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Long Term Financial Plan 2017/18 - 2026/27

o n e c i t y d i v e r s e p l a c e s

© 2017 City of Swan. Copyright subsists in this publication and such copyright is the property of the City of Swan. A reproduction of this publication or any part thereof without the written consent of the Chief Executive Officer of the City of Swan is not permitted and will be regarded as an infringement of the copyright.

Abbreviations

ABS Australian Bureau of Statistics AMP Asset Management Plan CBD Commercial Business District CEO Chief Executive Officer CPI A Consumer Price Index Australia CPI P Consumer Price Index Perth DLG Department of Local Government and

Communities FTE Full Time Equivalent GRV Gross Rental Value HA Hectare KM Kilometres

KPI Key Performance Indicator LG Local Government LGCI Western Australian Local

Government Cost Index LTFP Long Term Financial Plan SCP Strategic Community Plan UCL Unallocated Crown Land WALGA Western Australian Local

Government Association WALGGC Western Australian Local

Government Grants Commission

Table of ContentsExecutive Summary 21.0 Introduction 3

1.1 Purpose of the Plan 31.2 City Profile 41.3 Key Statistics 51.4 Integrated Planning Framework 61.5 Strategic Directions 71.6 Our Services 10

1.6.1 Service programs 101.6.2 Service Levels 111.6.3 Asset Management 12

2.0 Long Term Financial Forecasts 142.1 Strategies and Price Indicators 14

2.1.1 Plans and Policies 152.1.2 Financial Strategies and Principles 152.1.3 Economic and Social Environment Indicators 162.1.4 Summary of Long Term Financial Plan 172.1.5 Risk Management 17

2.2 Financial Statements 182.2.1 Statement of Comprehensive Income – by program 192.2.2 Statement of Comprehensive Income – by nature/type 202.2.3 Summary of Financial Activity (Rate Setting Statement) 212.2.4 Statement of Financial Position 222.2.5 Statement of Equity 222.2.6 Statement of Cash Flows 23

2.3 Financial Analysis 242.3.1 Source and Application of Funds 242.3.2 Key Performance Indicators 252.3.3 Scenario Modelling 262.3.4 Sensitivity Analysis 262.3.5 Measuring Sustainability 27

2.4 Key Elements 282.4.1 Operating Results 282.4.2 Capital Works Program 292.4.3 Capital Works – by Program 302.4.4 Debt Management 312.4.5 Cash Reserves 32

3.0 Conclusion 353.1 Implementation and Review of the Long Term Financial Plan 35

Attachments and Supporting Documents 37Attachment 1 - Glossary 37Attachment 2 – Informing Documents and Policies 39

CITY OF SWAN2

Executive SummaryThe City of Swan Long Term Financial Plan (LTFP) is a planning tool that has been developed to map and ensure the financial sustainability of the City into the future. It is a mechanism in determining financial projections for the period 2017/18 to 2026/27.

The Long Term Financial Plan has been prepared based on a number of objectives and assumptions that are outlined in this document. Strategies, priorities, issues and risks are all dynamic influences in relation to any planning and as such the LTFP is reviewed and adjusted annually to reflect material changes.

The City is challenged by growing community demands and expectations and recognises the importance of growth, prosperity, sustainability and lifestyle. It is committed to effective governance and providing infrastructure and services that satisfy all user groups within our Local Government area.

The long term financial estimates are an integral part of Council’s strategic planning process, informing the Corporate Business Plan which activates Strategic Community Plan priorities. It indicates the City’s long term financial sustainability, allows early identification of financial issues and their longer term impacts.

3LONG TERM FINANCIAL PLAN 2017/18 TO 2026/27

1.0 Introduction1.1 Purpose of the PlanThe purpose of the Long Term Financial Plan (LTFP) is to present a financial analysis of all strategic objectives and goals set out in the integrated planning framework documents over a ten year period. It is an integral part of Council’s strategic planning process and is aligned to other core planning documents, including the Strategic Community Plan (2017 to 2027) and the City’s Corporate Business Plan (2017/18). Information contained in other strategic plans including the Asset Management and Workforce Plans have informed the LTFP which is the basis for the preparation of the City’s Annual Budget.

Financial and social indicators are inherent to predicting future values; these include consumer price index, interest rates, employment levels, population growth and demographic trends. The LTFP analyses financial trends over a ten year period on a range of assumptions and provides the City with information to assess resourcing requirements to achieve its strategic objectives and to assist the City to ensure long term financial sustainability.

This plan addresses the operating and capital needs placed on the City over the next ten years. It also shows the linkages between specific plans and strategies, and enhances the transparency and accountability of the City to the community.

Altone

Ballajura

Ellenbrook

Midland/Guildford

Swan Valley/Gidgegannup

North

CAVERSHAM

WEST SWANBR

ABHA

M

HENLEYBROOK

BASKERVILLE

BRIGADOON

MILLENDON

HERNE HILL

MIDDLESWAN

RED HILL

UPPER SWAN

BULLSBROOK

MELALEUCA

LEXIA

BALLAJURA

MALAGA

GIDGEGANNUP

SOUTH GUILDFORD

GUILDFORD

HAZELMERE

WOODBRIDGE

STRATTON

MIDVALE

BELHUS

CULLACABARDEE

KIARA

JANE BROOK

SWAN VIEWVIVEASH

MIDLANDBELLEVUE

KOONGAMIA

PERTH AIRPORT

AVELEY

ELLENBROOK

WHITEMAN

WALYUNGA NATIONAL

PARK

THEVINES

BEECHBORO

DAYTON

AVON VALLEYNATIONAL PARK

LOCKRIDGE

BENNETT SPRINGS

4 CITY OF SWAN4

1.2 City ProfileThe City of Swan is geographically the largest local government in the Perth metropolitan area and is one of the fastest growing urban corridors in Australia. Located 20 km north-east of the Perth CBD, Midland is the gateway to the northern and eastern Wheatbelt region, giving it a large customer catchment and employee base. The area is an established mixed-use area, including industrial, commercial and residential land uses.

At over 1,042 square kilometres, it offers a diverse range of business spaces from rural through to high-tech industrial and diversity in the workforce to match. The City contains within its boundaries the area known as the Swan Valley with its associated coastal plains to the west; the Ellenbrook and lower Chittering Districts to the north; and the Hills District to the east. It also contains historic towns of Guildford and Midland to the south. It thus comprises the major and most populated parts of areas which were known since the early days of the Swan River Colony as the Swan District.

