be placed upon delivery of capital projects in the years proposed and forecasts will need to be amended. Likelihood: Medium Consequence: High Risk Rating: High New Assets Operating and Maintenance Costs New and upgraded infrastructure assets may require increased operating and maintenance needs and ongoing financial costs. There is therefore the financial risk of revenue and expenditure forecasts being inadequate to meet these possible cost increases. An example is the increased operating and maintenance costs for the Cultural Centre, however, as income has not been increased in the LTFP the two items offset each other. This risk can be mitigated by completing business cases and whole of life costs analyses for capital projects so these financial impacts can be included in the LTFP. Likelihood: High Consequence: Medium Risk Rating: Medium



Table 13: Risk Assessment (continued)

Annual Rate Yield Increase Assumption of a rate revenue increase of 3%, in addition to property growth, for only 2018-19 and forecasting that rates will only increase in line with inflation for the majority of years from 2019-20 is a financial risk which places pressure upon the organisation to meet future cost increases imposed by external influences and to meet service needs arising from increased demand upon the workforce and the implementation of new and upgraded capital infrastructure. Likelihood: High Consequence: High Risk Rating: High LTFP Balancing Decisions To balance the LTFP decisions have been made about expenditure and revenue forecasts which are necessary from a financial planning perspective but may not actually occur. For example, if forecast grant funds for a project are not received other funding will be required and the forecast balanced position would not be achieved. Likelihood: High Consequence: High Risk Rating: High Escalation Rates Used to Determine Forecasts Assumptions used as the basis for forecast revenue and expenditure escalation rates may have resulted in these escalation rates being understated (or overstated) and consequently the legitimacy of the LTFP as a planning document is compromised. This risk is mitigated to some extent by a conservative approach being adopted. Likelihood: High Consequence: Medium Risk Rating: Medium Margaret River Airstrip Access Road A significant Capital Works assumption is the Margaret River Airstrip access road will be able to be funded by Main Roads WA. If this did not occur there will be a significant financial impact to defer projects to fund these works as the project has not been included. Likelihood: High Consequence: High Risk Rating: High Land Sales Two capital projects are reliant on land sales as a funding source. These are the Margaret River Main Street Upgrade Project with at least $0.500 million required to make up the Shire’s required $2 million contribution and the contribution to the Rapids Landing Primary School shared use oval which requires a minimum of $0.560 million to be realised from the sale of 4 vacant residential lots. Likelihood: High Consequence: High Risk Rating: High



11.0 Model Results – The Unbalanced Model As outlined in the Model Framework section, the first model prepared is unbalanced and includes:

an updated capital works programme; an updated plant replacement programme; operating revenues and operating expenditures that have been increased by the base

inflation rate of 2%; employee labour costs that have been increased by the Enterprise Agreement increase of

2.5% for 2018-19 as well as the annual performance increase for eligible employees; and employee superannuation costs that have been increased in accordance with the above as

well as the increases necessary to achieve a SGC of 12% in 2025-26.

The reference for this model is “Draft Base Scenario – Unbalanced - Version 1.1”.

Following are the annual percentage changes which have been applied in this base model.

The table shows that most revenue and expenditure areas have changed by 2% per annum with the exceptions being:

capital grants as they are linked to capital projects; employee costs as explained above; materials and contracts due to the inclusion and exclusion of once off items; depreciation as it is linked to updated asset values and capital expenditure; interest as it is based on actual loan repayments; and rates in 2018-19 due to the inclusion of interim rates related to expected propertygrowth.

This base model recorded an end of year budget deficit of $0.201 million in 2018-19 which increases to $3.083 million in 2027-28. The recording of a budget deficit is unacceptable and requires additional rate revenue to achieve a balanced budget position.

1 2 3 4 5 6 7 8 9 10

2018‐19 2019‐20 2020‐21 2021‐22 2022‐23 2023‐24 2024‐25 2025‐26 2026‐27 2027‐28

OPERATING

Revenues

Rates 2.42% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Operating grants, subsidies and contributions 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Non‐Operating grants, subsidies and contributions (15.04%) (55.28%) (41.69%) 10.42% 10.00% (19.15%) 39.56% 1.06% (33.44%) 0.00%

Fees and charges 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Service charges ‐ ‐ ‐ (1.00) ‐ ‐ ‐ ‐ ‐ ‐

Interest earnings (7.70%) (40.14%) (20.65%) 0.43% 13.68% 9.89% 13.51% (7.95%) (6.91%) (7.40%)

Other revenue 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

2.04% 1.12% 1.72% 1.97% 2.11% 2.08% 2.13% 1.87% 1.90% 1.90%

Expenses

Employee costs 3.08% 2.72% 2.73% 2.76% 2.80% 2.84% 2.89% 2.93% 2.94% 2.94%

Materials and contracts 2.89% 2.39% 3.66% 0.60% 1.25% 4.64% (0.44%) 2.39% 3.52% 0.74%

Utility charges (electricity, gas, water etc.) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Depreciation on non‐current assets 3.65% 4.27% 3.07% 3.00% 3.00% 2.85% 3.66% 3.59% 3.28% 1.86%

Interest Expense (6.48%) (9.66%) (8.84%) (9.46%) (10.87%) (12.85%) (13.29%) (13.21%) (15.75%) (19.00%)

Insurance expense 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Other expenditure 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

2.97% 2.85% 2.85% 2.15% 2.32% 3.07% 2.17% 2.84% 3.01% 2.00%

Shire of Augusta Margaret RiverSummary of Percentage Adjustments on Prior Year

For the period 2018 ‐ 2028

Draft Base Scenario ‐ Unbalanced ‐ Version 1.1



Rates were increased by an additional 1% above inflation in 2018-19 to determine the impact upon the end of year closing position for 2018-19. It is also expected the following year’s closing budget position will be favourably impacted due to the compound impact of the additional rate increase in 2018-19.