The City of Swan can trace its lineage directly back to the Guildford Town Trust and the Swan Districts Roads Committee. The Swan City Council is therefore an historic body, which administers an area of great importance in the history of the State of Western Australia.

5LONG TERM FINANCIAL PLAN 2017/18 TO 2026/27 5

1.3 Key StatisticsGeneral Statistics

Area (sq. km) 1,042 km²

City of Swan 2017/18 population forecast1 151,408

Rateable Properties1 57,698

Eligible voters (citizens aged 18+)2 64,088

Permanent staff1 746

Full time employees 657

Part time employees 89

Assets / Facilities

Land Assets 396 Freehold Land Parcels

651 Crown Reserve Parcels

974 Easements

Building Assets 251 Buildings

Park & Streetscape Assets

395 ha

27 Active Reserves

217 Passive Reserves

295 Verges/Medians/Roundabouts

Natural Resource Management

1214 ha

45 Nature Reserves

72 Foreshore Reserves

Roads 2,900 roads (1,518 km)

Paths 1,328,646 m2 (553 km)

Bridges 14 Boardwalks

41 Footbridges

4 Ramps

32 Road Bridges

45 Culverts

Drainage 4 Underpasses

28,770 Objects approx.

Car Parks 785 km of pipe

110 Off Street Car Parks429 On Street Parking Zones

Localities

Altone Ward Beechboro, Bennett Springs, Caversham (part), Kiara, Lockridge, Whiteman, Dayton, Brabham

Ballajura Ward Ballajura, Cullacabardee, Malaga, Lexia (part)

Ellenbrook Ward Ellenbrook, Aveley

Swan Valley/Gidgegannup Ward

Baskerville, Belhus, Brigadoon, Caversham (part), Gidgegannup, Henley Brook, Herne Hill, Middle Swan (part), Millendon, Red Hill, West Swan, Jane Brook, Upper Swan

Midland/Guildford Ward

Guildford, Hazelmere, Perth Airport, South Guildford, Bellevue, Koongamia, Middle Swan (part), Midland, Midvale, Stratton, Swan View, Viveash, Woodbridge

North Ward Bullsbrook, Lexia (part), Melaleuca, The Vines

1 City of Swan.2 Profile.id (2011 Census).

INFORMING STRATEGIESFinance

WorkforceAssets

ServicesIssue Specific Strategies etc

STRATEGIC COMMUNITY PLAN

COMMUNITY ENGAGEMENT

MEASUREMENT AND REPORTING

CORPORATE BUSINESS PLAN

ANNUAL BUDGET

OUTPUTS: Plan Monitoringand Annual Reporting

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1.4 Integrated Planning FrameworkLong Term Financial Planning is a key element of the Integrated Planning and Reporting Framework. It enables the City to set priorities, based on their resourcing capabilities, for the delivery of short, medium and long term community priorities.

The Long Term Financial Plan is a ten year rolling plan that informs the Corporate Business Plan to activate Strategic Community Plan priorities. The Annual Budget is developed from these planning processes and is aligned with the organisational strategic objectives.

This plan indicates the City’s long term financial sustainability, allows early identification of financial issues and their longer term impacts, shows the linkages between specific plans and strategies, and enhances the transparency and accountability of the Council to the community.

The following figure illustrates how the Long Term Financial Plan informs the Integrated Planning and Reporting Framework.

STRATEGIC PRIORITIES(4–5 YEARS)

STRATEGIC COMMUNITY PLAN(10 YEARS)STRATEGIES

COMMUNITY VISION

PLACE PLANS

PLANNING STRATEGYSERVICE PLANS

RESOURCING• FINANCIAL• ASSETS• WORKFORCE

ANNUAL BUDGET(1 YEAR)

CORPORATE BUSINESS PLAN(4–5 YEARS)


1.5 Strategic Directions

Vision: one city diverse placesThe overarching directions for this plan are provided by the City of Swan Strategic Community Plan 2017-2027.

The Strategic Community Plan sets out our vision, aspirations and objectives for the Swan community over the next 10 years and is our principal strategy and planning document. This means that it governs all of the work that the City undertakes, either through direct service delivery, partnership arrangements or advocacy on behalf of the community. The clear direction set by the Council ensures asset and service provision is focused to meet the requirements of the community, now and into the future.

The Strategic Community Plan is a legislative requirement to ensure that we appropriately plan for the future of the Swan region. When setting the direction for the City, it is conscious of the financial, asset and workforce constraints that it will work within.

City of Swan Integrated Planning Framework

This plan reflects the objectives and strategies included in the City of Swan Strategic Community Plan 2017–2027 and the financial resources required to achieve those goals.

The Strategic Community Plan will become the principal strategy and planning document for the City, and will provide the blueprint for our activities over at least the next 10 years.

CITY OF SWAN8


EconomicThriving, sustainable business capacity and growthOur vision:“The City of Swan will be nationally and globally recognised as a great place and strategic location to invest, visit and establish commercial and local business centres. Midland will be developed as a strategic metropolitan centre, which is located at the northern/eastern gateway to WA and Australia.

We will have developed partnerships with government and business to ensure local businesses are supported and sustainable. Local employment opportunities will attract and sustain our community, who will have access to local services, shopping, health and education.”

Natural environmentEnvironmentally sustainable leadership and stewardshipOur vision:“Our City is proud of the green, rural nature of Swan, blessed with many natural assets, including high value natural lands, open spaces, the Swan River, wetlands and waterways which we will maintain and protect.”

We will preserve and protect the ecology and biodiversity of our natural ecosystems.

Our City is committed to enhance our environmental performance through our actions, services and partnerships.

Our City will take a leadership role in emergency planning, necessary because we are experiencing longer and later summer seasons and more frequent extreme storm events.”

Built environmentDiverse, connected, sustainable placesOur vision:“Our City will lead the State in providing diverse and connected Places, providing housing options for our growing and diverse population, young and old. Our growth will be supported by adaptable and flexible planning to ensure our vision and actions match our rate of growth. Our Places will reflect our local identities providing safe, central community hubs, with supporting open spaces and facilities, such as libraries and community centres to meet, connect and recreate.

Our community will take pride in its Places, with attractive, safe and maintained built assets, roads and streetscapes, whilst protecting our local heritage. Our City will be accessible, providing sustainable transport solutions, including public, pedestrian and cycle access.”

SocialConnected, safe, inclusiveOur vision:“Our diversity enhances and differentiates our community and will be supported through engagement and service partnerships. Our communities are inclusive and connected, and have a sense of belonging, building the community together within safe and supportive environments.”

The City will support our diverse, community through services and facilities.