Model reference “Draft Base Scenario – Balanced - Version 1.2” has the following percentage increases.

The only variation in this table compared to Model reference “Draft Base Scenario – Unbalanced - Version 1.1” is to rates. As a result of rates increasing by 1% above the forecast rate of inflation in 2018-19 the forecast budget closing position for that year improved to a small surplus of $3,387 which carries forward and is absorbed by a small deficit in the next year. This deficit increases substantially in 2020-21 requiring a rate increase of 0.75% above forecast inflation to meet service demand needs for that year and future years. The forecast large budget deficit in 2027-28 requires another corrective rate increase above the forecast rate of inflation.

A rate increase for 2018-19 of 1% above the forecast rate of inflation is only sufficient to achieve a balanced result for two years by providing sufficient funds to match forecast expenditure demands for current service levels. However, a further rate increase above the forecast rate of inflation is required to correct an ongoing budget deficit issue from 2020-21 onwards.

The table also shows the average annual increase in operating revenue over 10 years is 2.07% and for operating expenditure (including depreciation) is 2.62%. These averages confirm the conservative nature of this LTFP.

Rather than presenting budget deficits and surpluses for each year, balancing adjustments have been processed against the Community Facilities and Plant Replacement reserves in order to present a balanced (nil surplus/deficit) position for each year.

1 2 3 4 5 6 7 8 9 10

2018‐19 2019‐20 2020‐21 2021‐22 2022‐23 2023‐24 2024‐25 2025‐26 2026‐27 2027‐28

OPERATING

Revenues

Rates 3.42% 2.00% 2.75% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 3.00%

Operating grants, subsidies and contributions 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Non‐Operating grants, subsidies and contributions (15.04%) (55.28%) (41.69%) 10.42% 10.00% (19.15%) 39.56% 1.06% (33.44%) 0.00%

Fees and charges 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Service charges ‐ ‐ ‐ (1.00) ‐ ‐ ‐ ‐ ‐ ‐

Interest earnings (7.70%) (39.40%) (19.12%) 3.27% 15.77% 11.75% 12.51% (7.53%) (5.63%) (5.61%)

Other revenue 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

2.67% 1.14% 2.22% 2.00% 2.14% 2.11% 2.13% 1.87% 1.91% 2.55%

Expenses

Employee costs 3.08% 2.72% 2.73% 2.76% 2.80% 2.84% 2.89% 2.93% 2.94% 2.94%

Materials and contracts 2.89% 2.39% 3.66% 0.60% 1.25% 4.64% (0.44%) 2.39% 3.52% 0.74%

Util ity charges (electricity, gas, water etc.) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Depreciation on non‐current assets 3.65% 4.27% 3.07% 3.00% 3.00% 2.85% 3.66% 3.59% 3.28% 1.86%

Interest Expense (6.48%) (9.66%) (8.84%) (9.46%) (10.87%) (12.85%) (13.29%) (13.21%) (15.75%) (19.00%)

Insurance expense 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Other expenditure 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

2.97% 2.85% 2.85% 2.15% 2.32% 3.07% 2.17% 2.84% 3.01% 2.00%

Shire of Augusta Margaret RiverSummary of Percentage Adjustments on Prior Year


Draft Base Scenario ‐ Balanced ‐ Version 1.2



12.0 Model Results – The Base Balanced Model Overview and Statements

The Statement of Financial Position, Statement of Comprehensive Income by Nature or Type and the Funding Statement are the key statements used to examine the summarised financial forecasts.

The Statement of Financial Position shows net assets are forecast to increase from $410.935 million from the 30 June 2018 base year to $496.487 million at 30 June 2028. This represents an overall increase of 21% over 10 years. The main contributor to this increase is the growth in non-current assets specifically infrastructure and property, plant and equipment.

Loan borrowings are forecast to decrease from $9.621 million for the base year to $2.529 million at 30 June 2028.

Reserves are forecast to decrease from $22.891 million for the base year to $17.565 million at 30 June 2028 as a result of reserve funds being used to fund capital projects. Reserves represent the majority of the Shire’s forecast cash balance.

The Statement of Comprehensive Income shows operating revenue increasing from $32.406 million for the base year to $39.785 million for 2027-28. For the same timeframe operating expenditure increases from $34.031 million to $44.079 million. The net operating result deteriorates from a deficit of $1.772 million in 2018-19 to a deficit of $4.294 million in 2027-28. The main reason for the increase in the net operating result is the increased allocation of depreciation.