Our Council will advocate for services and work in partnership with a variety of providers to facilitate service provision for our children, families, youth and aged.

GovernanceA sustainable and capable CouncilOur vision:“The City of Swan will be regarded as a leader across Local Government. We will be proactive, focused and known as a Council that provides good governance. This will be displayed through our accountable, transparent and fiscally responsible management of competing community demands.”

We will reliably provide high quality assets and excellent customer services. Our workforce will be highly skilled and focused on improvement, seeing Swan as a great place to work.

The City will be well positioned and strengthened to deliver community lifestyle choices through successful advocacy and ongoing collaborative partnerships with government, industry, service providers and community.”

City of Swan Strategic Community Plan 2017–2027.

CITY OF SWAN10

1.6 Our Services

1.6.1 Service programsThe City delivers a wide range of services and facilities to the community. The revenues and expenditures of the City are required to be classified in accordance with legislation. The Local Government (Financial Management) Regulations 1996 (Schedule 1 Part 1) specify the minimum program classifications to be disclosed.

General Purpose FundingOBJECTIVE: To collect revenue to allow for the provision of services.ACTIVITIES: Rates, general purpose government grants and interest

revenue.

GovernanceOBJECTIVE: To provide a decision making process for the efficient

allocation of scarce resources.ACTIVITIES: Administration and operation of facilities and services to

members of council. Other costs that relate to the tasks of assisting elected members and ratepayers on matters which do not concern specific City services.

VENUES/FACILITIES: Administration Building, Altone Place Office, Ellenbrook Place Office.

Law, Order and Public SafetyOBJECTIVE: To provide services to help ensure a safe community.ACTIVITIES: Supervision of various by-laws, fire prevention,

emergency services and animal control.VENUES/FACILITIES: Swan Emergency Services Facility, West Swan Fire

Station.

HealthOBJECTIVE: To provide an operational framework for good

community health.ACTIVITIES: Food and water quality, pest control, immunisation

services, child health services and health education.VENUES/FACILITIES: Beechboro Family Centre, Midland Health Campus.

Education and WelfareOBJECTIVE: To meet the needs of the community in these areas.ACTIVITIES: Management and support for families, children, youth

and the aged within the community by providing Youth, Aged and Family Centres, Home and Community Aged Care Program, Junior Council and assistance to schools.

VENUES/FACILITIES: Alice Daveron Centre, Swan Child Care Centre.

HousingOBJECTIVE: To help ensure adequate housing.ACTIVITIES: Maintain and administer Elvire Chalets.

VENUES/FACILITIES: Elvire Chalets.

LONG TERM FINANCIAL PLAN 2017/18 TO 2026/27 1111

Community Amenities

OBJECTIVE: Provide services required by the community.ACTIVITIES: Rubbish collection services and disposal of waste, urban

stormwater drainage, protection of environment, town planning & regional development and other community amenities (bus shelters, public toilets).

VENUES/FACILITIES: Bullsbrook Transfer Station.

Recreation and CultureOBJECTIVE: To establish and manage efficiently infrastructure and

resources which will help the social wellbeing of the community.

ACTIVITIES: Public halls, civic centre, recreation and aquatic centres, parks and reserves, libraries, heritage and culture.

VENUES/FACILITIES: Midland Town Hall, Swan Park Leisure Centre, Altone Park Complex, Lilac Hill.

TransportOBJECTIVE: To provide effective and efficient transport services to

the community.ACTIVITIES: Construction and maintenance of roads, footpaths,

bridges; street cleaning and lighting, road verges, street scaping and depot maintenance.

VENUES/FACILITIES: Operations Centre.

Economic ServicesOBJECTIVE: To help promote the Municipality and improve its

economic wellbeing.ACTIVITIES: The regulation and provision of tourism, area promotion,

building control, noxious weeds, vermin control.

VENUES/FACILITIES: Swan Valley Visitor Centre, Guildford Visitor Centre.

Other Property and ServicesACTIVITIES: Private works, public works overheads, plant and

equipment operations and activities not reported in the above programs.

1.6.2 Service LevelsIt is proposed that existing service levels will be maintained for all operational areas in formulating this plan. A key objective in the Corporate Business Plan is to improve existing service levels in the longer term whilst continuing to achieve annual operating surpluses each year to fund the provision of infrastructure.

The City delivers a wide range

of services and facilities to the

community.

CITY OF SWAN1212

1.6.3 Asset ManagementAsset management is the combination of management, financial, economic, engineering, and other practices applied to physical assets with the objective of providing the required level of service in the most cost-effective manner. The City records information about the location, acquisition, condition, useful life and construction characteristics of its asset base along with current levels of service in an asset register.

As part of our integrated planning framework the City has developed asset management plans for each of our major asset classes, including, but not limited to: roads, buildings, drainage, paths and parks infrastructure. The plans initiate with the asset register and involve demand forecasting, influenced by population and demographic trend forecasting, risk management strategies and financial information such as asset values, depreciation rates, depreciated values, capital expenditure projections for new assets as a result of growth, or to renew, upgrade and extend assets.

The City has nine Asset Management Plans. These plans contain high level details on each asset class. A snapshot of information for each class can be found below:

LandThe management of the City’s ‘Land Assets’ differentiates itself from other asset classes as it relates more to procedures and legislation dealing with land which is owned by the City. The management of Land Assets excludes any infrastructure or improvements located over the land parcel including bushland, parks and buildings which are referenced and included in other Asset groups.

BuildingsThe City has a number of ‘Building’ assets that support the delivery of community services and act as focal points for community life. This contributes to the social, cultural and economic development of the local community. The City’s building portfolio consists of a variety of building categories that have been constructed over many years and to varying building standards and codes.

Parks & StreetscapesThe City provides ‘Parks & Streetscaping’ that are visually attractive and well maintained. Quality public open space is an important element of a community’s urban fabric and enhances quality of life. Public open space assists in defining a community’s identity and provides social, environmental and economic benefits. Public open space is provided in several different ways which includes sporting grounds, neighbourhood parks and landscaped medians, verges & roundabouts.


Natural Resource ManagementThe City’s ‘Natural Resource Management’ covers the bushland and foreshore reserves that the City manages for fauna and flora conservation and public recreation. The City currently manages 45 nature reserves and 72 foreshore reserves. The asset management plan for the natural areas does not currently include information on any roadside vegetation, compensation basins, Unallocated Crown Land (UCL), unmade road reserves or bridle trails that have ecological value.

RoadsThe City provides and maintains a working ‘Road Network’ in partnership with Main Roads WA, to enable effective transport of road users through the City of Swan. This includes all roads from district distributors and through to access roads. The City does not maintain highways and arterial roads, such as Great Eastern, Great Northern, Reid and Roe Highways. These roads are the responsibility of Main Roads WA.

FootpathsThe City’s ‘Path Network’ supports the delivery of community services and acts as focal points for community life, contributing to the social, cultural and economic development of the local community. The Path Network portfolio consists of a variety of Asset categories and surface types that have been constructed over many years and to varying standards, codes and quality.

BridgesThe City’s ‘Bridge Infrastructure’ provides the community with safe access across obstacles and includes both vehicle and pedestrian bridges. Bridges enhance the efficiency of vehicle and pedestrian movements, in some cases bridges are so fundamental as to be the determining factor in whether those movements are indeed possible. Main Roads WA has input into the management and maintenance of the City’s bridges.

DrainageThe City’s ‘Stormwater Drainage’ infrastructure ensures the removal of stormwater arising from rain events. The drainage infrastructure protects residents’ property from damage, and also protects the surrounding services from damage or deterioration, which allows infrastructure such as roads, footpaths, car parks etc., to achieve their intended useful lives. In addition, the drainage infrastructure protects the environment by including devices that improve the water quality before it is discharged into the waterways.

Car ParksThe City’s ‘Car Park’ infrastructure supports the community by allowing access to facilities and areas after travelling by vehicle. Car park assets enhance the road infrastructure for users other than through traffic and those with privately or commercially provided parking facilities. The parking lots (on road and off road) enhance the amenity of the Council area and support commerce and leisure.

CITY OF SWAN14

2.0 Long Term Financial Forecasts2.1 Strategies and Price IndicatorsThe Long Term Financial Plan has been prepared to support the strategic planning process for the City of Swan. The plan is an informing strategy that outlines the City’s approach to delivering infrastructure and services to the community in a financially sustainable and affordable manner for the next ten years.

This plan is set against economic uncertainty and will be reviewed every twelve months to reflect the prevailing economic conditions and changing community demands placed on the City. Consideration has been given to the economic drivers that will influence the future cost of providing infrastructure, facilities and services for the period 2017/18 to 2026/27. The values disclosed in this plan represent estimated future prices and costs.

This plan represents a financial solution to meeting the competing demands of services and facilities to the community. There are numerous ways in which the City can achieve its objectives. This plan balances the funding needs of renewal and new infrastructure assets, existing services against rating expectations, reasonable fees, debt leverage and the use of accumulated funds held in reserve accounts.


2.1.1 Plans and PoliciesThe Long Term Financial Plan assists the City’s Strategic Community Plan by advising the financial capabilities of the City to deliver infrastructure and services to the community. The Corporate Business Plan assists in the realisation of our community’s vision in the medium term; it details the actions, services, operations and projects the City will deliver within a 5 year period. Other critical informing strategies associated with this plan are the Asset Management and Workforce Plans.

The Long Term Financial Plan will guide the City’s financial management in a responsible and sustainable manner. The City’s financial sustainability is fostered by maintaining adequate financial reserves to meet long term needs, seeking alternative funding sources and partnerships with the community and other levels of government. The City will continue to explore funding innovations as a means to improve services and infrastructure.

2.1.2 Financial Strategies and PrinciplesThe Long Term Financial Plan is underpinned by the following principles:

• Continuous improvement in the financial capacity and sustainability of the City through:• Strengthening results to ensure long term financial

sustainability• Prudent use of debt• Accumulate funds to meet cash flow demands

• The maintenance of a fair and equitable rating structure.

• Maintaining or improving service level standards.

• Maintenance of cash reserves for future commitments.

• Maintaining/ increasing funding for asset maintenance and renewal.

• Continuous development of Developer Contribution Plans and Specified Area Rate modelling to fund specific Capital Works.

CITY OF SWAN16

2.1.3 Economic and Social Environment Indicators The following economic and social drivers have been used to develop this plan:

Economic Assumptions 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

Gross Domestic Product (GDP)Federal Mid-Year Economic and Fiscal Outlook 2016-17

2.75% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%

Gross State Product WA2016/17 State Budget - Economic and Fiscal Outlook Budget Paper No 3

2.50% 2.50% 3.00% 3.40% 3.80% 4.00% 4.00% 4.00% 4.00% 4.00%

Population PerthTABLE B9.Population projections, By age and sex, Australia - Series B

1.20% 1.95% 1.91% 1.88% 1.85% 1.81% 1.78% 1.75% 1.72% 1.68%

Population - City of SwanForecast I.D.

4.42% 3.93% 3.19% 2.90% 2.77% 2.51% 2.36% 2.28% 2.25% 2.28%

Residential PropertiesGrowth in residential properties

2.2% 2.0% 1.6% 1.5% 1.4% 1.3% 1.2% 1.1% 1.1% 1.1%

Consumer Price Index Australia2017/18 Budget - Domestic Economy Forecast - Statement 2

2.0% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3%

Consumer Price Index Perth2016/17 State Budget - Mid Year Financial Projections Statement.

1.8% 2.3% 2.3% 2.6% 2.5% 2.4% 2.3% 2.3% 2.3% 2.3%

WALGA - Local Government Cost Index WALGA Economic Briefing May 2017

1.7% 2.2% 2.2% 2.5% 2.4% 2.3% 2.2% 2.2% 2.2% 2.2%

Road and bridge construction index6427.0 Producer Price Indexes, Australia Tables 15 and 16. Road and bridge construction (4121) Western Australia (A2333769K)

1.8% 2.4% 2.4% 2.7% 2.6% 2.5% 2.4% 2.4% 2.4% 2.4%

Utility - Electricity2016/17 State Budget - Economic and Fiscal Outlook Budget Paper No 3

7.0% 7.0% 2.3% 2.6% 2.5% 2.4% 2.3% 2.3% 2.3% 2.3%

3 Months Banks’ term deposits ($10 000) 2.4% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8%

10 Year Bond Rate 2.9% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4%

3.1.3 Economic and Social Environment IndicatorsThe following economic and social drivers have been used to develop this plan:

2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26

NATIONAL ECONOMIC AND SOCIAL INDICATORS

Gross Domestic Product (GDP)ABS 5206.0 Australian National Accounts: National Income, Expenditure and Product. Projection Source: Federal Budget 2016/17 Economic Outlook Statement No 2.

2.50% 3.00% 3.00% 3.00% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%

PRICE INDICES AND COST DRIVERS

Consumer Price Index AustraliaABS Publication - Catalogue No 6401.0. Projection Source: Federal Government 2016/17 Budget.