The net result takes into consideration non-operating or capital grants and profit on asset disposals. Higher capital grants for major capital projects in the first years of the plan have caused the forecast net result for the first two years to be a surplus. As capital grants reduce this net result deteriorates and deficits are recorded from 2020-21 onwards. However, these results do not represent a cash surplus/deficit as the inclusion of the non-cash item of depreciation has a significant impact.



The Statement of Funding shows a balanced forecast budget position which means no additional funding is required to be sourced to meet forecast expenditure demands. In addition to the operating revenue and expenditure details from the Statement of Comprehensive Income this statement includes funding inflows and outflows from capital activities and funding inflows and outflows from financing activities.

The capital activities section of the statement shows that for 2018-19 $24.109 million of capital works is required to be funded from operating revenue, loan borrowings and reserve transfers. Capital expenditure decreases significantly to $13.591 million in 2019-20 as the Margaret River main street upgrade and Cultural Centre redevelopment projects are completed. It again reduces to $8.580 million after waste management works are completed, however these waste management works were envisaged in a plan which is being reviewed and is therefore likely to change.

Total capital works planned for the major asset classes for the term of the LTFP are shown in the following chart. For the 10 years a total of $109.625 million has been allocated to capital works.

The financing activities section of the statement includes new borrowings with one new loan planned to be drawn down in 2018-19 as well as loan repayments and reserve transfers. The following chart shows that loan borrowings are expected to reduce and despite large transfers from reserves the balance of reserves exceeds loan principal outstanding.



Significantly the statement assumes a balanced brought forward position for 2018-19 which means no items or projects have been carried forward from 2017-18. Recent financial history has shown that items carried forward, over budget revenue and under budget expenditure have resulted in a reasonable budget surplus being brought forward and indications are this will again be the case for 2018-19. If this is the case this positive result would mitigate some of the risk associated with possibly under-forecasting operating expenditures.

The following chart shows for the term of the plan the net funding sources for operating and capital expenditure represented in the Statement of Funding.



The chart shows that:

Net funding from operational activities is reasonably consistent every year increasing from an inflow of $7.605 million to $8.127 million. However the 7% increase over 10 years should be greater in order to fund a greater proportion of capital works.

Net funding from capital activities which represents capital expenditure less capital grants, reduces from an outflow of $15.042 million to $5.014 million. This confirms major capital projects occur in the early years of the plan and that insufficient capital expenditure is scheduled for later years. This situation may result in deterioration of the Shire’s assets.

Net funding from financing activities represents transfers to and from reserves as well as the drawdown and repayment of loan borrowings. In the first year of the LTFP reserves and loans are required to fund capital works and results in an inflow of funds of $7.437 million. The steady repayment of loan borrowings and the ability to transfer more funds to reserves results in a forecast outflow of funds of $3.113 million in 2027-28.

Overall the Statement of Funding shows a balanced annual result but based on analysis of its net funding components does not necessarily indicate an improving financial position.

Copies of each of the statutory statements are included at the end of this document.

Ratios and Performance

The following charts show the forecast statutory ratio results with the solid lines representing the targets set by the Department of Local Government, Sport and Cultural Industries (DLGSCI).

The results for the Own Source Revenue Coverage, Debt Service Cover, Asset Consumption and Current ratios exceed the benchmark targets. Due to the high amount of restricted assets (reserves) the Shire has, the Current Ratio calculation has been amended to exclude reserve accounts that have been restricted by choice rather than statutory requirements. For example, the Waste Management reserve is a self imposed restriction rather than a statutory requirement. The removal of these reserves results in a stronger Current Ratio being recorded.

Recording a net operating deficit for each year of the LTFP has resulted in the Operating Surplus ratio not achieving the benchmark and despite an emphasis on asset renewal expenditure the benchmark targets for the Asset Sustainability and Asset Renewal ratios are not achieved despite almost achieving the target on a number of occasions. The results of these ratios indicate expenditure on asset renewal is insufficient or capital works expenditure has not been categorised appropriately.



The Shire’s ability to generate the majority of its revenue from rates and fees and charges rather than relying upon operating grants has contributed to the strong Own Source Revenue Coverage ratio.

The recording of annual net operating deficits has resulted in the Operating Surplus ratio not achieiving benchmark targets.

The forecast results indicate the Shire has a strong ability to repay loan principal and interest from its operating revenue.



The declining trend of this ratio shows the Shire needs to invest in capital expenditure to ensure assets do not deteriorate and to build on the strong results evident in the initial years of the forecast.

Allocating greater expenditure to asset renewal will result in the following ratio achieving benchmark targets.

This ratio compares the amounts allowed in the LTFP for asset renewal with the Asset Management Plan and confirms the need for an emphasis on asset renewal expenditure.



A Financial Health Indicator (FHI) score which is the equivalent of that published on the DLGSCI’s My Council website and which takes into consideration the results of each of the individual ratios, shows that although the forecast result does not achieve the benchmark target of 70 it is reasonably close for the first years but then has a deteriorating trend.