2.00% 2.25% 2.50% 2.14% 2.14% 2.14% 2.14% 2.14% 2.14% 2.14%

Consumer Price Index PerthABS Publication - Catalogue No 6401.0. Projection Source: Federal Budget 2016/17 Economic Outlook Statement No 2.

1.75% 2.25% 2.50% 2.50% 2.43% 2.40% 2.26% 2.14% 2.14% 2.14%

WALGA – Local Government Cost IndexWALGA Economic Briefing. Projection Source: WALGA Economic Briefing March 2016.

2.70% 2.17% 2.41% 2.41% 2.34% 2.31% 2.17% 2.07% 2.07% 2.07%

FINANCIAL INDICATORS

Cash management ratesReserve Bank – F04 Retail Deposit and Investment Rates.

1.75% 2.60% 2.60% 2.60% 3.03% 3.03% 3.03% 3.03% 3.03% 3.03%

3 Months Banks’ term deposits ($10,000)Reserve Bank – F04 Retail Deposit and Investment Rates.

2.18% 3.23% 3.23% 3.23% 3.77% 3.77% 3.77% 3.77% 3.77% 3.77%

10 Year Bond RateReserve Bank F02 Capital Market Yields – Government Bonds.

2.62% 3.89% 3.89% 3.89% 4.54% 4.54% 4.54% 4.54% 4.54% 4.54%

WATC 10 year borrowing rate 3.71% 5.51% 5.51% 5.51% 6.43% 6.43% 6.43% 6.43% 6.43% 6.43%

POPULATION

Population – City of SwanLocal population forecasts.

4.14% 3.98% 3.83% 3.68% 3.55% 2.53% 2.47% 2.41% 2.36% 2.30%

Residential PropertiesGrowth in residential properties.

3.09% 2.65% 2.34% 2.72% 2.50% 2.48% 2.18% 2.03% 1.95% 1.86%

PopulationCity of Swan forecasts for annual population growth are expected to slow from 4.4% to 2.3% over the next 10 years, whereas WA population forecasts suggest a slight upward trend from 1.2% to 1.9% in the initial 5 years and maintaining that level for the following 5 years. This plan has been developed on demographic trends and the following forecast of residential population:

2025/2

6e

2026/2

7e

2016/

17e

2017/

18e

2018/

19e

2019/

20e

2020/2

1e

2021/2

2e

2022/2

3e

2024/2

5e

2023/2

4e

2007/

08

2008

/09

2009

/10

2010/

11

2011/

12r

20212/

23r

2013/

14r

2015/

16e

2014/

15p

Population Changes Growth pa

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

0

50,000

100,000

150,000

200,000

250,000Population Changes

CityCity % changeWestern Australia % change


2.1.4 Summary of Long Term Financial PlanThe plan shows a balanced budget for each financial year, shown in table 2.2.3. The net operating result, shown in table 2.2.1 shows some fluctuation in the initial 5 years with a slight decline over the 10-year period, arising from both the increased costs in delivering the City’s amenities and services and an increased depreciation charge year on year due to new acquisitions, mainly in gifted assets. A key element of the financial strategy is to minimise the financial burden placed on ratepayers whilst also maintaining tight control of costs so as to achieve zero deficit year on year. Increases in borrowing rates will have a negative impact on the future budget, whilst increases in price drivers will offer some relief as the gains on revenues outweigh potential losses on expenditure from these price increases.

The plan will be continuously reviewed to reflect the prevailing economic conditions and evolving community demands. Consideration has been given to the economic drivers that will influence future costs of providing facilities and services. The values disclosed in the plan represent estimated future prices and costs. The plan addresses the City’s operating and capital requirements from 2017/18 to 2026/27.

The key financial objectives in the plan are:

• achieving operating surpluses• continuous improvement in financial position• maintaining a positive unrestricted cash flow• development of alternative revenue streams• maintaining and improving service levels• adequately fund asset renewal/replacement requirements• maintaining a fair and equitable rating structure

ExclusionsThere are projects and facilities that at this stage are not sufficiently detailed to be included in this plan. As such, they will be incorporated into future plans when clarity around timing and likely revenue, expenditure and capital is known.

2.1.5 Risk ManagementThe City’s activities are subject to a variety of risks that have been considered in preparing the Long Term Financial Plan. Users of this information should be aware that there are inherent risks associated with the outcomes reported, as circumstances (i.e. change in legislative requirements) may bring about changes that could materially affect the outcome and projected results of the Plan.

Asset Management Plans identify assets that are critical to the City’s operations and outline specific risk management strategies (POL-C-067 – Risk Management) for these assets. For specific projects, the ability to accurately quantify the financial risks over a long period is hampered by uncertainties surrounding the availability of funding such as grants and contributions from State and Federal governments.

The inherent economic risks have been addressed in section 2.3.4 and 2.3.5.

CITY OF SWAN1818

2.2 Financial StatementsThe following Financial Statements have been prepared for the ten years covered in this plan.

Statement of Comprehensive IncomeThe Statement of Comprehensive Income has been prepared by program and by nature and type.

Statement of Comprehensive Income by Program Identifies the cost of goods and services provided, and the extent to which costs are recovered from revenues. Programs are defined by Regulation under the Local Government Act WA 1995.

Statement of Comprehensive Income by Nature/type Identifies the inputs by nature/ type of the revenue or expense. Descriptions are defined by Regulation under the Local Government Act WA.

The Statement of Comprehensive Income is prepared on an accrual basis which recognises income as it is earned and expenses as they are incurred. In addition it makes adjustments for unearned income, credit sales, pre-payments, accrued expenses and non-cash provisions (i.e. depreciation and leave entitlements). This method provides a more accurate reflection of the transactions which actually occurred during the accounting period, and is a better reflection of the actual business activities undertaken by the City.

Contributions to be recognised as revenue (i.e. in the Statement of Comprehensive Income) when the City obtains control over the assets comprising the contributions, notwithstanding that those contributions may be a grant for a capital item. Given this requirement, grants for capital works have the potential to significantly affect the operating result in a particular year.

Rate Setting StatementThis statement summarises the operating, capital, debt and reserves transactions. It utilises the same reporting procedures required formulating the City’s Annual Budget under the Local Government Act (WA). The plan identifies the funds necessary to balance the budget in each financial year through the collection of Rates.

Statement of Financial Position (Balance Sheet)The purpose of the Statement of Financial Position is to provide a “snap-shot” of the overall financial position of the City. This statement is constructed according to well defined accounting principles which are embodied in the Australian Accounting Standards. The ratepayer equity in the City can be calculated by deducting total liabilities from total assets.

The Statement discloses transactions as current and non-current assets, and current and non-current liabilities and equity.


2.2.1 Statement of Comprehensive Income - by Program2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

OPERATING REVENUE $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

General Purpose Funding 138,778 144,090 150,254 156,595 163,276 170,115 176,800 183,770 189,697 193,623

Governance 12,728 18,811 16,621 13,110 12,410 12,100 12,946 27,368 24,669 11,935

Law, Order & Public Safety 3,008 2,575 2,480 2,557 2,634 2,711 2,787 2,865 2,946 3,029

Health 267 274 281 287 294 300 307 314 321 328

Education & Welfare 4,597 4,731 4,861 4,977 5,037 5,080 5,136 5,125 5,244 5,367

Housing 60 62 63 65 66 68 69 71 72 74

Community Amenities 23,444 24,985 26,428 27,837 29,251 30,657 32,083 33,552 35,077 36,681

Recreation & Culture 9,690 17,785 36,897 32,588 20,632 16,101 18,660 19,621 19,370 18,323

Transport 26,832 59,003 51,608 33,873 43,530 37,680 32,077 28,681 27,751 28,358

Economic Services 1,660 1,759 1,852 1,943 4,941 5,101 19,504 5,423 5,591 5,765

Other Property & Services 2,995 3,203 3,188 3,208 3,280 3,489 3,786 3,809 3,586 3,666

Operating Revenues 224,059 277,277 294,531 277,039 285,352 283,403 304,155 310,598 314,325 307,149

OPERATING EXPENSES

General Purpose Funding (2,625) (2,695) (2,765) (2,833) (2,900) (2,968) (3,037) (3,108) (3,181) (3,255)

Governance (13,002) (13,898) (14,921) (15,070) (15,961) (16,009) (16,757) (16,819) (17,618) (17,618)

Law, Order & Public Safety (6,243) (6,434) (6,618) (6,797) (6,975) (7,154) (7,336) (7,523) (7,717) (7,918)

Health (1,848) (1,892) (1,937) (1,980) (2,023) (2,066) (2,110) (2,155) (2,201) (2,249)

Education & Welfare (9,761) (9,936) (10,113) (10,193) (10,266) (10,361) (10,533) (10,487) (10,661) (10,839)

Housing (109) (112) (114) (117) (119) (122) (124) (127) (130) (132)

Community Amenities (26,227) (27,720) (29,191) (30,191) (31,182) (32,179) (33,195) (34,238) (35,315) (36,433)

Recreation & Culture (54,457) (56,762) (59,600) (70,531) (73,261) (75,875) (77,960) (80,801) (83,137) (85,467)

Transport (35,093) (36,711) (40,429) (43,113) (46,177) (48,469) (50,017) (52,593) (54,398) (56,122)

Economic Services (6,357) (7,359) (7,548) (7,736) (9,399) (9,621) (9,844) (10,074) (10,309) (10,551)

Other Property & Services (3,458) (3,605) (3,783) (4,395) (4,075) (4,198) (4,297) (4,457) (4,673) (5,304)

Operating Expenses (159,180) (167,123) (177,020) (192,959) (202,338) (209,022) (215,210) (222,384) (229,339) (235,890)

BORROWING COSTS EXPENSE

Governance (533) (516) (454) (390) (323) (252) (179) (104) (50) (22)

Recreation & Culture (803) (816) (913) (898) (842) (772) (637) (507) (385) (267)

Transport (434) (461) (701) (614) (526) (448) (370) (289) (213) (139)

Economic Services (15) (96) (86) (77) (1,303) (1,483) (2,021) (2,470) (2,193) (1,950)

Other Property & Services (418) (533) (615) (577) (493) (447) (369) (288) (218) (169)

BORROWING COSTS EXPENSE (2,203) (2,423) (2,769) (2,556) (3,486) (3,402) (3,577) (3,658) (3,059) (2,547)Net Operating Result 62,676 107,730 114,742 81,524 79,528 70,978 85,369 84,556 81,927 68,713

CITY OF SWAN2020

2.2.2 Statement of Comprehensive Income - by nature/type

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

OPERATING REVENUE $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Rate revenue 122,964 128,452 134,440 140,835 147,383 153,907 160,410 167,115 172,415 176,310

Operating grants/subsidies/contributions 10,070 10,312 10,557 10,801 11,044 11,293 11,547 11,807 12,072 12,344

Service Charges 1,212 1,240 1,267 1,300 1,332 1,364 1,395 1,426 1,458 1,491

Fees and Charges 37,490 39,679 41,743 48,913 53,973 56,184 58,418 60,717 63,099 65,592

Interest earnings 5,364 5,053 5,090 4,897 4,887 5,058 5,092 5,204 5,677 5,548

Other Revenue 923 1,076 1,006 973 991 1,144 1,382 1,348 1,070 1,095

Operating Revenue 178,024 185,810 194,104 207,720 219,612 228,949 238,244 247,618 255,791 262,379

OPERATING EXPENSES

Employee costs (76,251) (79,781) (83,347) (86,418) (89,373) (91,651) (93,979) (96,176) (98,619) (101,130)

Material and Contracts (36,884) (37,990) (39,059) (40,492) (41,048) (41,988) (43,043) (44,088) (45,306) (46,985)

Utilities (gas elect water) (6,986) (7,296) (7,593) (7,882) (8,169) (8,457) (8,750) (9,051) (9,362) (9,687)

Depreciation (34,877) (37,811) (41,679) (43,958) (46,970) (49,826) (51,283) (54,585) (56,487) (58,204)

Insurance (604) (656) (705) (752) (799) (846) (894) (943) (994) (1,048)

Interest (2,203) (2,423) (2,769) (2,556) (3,486) (3,402) (3,577) (3,658) (3,059) (2,547)

New Initiatives - expenses 0 (1,907) (2,567) (11,693) (13,809) (14,409) (14,994) (15,610) (16,200) (16,818)

Other expenses (1,970) (1,682) (2,071) (1,765) (2,168) (1,845) (2,267) (1,929) (2,370) (2,017)


Profit(Loss) - normal operations 18,247 16,264 14,315 12,205 13,788 16,525 19,458 21,576 23,393 23,943

OTHER

Non-operating grants/contributions 8,954 35,593 51,630 24,051 20,450 12,622 20,621 1,891 4,343 2,218

Developers Contributions 7,690 12,812 12,542 12,960 12,262 11,954 12,802 27,225 24,523 11,786

Profit on asset disposals 1,263 0 0 0 0 0 0 0 0 0

Share of interests in joint ventures 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000