The calculation of the FHI is complex and firstly assigns a score of between 0 and 10 for each ratio depending on whether the ratio’s results exceed a benchmark. Ratios are then weighted according to perceived importance with the Current Ratio and the Operating Surplus Ratios having the highest weightings.

The forecast FHI results take into consideration the strong resuts of the Current Ratio, Own Source Revenue Coverage Ratio, Debt Service Cover Ratio and Asset Consumption Ratio. These results are offset by the three ratios not achieving targets, specifically the operating surplus ratio (as the forecast financial result is a net operating deficit) and the asset sustainability and asset renewal ratios (as there are insufficient funds being allocated to asset renewal). This indicates the net operating result must be improved by increasing operating revenue and decreasing operating expenditure so increased funds can be allocated to meeting asset renewal needs.



Asset Renewal Gap

Asset renewal amounts identified in the LTFP are compared against the Asset Management Plan’s (AMP) asset renewal needs to determine the asset renewal gap. However, as this information was last updated in 2015-16 asset renewal needs may not be current.

The following table and chart show the asset renewal expenditure identified in the LTFP is lower than the AMP for every year of the term of the LTFP. This may be due to renewal needs in the AMP being overstated, capital works projects in the LTFP being categorised incorrectly, insufficient emphasis on asset renewal or most likely a combination of all these factors.

LTFP 2018-19 to 2027-28

Asset Management Plan

Renewal GapCumulative

Renewal Gap

Planned capital renewals year 1 2018-19 6,042,520 9,062,535 (3,020,015) (3,020,015)Planned capital renewals year 2 2019-20 7,976,152 8,584,341 (608,189) (3,628,204)Planned capital renewals year 3 2020-21 7,604,193 8,551,285 (947,092) (4,575,296)Planned capital renewals year 4 2021-22 6,315,427 8,434,814 (2,119,387) (6,694,683)Planned capital renewals year 5 2022-23 7,183,214 8,709,170 (1,525,956) (8,220,639)Planned capital renewals year 6 2023-24 6,450,592 8,902,125 (2,451,533) (10,672,172)Planned capital renewals year 7 2024-25 7,667,023 9,024,717 (1,357,694) (12,029,866)Planned capital renewals year 8 2025-26 6,477,775 9,091,663 (2,613,888) (14,643,754)Planned capital renewals year 9 2026-27 6,236,732 9,119,860 (2,883,128) (17,526,882)Planned capital renewals year 10 2027-28 7,179,602 9,125,840 (1,946,238) (19,473,120)

61,953,628 88,606,350 (17,526,882)



Comparison with Previous Models

A comparison with the results of the LTFP models prepared for the 4 previous years has been completed to identify if there are any major differences between these models. The major difference is that revenue forecast from property rates for the 2018 model is lower than the previous models. This has resulted in operating revenue also being lower and consequently operating expenditure forecasts for the 2018 LTFP have also been reduced. Employee costs and materials and contracts expenditure for the 2018 LTFP are also lower than previous years due to the application of a lower escalation rate.



The greatest variations are evident in the capital expenditure and capital grant forecasts and are the result of the timing, value and funding of projects being refined. This is most evident for property, plant and equipment due to the delay with the Cultural Centre project.



Forecast expenditure for infrastructure more closely aligns with the 2017-18 LTFP and reflects the minimal changes made to the Forward Capital Works Plan.



13.0 Scenarios To determine the sensitivity and the financial impact of changing the assumptions used to prepare the baseline balanced or conservative LTFP model detailed in this document, scenarios may be considered. However, as the assumptions for this version of the LTFP are not complex, the process of preparing and running full scale scenario models did not occur. The following table outlines possible scenarios and likely results.

Table 14: Possible Scenarios

Possible Scenario Likely Outcome A pessimistic annual property growth rate of 1% (rather than 2%) with all other assumptions unchanged.

This scenario will result in annual interim rates reducing by 50% or almost $100,000 in 2018-19. This reduction would flow through to every year of the LTFP.

An optimistic annual property growth rate of 4% (rather than 2%) with all other assumptions unchanged.

This scenario will result in annual interim rates doubling or almost $200,000 extra being raised in 2018-19. This increase would flow through to every year of the LTFP.

An annual base inflation factor of 2.5% (rather

than 2%) with all assumptions that are

dependent on this base inflation factor

increasing.

This scenario will result in all operating revenue and operating expenditure increasing by 0.5%. However the increases will not change the quantum of the net operating result significantly.

An annual rate yield increase of 3% for the term

of the LTFP with all other assumptions

unchanged.

This scenario will result in increased rate revenue of at least $200,000 per annum from years 1 to 9 (2019-20 to 2026-27) as rate increases of 3% have already been factored in for 2018-19 and 2027-28. This additional revenue could be used to fund additional services or increased asset renewal.



14.0 Forecast Financial Statements The following forecast financial statements are included for reference:

Forecast Statement of Comprehensive Income by Nature or Type

Forecast Statement of Financial Position

Forecast Statement of Funding

Capital Funding

Capital Works Summary


1 2 3 4 5 6 7 8 9 10

2018‐19 2019‐20 2020‐21 2021‐22 2022‐23 2023‐24 2024‐25 2025‐26 2026‐27 2027‐28

$ $ $ $ $ $ $ $ $ $

Revenues

Rates 21,096,493 21,518,423 22,110,179 22,552,383 23,003,430 23,463,499 23,932,769 24,411,425 24,899,654 25,646,643

Operating grants, subsidies and contributions 1,883,687 1,921,361 1,959,789 1,998,986 2,038,964 2,079,742 2,121,335 2,163,761 2,207,037 2,251,180

Fees and charges 9,570,156 9,761,557 9,956,788 10,155,922 10,359,045 10,566,218 10,777,541 10,993,094 11,212,953 11,437,216

Service charges 4,333 4,333 4,333 0 0 0 0 0 0 0

Interest earnings 688,698 417,385 337,590 348,614 403,602 451,033 507,436 469,232 442,820 417,972

Other revenue 27,030 27,571 28,123 28,685 29,258 29,843 30,439 31,047 31,668 32,302

33,270,397 33,650,630 34,396,802 35,084,590 35,834,299 36,590,335 37,369,520 38,068,559 38,794,132 39,785,313

Expenses

Employee costs ( 14,735,244) ( 15,136,647) ( 15,549,281) ( 15,979,118) ( 16,427,076) ( 16,894,167) ( 17,381,586) ( 17,890,690) ( 18,415,993) ( 18,958,058)

Materials and contracts ( 8,103,196) ( 8,297,248) ( 8,601,188) ( 8,653,211) ( 8,761,271) ( 9,167,489) ( 9,126,853) ( 9,345,388) ( 9,674,292) ( 9,745,783)

Utility charges (electricity, gas, water etc.) ( 1,235,517) ( 1,260,227) ( 1,285,428) ( 1,311,136) ( 1,337,358) ( 1,364,105) ( 1,391,386) ( 1,419,213) ( 1,447,599) ( 1,476,552)

Depreciation on non‐current assets ( 9,376,938) ( 9,777,233) ( 10,077,379) ( 10,379,337) ( 10,691,028) ( 10,995,215) ( 11,397,337) ( 11,806,101) ( 12,193,893) ( 12,420,639)

Interest expense ( 472,294) ( 426,650) ( 388,953) ( 352,153) ( 313,860) ( 273,527) ( 237,163) ( 205,843) ( 173,426) ( 140,483)

Insurance expense ( 640,253) ( 653,058) ( 666,119) ( 679,441) ( 693,030) ( 706,891) ( 721,029) ( 735,449) ( 750,157) ( 765,161)

Other expenditure ( 478,861) ( 488,438) ( 498,206) ( 508,170) ( 518,332) ( 528,697) ( 539,270) ( 550,056) ( 561,058) ( 572,279)

( 35,042,303) ( 36,039,501) ( 37,066,554) ( 37,862,566) ( 38,741,955) ( 39,930,091) ( 40,794,624) ( 41,952,740) ( 43,216,418) ( 44,078,955)

( 1,771,906) ( 2,388,871) ( 2,669,752) ( 2,777,976) ( 2,907,656) ( 3,339,756) ( 3,425,104) ( 3,884,181) ( 4,422,286) ( 4,293,642)

Non‐operating grants, subsidies and contributions 8,195,000 3,665,000 2,137,000 2,359,650 2,595,700 2,098,500 2,928,600 2,959,600 1,969,950 1,969,950

Loss on Revaluation 0 0 0 0 0 0 0 0 0 0

Profit on disposal of assets 872,600 0 0 0 0 0 0 0 0 0

Loss on asset disposal 0 0 0 0 0 0 0 0 0 0

NET RESULT 7,295,694 1,276,129 ( 532,752) ( 418,326) ( 311,956) ( 1,241,256) ( 496,504) ( 924,581) ( 2,452,336) ( 2,323,692)

Other Comprehensive Income 7,639,027 8,082,958 8,306,768 8,442,468 8,539,787 8,651,473 8,736,686 8,921,207 9,088,548 9,272,451

TOTAL COMPREHENSIVE INCOME 14,934,721 9,359,087 7,774,016 8,024,142 8,227,831 7,410,217 8,240,182 7,996,626 6,636,212 6,948,759

Shire of Augusta Margaret RiverForecast Statement of Comprehensive Income ‐ by Nature or Type




1 2 3 4 5 6 7 8 9 10

30 June 19 30 June 20 30 June 21 30 June 22 30 June 23 30 June 24 30 June 25 30 June 26 30 June 27 30 June 28

$ $ $ $ $ $ $ $ $ $

CURRENT ASSETS

Unrestricted Cash and Equivalents 155,972 155,972 155,972 155,972 155,972 155,972 155,972 155,972 155,972 155,972

Restricted Cash and Cash Equivalent 16,539,402 13,347,684 13,788,483 15,988,062 17,885,398 20,141,515 18,613,258 17,556,802 16,562,964 19,001,214

Trade and Other Receivables 976,693 977,435 978,225 979,064 979,958 980,908 981,918 965,034 965,034 965,034

Inventories 141,789 141,789 141,789 141,789 141,789 141,789 141,789 141,789 141,789 141,789