Asset contributed/gifted 23,129 38,062 31,255 27,308 28,029 24,877 27,488 28,864 24,668 25,765

Land ceded to the Crown (1,607) 0 0 0 0 0 0 0 0 0

Other 44,429 91,466 100,427 69,319 65,740 54,453 65,911 62,980 58,534 44,770

Profit/(Loss) 62,676 107,730 114,742 81,524 79,528 70,978 85,369 84,556 81,927 68,713


2.2.3 Summary of Financial Activity (Rate Setting Statement)

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

OPERATING REVENUES $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

General rate revenue 120,251 125,678 131,604 137,926 144,402 150,855 157,289 163,925 169,152 174,546 Specified area rates 2,712 2,773 2,836 2,908 2,981 3,052 3,121 3,191 3,263 1,764 Operating grants/subsidies/contributions 10,070 10,312 10,557 10,801 11,044 11,293 11,547 11,807 12,072 12,344 Service Charges 1,212 1,240 1,267 1,300 1,332 1,364 1,395 1,426 1,458 1,491 Fees and Charges 37,490 39,679 41,743 48,913 53,973 56,184 58,418 60,717 63,099 65,592 Interest earnings 5,364 5,053 5,090 4,897 4,887 5,058 5,092 5,204 5,677 5,548 Other Revenue 923 1,076 1,006 973 991 1,144 1,382 1,348 1,070 1,095 Operating revenues 178,024 185,810 194,104 207,720 219,612 228,949 238,244 247,618 255,791 262,379

OPERATING EXPENSES

Employee costs (76,251) (79,781) (83,347) (86,418) (89,373) (91,651) (93,979) (96,176) (98,619) (101,130)



Insurance (604) (656) (705) (752) (799) (846) (894) (943) (994) (1,048)

Interest (2,203) (2,423) (2,769) (2,556) (3,486) (3,402) (3,577) (3,658) (3,059) (2,547)


Other expenses (1,970) (1,682) (2,071) (1,765) (2,168) (1,845) (2,267) (1,929) (2,370) (2,017)


Profit(Loss) - normal operations 53,125 54,075 55,994 56,162 60,758 66,350 70,741 76,161 79,880 82,147

MOVEMENT IN NON CASH ASSETS/LIABILITIES

(Increase)/decrease in deferred Rates (176) 0 0 0 0 0 0 0 0 0

Increase/(decrease) in Employee Provisions 1,612 957 965 1,001 889 21 (22) 23 (24) 25

NET OPERATING DEMAND 1,436 957 965 1,001 889 21 (22) 23 (24) 25

54,561 55,032 56,960 57,164 61,648 66,371 70,719 76,184 79,856 82,172

CAPITAL TRANSACTIONS

Non-operating grants/contributions 8,954 35,593 51,630 24,051 20,450 12,622 20,621 1,891 4,343 2,218


Asset contributed/gifted 23,129 38,062 31,255 27,308 28,029 24,877 27,488 28,864 24,668 25,765

Proceeds from Sale of Non-Current Assets 13,891 12,583 2,077 2,028 2,962 19,729 9,293 2,841 16,837 10,309

Land Ceded to the Crown (1,607) 0 0 0 0 0 0 0 0 0

Land (10,166) (6,361) (3,084) (1,384) (357) 0 0 0 (1,295) 0 Outlays on Property Plant & Equipment (36,268) (46,515) (54,168) (76,109) (26,883) (27,911) (68,780) (28,118) (30,540) (31,122)

Outlays on Infrastructure (58,131) (75,048) (65,700) (50,183) (78,719) (64,722) (60,859) (61,987) (60,205) (71,408)

Assets contributed by developers (21,522) (38,062) (31,255) (27,308) (28,029) (24,877) (27,488) (28,864) (24,668) (25,765)

Transfer from(to) Trust Fund 250

Net Capital (73,780) (66,936) (56,703) (88,637) (70,285) (48,327) (86,922) (58,147) (46,337) (78,216)

Reserve Transactions

Transfers (to) Reserves (44,823) (45,316) (34,631) (35,356) (34,317) (52,629) (58,245) (53,211) (66,790) (41,929)

Transfers from Reserves 47,585 47,370 34,665 46,101 36,814 46,870 58,598 50,085 46,591 49,382

Net Transfers (to)/From Reserves 2,763 2,054 35 10,746 2,497 (5,759) 353 (3,126) (20,199) 7,453

Debt Management

Proceeds from New Debentures 12,646 17,890 8,856 30,044 18,507 0 29,405 0 0 2,002

Repayment of Debentures (6,825) (8,230) (9,212) (9,385) (12,441) (12,363) (13,642) (14,910) (13,320) (13,412)

Proceeds from Self Supporting Loans 83 104 65 69 74 79 87 0 0 0

Net Debt 5,904 9,763 (291) 20,728 6,140 (12,284) 15,850 (14,910) (13,320) (11,410)

1 July Surplus/(Deficit) 10,639 86 0 0 0 0 0 0 0 0

LESS 30 June Surplus/(Deficit) 86 0 0 0 0 0 0 0 0 0

10,552 86 0 0 0 0 0 0 0 0

Budget (Deficit)/Surplus 0 0 0 0 0 0 0 0 0 0

CITY OF SWAN2222

2.2.4 Statement of Financial Position

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

CURRENT ASSETS $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Cash & Cash Equivalents 103,058 100,012 98,734 87,281 83,584 89,650 88,974 92,441 112,280 105,207 Trade and Other Receivables 11,468 11,304 11,440 11,306 11,458 11,311 11,388 11,215 11,397 11,205 Inventories 182 175 182 175 183 175 183 174 184 174 Total Current Assets 114,708 111,491 110,357 98,761 95,225 101,135 100,544 103,830 123,861 116,585

CURRENT LIABILITIES

Trade and Other Payables 18,926 18,824 18,709 18,830 18,702 18,837 18,695 18,845 18,687 18,854

Provisions 12,928 12,938 12,927 12,938 12,927 12,939 12,926 12,940 12,925 12,940

Borrowings (current) 7,866 8,848 9,021 12,077 11,999 13,278 14,546 12,956 13,048 14,877

Total Current Liabilities 39,720 40,609 40,658 43,845 43,628 45,054 46,167 44,741 44,660 46,671

Net Current Assets 74,988 70,882 69,699 54,916 51,597 56,081 54,378 59,089 79,201 69,914

Non-Current Assets

Receivables 2,515 2,450 2,381 2,308 2,229 2,142 2,142 2,142 2,142 2,142

Investments (Equity Method) 69,646 74,646 79,646 84,646 89,646 94,646 99,646 104,646 109,646 114,646