TOTAL CURRENT ASSETS 17,813,856 14,622,880 15,064,469 17,264,887 19,163,117 21,420,184 19,892,937 18,819,597 17,825,759 20,264,009

NON‐CURRENT ASSETS

Other Receivables 64,298 51,897 38,706 24,676 9,752 ( 6,122) ( 23,006) ( 23,006) ( 23,006) ( 23,006)

Property Plant and Equipment 99,841,607 100,653,510 101,142,922 101,374,258 101,799,013 101,885,054 102,899,224 102,799,954 102,495,750 102,936,134

Infrastructure 321,028,752 331,938,939 338,050,253 342,900,023 348,024,852 352,292,519 360,388,097 368,851,448 376,064,946 379,460,781

TOTAL NON‐CURRENT ASSETS 421,520,657 433,230,346 439,817,881 444,884,957 450,419,617 454,757,451 463,850,315 472,214,396 479,123,690 482,959,909

TOTAL ASSETS 439,334,513 447,853,226 454,882,350 462,149,844 469,582,734 476,177,635 483,743,252 491,033,993 496,949,449 503,223,918

CURRENT LIABILITIES

Trade and Other Payables 2,197,579 2,197,579 2,197,579 2,197,579 2,197,579 2,197,579 2,197,579 2,197,579 2,197,579 2,197,579

Current Portion of Long‐term Liabil ities 828,715 732,491 743,457 780,911 800,392 658,691 689,001 720,756 674,290 625,462

Provisions 1,551,012 1,551,012 1,551,012 1,551,012 1,551,012 1,551,012 1,551,012 1,551,012 1,551,012 1,551,012

TOTAL CURRENT LIABILITIES 4,577,306 4,481,082 4,492,048 4,529,502 4,548,983 4,407,282 4,437,592 4,469,347 4,422,881 4,374,053

NON‐CURRENT LIABILITIES

Long‐term Borrowings 8,427,932 7,683,782 6,927,924 6,133,822 5,319,400 4,645,785 3,940,910 3,203,270 2,528,980 1,903,518

Provisions 459,166 459,166 459,166 459,166 459,166 459,166 459,166 459,166 459,166 459,166

TOTAL NON‐CURRENT LIABILITIES 8,887,098 8,142,948 7,387,090 6,592,988 5,778,566 5,104,951 4,400,076 3,662,436 2,988,146 2,362,684

TOTAL LIABILITIES 13,464,404 12,624,030 11,879,138 11,122,490 10,327,549 9,512,233 8,837,668 8,131,783 7,411,027 6,736,737

NET ASSETS 425,870,109 435,229,196 443,003,212 451,027,354 459,255,185 466,665,402 474,905,584 482,902,210 489,538,422 496,487,181

EQUITY

Retained Surplus 221,953,365 226,421,212 225,447,661 222,829,756 220,620,464 217,123,091 218,154,844 218,286,719 216,828,221 212,066,279

Reserves ‐ Cash Backed 15,103,305 11,911,587 12,352,386 14,551,965 16,449,301 18,705,418 17,177,161 16,120,705 15,126,867 17,565,117

Asset Revaluation Surplus 188,813,439 196,896,397 205,203,165 213,645,633 222,185,420 230,836,893 239,573,579 248,494,786 257,583,334 266,855,785

TOTAL EQUITY 425,870,109 435,229,196 443,003,212 451,027,354 459,255,185 466,665,402 474,905,584 482,902,210 489,538,422 496,487,181

Shire of Augusta Margaret RiverForecast Statement of Financial Position




1 2 3 4 5 6 7 8 9 10

2018‐19 2019‐20 2020‐21 2021‐22 2022‐23 2023‐24 2024‐25 2025‐26 2026‐27 2027‐28

$ $ $ $ $ $ $ $ $ $

FUNDING FROM OPERATIONAL ACTIVITIES

Revenues

Rates 21,096,493 21,518,423 22,110,179 22,552,383 23,003,430 23,463,499 23,932,769 24,411,425 24,899,654 25,646,643

Operating grants, subsidies and contributions 1,883,687 1,921,361 1,959,789 1,998,986 2,038,964 2,079,742 2,121,335 2,163,761 2,207,037 2,251,180

Profit on asset disposal 872,600 0 0 0 0 0 0 0 0 0

Fees and charges 9,570,156 9,761,557 9,956,788 10,155,922 10,359,045 10,566,218 10,777,541 10,993,094 11,212,953 11,437,216

Service charges 4,333 4,333 4,333 0 0 0 0 0 0 0

Interest earnings 688,698 417,385 337,590 348,614 403,602 451,033 507,436 469,232 442,820 417,972

Other revenue 27,030 27,571 28,123 28,685 29,258 29,843 30,439 31,047 31,668 32,302

34,142,997 33,650,630 34,396,802 35,084,590 35,834,299 36,590,335 37,369,520 38,068,559 38,794,132 39,785,313

Expenses

Employee costs ( 14,735,244) ( 15,136,647) ( 15,549,281) ( 15,979,118) ( 16,427,076) ( 16,894,167) ( 17,381,586) ( 17,890,690) ( 18,415,993) ( 18,958,058)

Materials and contracts ( 8,103,196) ( 8,297,248) ( 8,601,188) ( 8,653,211) ( 8,761,271) ( 9,167,489) ( 9,126,853) ( 9,345,388) ( 9,674,292) ( 9,745,783)

Util ity charges (electricity, gas, water etc.) ( 1,235,517) ( 1,260,227) ( 1,285,428) ( 1,311,136) ( 1,337,358) ( 1,364,105) ( 1,391,386) ( 1,419,213) ( 1,447,599) ( 1,476,552)

Depreciation on non‐current assets ( 9,376,938) ( 9,777,233) ( 10,077,379) ( 10,379,337) ( 10,691,028) ( 10,995,215) ( 11,397,337) ( 11,806,101) ( 12,193,893) ( 12,420,639)

Loss on asset disposal 0 0 0 0 0 0 0 0 0 0

Interest expense ( 472,294) ( 426,650) ( 388,953) ( 352,153) ( 313,860) ( 273,527) ( 237,163) ( 205,843) ( 173,426) ( 140,483)

Insurance expense ( 640,253) ( 653,058) ( 666,119) ( 679,441) ( 693,030) ( 706,891) ( 721,029) ( 735,449) ( 750,157) ( 765,161)

Other expenditure ( 478,861) ( 488,438) ( 498,206) ( 508,170) ( 518,332) ( 528,697) ( 539,270) ( 550,056) ( 561,058) ( 572,279)

( 35,042,303) ( 36,039,501) ( 37,066,554) ( 37,862,566) ( 38,741,955) ( 39,930,091) ( 40,794,624) ( 41,952,740) ( 43,216,418) ( 44,078,955)

( 899,306) ( 2,388,871) ( 2,669,752) ( 2,777,976) ( 2,907,656) ( 3,339,756) ( 3,425,104) ( 3,884,181) ( 4,422,286) ( 4,293,642)

Funding Position Adjustments

Depreciation on non‐current assets 9,376,938 9,777,233 10,077,379 10,379,337 10,691,028 10,995,215 11,397,337 11,806,101 12,193,893 12,420,639

Net profit and losses on disposal ( 872,600) 0 0 0 0 0 0 0 0 0

Net Funding From Operational Activities 7,605,032 7,388,362 7,407,627 7,601,361 7,783,372 7,655,459 7,972,233 7,921,920 7,771,607 8,126,997

FUNDING FROM CAPITAL ACTIVITIES

Inflows

Proceeds on disposal 872,600 174,787 209,056 200,252 267,189 260,142 196,424 273,000 244,993 468,095

Non‐operating grants, subsidies and contributions 8,195,000 3,665,000 2,137,000 2,359,650 2,595,700 2,098,500 2,928,600 2,959,600 1,969,950 1,969,950

Outflows

Purchase of property plant and equipment ( 10,483,520) ( 2,543,652) ( 2,359,693) ( 2,184,427) ( 2,555,214) ( 2,307,592) ( 3,299,023) ( 2,359,775) ( 2,238,732) ( 3,181,602)

Purchase of infrastructure ( 13,625,650) ( 11,047,500) ( 6,220,700) ( 5,033,800) ( 5,412,800) ( 4,650,000) ( 8,667,800) ( 9,162,200) ( 8,020,900) ( 4,270,900)

Net Funding From Capital Activities ( 15,041,570) ( 9,751,365) ( 6,234,337) ( 4,658,325) ( 5,105,125) ( 4,598,950) ( 8,841,799) ( 8,289,375) ( 8,044,689) ( 5,014,457)

FUNDING FROM FINANCING ACTIVITIES

Inflows

Transfer from reserves 10,317,406 5,650,156 1,810,156 262,656 487,656 287,656 4,137,656 3,887,656 3,887,656 317,069

New borrowings 500,000 0 0 0 0 0 0 0 0 0

Outflows

Transfer to reserves ( 2,529,217) ( 2,458,438) ( 2,250,955) ( 2,462,235) ( 2,384,992) ( 2,543,773) ( 2,609,399) ( 2,831,200) ( 2,893,818) ( 2,755,319)

Repayment of past borrowings ( 863,950) ( 840,374) ( 744,892) ( 756,648) ( 794,941) ( 815,316) ( 674,565) ( 705,885) ( 720,756) ( 674,290)

Net Funding From Financing Activities 7,436,538 2,363,003 ( 1,173,290) ( 2,943,036) ( 2,678,247) ( 3,056,509) 869,566 367,455 273,082 ( 3,112,540)

Estimated Surplus/Deficit July 1 B/Fwd 0 0 0 0 0 0 0 0 0 0

Estimated Surplus/(Deficit) June 30 C/Fwd 0 0 0 0 0 0 0 0 0 0

Shire of Augusta Margaret RiverForecast Statement of Funding ‐ for the period 2018 ‐ 2028




1 2 3 4 5 6 7 8 9 10

2018‐19 2019‐20 2020‐21 2021‐22 2022‐23 2023‐24 2024‐25 2025‐26 2026‐27 2027‐28

$ $ $ $ $ $ $ $ $ $

Capital Expenditure

Roads 9,830,000 2,875,000 2,875,000 2,875,000 2,975,000 2,975,000 2,975,000 3,975,000 2,975,000 2,975,000

Road Bridges 400,000 900,000 0 147,000 0 0 0 0 0 0

Car Parks 20,000 20,000 280,000 160,000 20,000 20,000 305,000 120,000 20,000 20,000

Paths 311,900 375,000 355,200 313,800 379,800 342,000 394,800 289,200 267,900 267,900

Drainage 330,000 380,000 330,000 330,000 330,000 330,000 330,000 330,000 330,000 330,000

Caravan and Camping 100,000 100,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000

Parks and Reserves 2,030,000 1,175,000 908,000 968,000 1,498,000 763,000 703,000 468,000 468,000 468,000

Aerodromes 10,000 10,000 10,000 40,000 10,000 20,000 10,000 30,000 10,000 10,000

Boat Ramps and Jetties 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000

Waste Management Facilities 543,750 5,162,500 1,262,500 0 0 0 3,750,000 3,750,000 3,750,000 0

Buildings 9,201,000 1,600,000 1,057,000 1,154,000 1,300,000 1,100,000 2,015,000 1,100,000 1,100,000 1,100,000

Furniture and Equipment 75,000 105,000 163,000 145,000 115,000 89,000 75,000 129,000 99,000 105,000

Plant and Equipment 1,207,520 838,652 1,139,693 885,427 1,140,214 1,118,592 1,209,023 1,130,775 1,039,732 1,976,602

Total ‐ Capital Expenditure 24,109,170 13,591,152 8,580,393 7,218,227 7,968,014 6,957,592 11,966,823 11,521,975 10,259,632 7,452,502

Funded By:

Capital Grants & Contributions

Roads 1,100,000 1,685,000 1,685,000 1,685,000 1,685,000 1,685,000 1,685,000 2,685,000 1,685,000 1,685,000

Road Bridges 400,000 900,000 0 147,000 0 0 0 0 0 0

Car Parks 0 0 0 0 0 0 285,000 0 0 0

Paths 0 105,000 0 25,650 53,700 88,500 171,300 24,600 34,950 34,950

Parks and Reserves 245,000 175,000 225,000 175,000 625,000 125,000 125,000 50,000 50,000 50,000

Buildings 6,250,000 600,000 27,000 127,000 32,000 0 462,300 0 0 0

Total ‐ Capital Grants & Contributions 7,995,000 3,465,000 1,937,000 2,159,650 2,395,700 1,898,500 2,728,600 2,759,600 1,769,950 1,769,950

Own Source Funding

Roads 8,230,000 1,190,000 1,190,000 1,190,000 1,290,000 1,290,000 1,290,000 1,290,000 1,290,000 1,290,000

Car Parks 20,000 20,000 280,000 160,000 20,000 20,000 20,000 120,000 20,000 20,000

Paths 311,900 270,000 355,200 288,150 326,100 253,500 223,500 264,600 232,950 232,950

Drainage 330,000 380,000 330,000 330,000 330,000 330,000 330,000 330,000 330,000 330,000

Caravan and Camping 100,000 100,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000

Parks and Reserves 1,545,000 1,000,000 683,000 793,000 873,000 638,000 578,000 418,000 418,000 418,000

Aerodromes 10,000 10,000 10,000 40,000 10,000 20,000 10,000 30,000 10,000 10,000

Boat Ramps and Jetties 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000

Waste Management Facilities 543,750 5,162,500 1,262,500 0 0 0 3,750,000 3,750,000 3,750,000 0

Buildings 2,451,000 1,000,000 1,030,000 1,027,000 1,268,000 1,100,000 1,552,700 1,100,000 1,100,000 1,100,000

Furniture and Equipment 75,000 105,000 163,000 145,000 115,000 89,000 75,000 129,000 99,000 105,000

Plant and Equipment 1,074,920 663,865 930,637 685,175 873,025 858,450 1,012,599 857,775 794,739 1,508,507

Total ‐ Own Source Funding 14,741,570 9,951,365 6,434,337 4,858,325 5,305,125 4,798,950 9,041,799 8,489,375 8,244,689 5,214,457

BorrowingsBuildings 500,000 0 0 0 0 0 0 0 0 0

Total ‐ Borrowings 500,000 0 0 0 0 0 0 0 0 0

Other (Disposals & C/Fwd)Roads 500,000 0 0 0 0 0 0 0 0 0Parks and Reserves 240,000 0 0 0 0 0 0 0 0 0Plant and Equipment 132,600 174,787 209,056 200,252 267,189 260,142 196,424 273,000 244,993 468,095

Total ‐ Other (Disposals & C/Fwd) 872,600 174,787 209,056 200,252 267,189 260,142 196,424 273,000 244,993 468,095

Total Capital Funding 24,109,170 13,591,152 8,580,393 7,218,227 7,968,014 6,957,592 11,966,823 11,521,975 10,259,632 7,452,502

Shire of Augusta Margaret RiverForecast Statement of Capital Funding ‐ for the period 2018 ‐ 2028


long term financial plan 2018-19 to 2027-28 is… · the 2018-19 to 2027-28 long term financial...

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