Other non-current assets 127 127 127 127 127 127 127 127 127 127

Other Non-Current Assets 72,287 77,223 82,153 87,080 92,001 96,914 101,914 106,914 111,914 116,914

Property, Plant, Equipment Infrastructure

Property Plant and Equipment 417,184 447,427 488,386 547,580 554,603 544,200 587,709 594,932 588,583 587,312

Infrastructure 1,057,755 1,143,105 1,212,597 1,262,402 1,339,434 1,397,791 1,450,833 1,505,152 1,554,885 1,615,938

Total 1,474,940 1,590,532 1,700,983 1,809,982 1,894,037 1,941,992 2,038,541 2,100,084 2,143,468 2,203,250

Total Assets 1,622,215 1,738,636 1,852,835 1,951,977 2,037,634 2,094,987 2,194,833 2,266,088 2,334,584 2,390,078

Non-Current Liabilities

Provisions 1,529 1,535 1,528 1,535 1,528 1,536 1,527 1,536 1,527 1,537

Long Term Borrowings 45,076 53,754 53,224 70,828 76,972 63,330 77,825 64,505 51,093 37,855

Bonds/Deposits 3,469 3,476 3,469 3,476 3,468 3,477 3,468 3,477 3,468 3,478

Total Non-Current Liabilities 50,073 58,765 58,221 75,840 81,968 68,343 82,821 69,519 56,088 42,870

Net Assets 1,572,141 1,679,872 1,794,614 1,876,138 1,955,666 2,026,644 2,112,013 2,196,569 2,278,496 2,347,209

Equity

Accumulated Surplus 1,020,552 1,130,337 1,245,114 1,337,384 1,419,409 1,484,628 1,570,349 1,651,779 1,713,507 1,789,673

Cash Backed Reserves 88,312 86,258 86,223 75,477 72,981 78,740 78,387 81,513 101,712 94,259

Asset Revaluation Reserve 463,277 463,277 463,277 463,277 463,277 463,277 463,277 463,277 463,277 463,277

Total Equity 1,572,141 1,679,872 1,794,614 1,876,138 1,955,666 2,026,644 2,112,013 2,196,569 2,278,496 2,347,209

2.2.5 Statement of Equity

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

ACCUMULATED FUNDS $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Balance as at 1 July 955,114 1,020,552 1,130,337 1,245,114 1,337,384 1,419,409 1,484,628 1,570,349 1,651,779 1,713,507 Prior year adjustments Net Result 62,676 107,730 114,742 81,524 79,528 70,978 85,369 84,556 81,927 68,713 Reserve Transfers 2,763 2,054 35 10,746 2,497 (5,759) 353 (3,126) (20,199) 7,453 Balance as at 30 June 1,020,552 1,130,337 1,245,114 1,337,384 1,419,409 1,484,628 1,570,349 1,651,779 1,713,507 1,789,673

Cash Backed Reserves

Balance as at 1 July 91,075 88,312 86,258 86,223 75,477 72,981 78,740 78,387 81,513 101,712

Transfers to 44,823 45,316 34,631 35,356 34,317 52,629 58,245 53,211 66,790 41,929

Funds Utilised (47,585) (47,370) (34,665) (46,101) (36,814) (46,870) (58,598) (50,085) (46,591) (49,382)

Balance as at 30 June 88,312 86,258 86,223 75,477 72,981 78,740 78,387 81,513 101,712 94,259

Revaluation Reserves

Balance as at 1 July 463,277 463,277 463,277 463,277 463,277 463,277 463,277 463,277 463,277 463,277

Increase valuations 0 0 0 0 0 0 0 0 0 0

adjustments

Balance as at 30 June 463,277 463,277 463,277 463,277 463,277 463,277 463,277 463,277 463,277 463,277

Total Equity 1,572,141 1,679,872 1,794,614 1,876,138 1,955,666 2,026,644 2,112,013 2,196,569 2,278,496 2,347,209


2.2.6 Statement of Cash Flows

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

CASH FLOWS FROM OPERATING ACTIVITIES

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

RECEIPTS

Rate revenue 122,695 128,452 134,440 140,835 147,383 153,907 160,410 167,115 172,415 176,310 Operating grants/subsidies/contributions 10,070 10,312 10,557 10,801 11,044 11,293 11,547 11,807 12,072 12,344 Service Charges 1,212 1,240 1,267 1,300 1,332 1,364 1,395 1,426 1,458 1,491 Fees and Charges 37,490 39,804 41,610 49,053 53,826 56,339 58,255 60,890 62,916 65,784 Interest earnings 5,364 5,053 5,090 4,897 4,887 5,058 5,092 5,204 5,677 5,548 Goods and Services Tax 6,184 4,750 4,956 5,075 5,233 5,299 5,511 5,584 5,821 5,955 Other Revenue 1,066 1,076 1,006 973 991 1,144 1,382 1,348 1,070 1,095 184,081 190,686 198,928 212,934 224,698 234,403 243,591 253,375 261,430 268,527

Payments

Employee costs (76,121) (79,804) (83,364) (86,399) (89,393) (91,630) (94,000) (96,154) (98,643) (101,105)



Insurance (604) (656) (705) (752) (799) (846) (894) (943) (994) (1,048)

Interest (2,203) (2,423) (2,769) (2,556) (3,486) (3,402) (3,577) (3,658) (3,059) (2,547)

Goods and Services Tax (6,008) (4,926) (4,956) (5,075) (5,233) (5,299) (5,511) (5,584) (5,821) (5,955)


Other expenses (1,970) (1,682) (2,071) (1,765) (2,168) (1,845) (2,267) (1,929) (2,370) (2,017)

(130,761) (136,558) (143,212) (156,478) (164,249) (167,726) (173,195) (176,851) (181,933) (185,975)

Net Cash from Operating Activities 53,321 54,127 55,716 56,456 60,448 66,677 70,396 76,524 79,496 82,552

Cash Flows from Investing Activities

Payments for:Land (10,166) (6,361) (3,084) (1,384) (357) 0 0 0 (1,295) 0

Property, Plant & Equipment (36,268) (46,515) (54,168) (76,109) (26,883) (27,911) (68,780) (28,118) (30,540) (31,122)

Infrastructure (58,131) (75,048) (65,700) (50,183) (78,719) (64,722) (60,859) (61,987) (60,205) (71,408)Proceeds from Non-Operating Subsidies and Contributions 8,954 35,593 51,630 24,051 20,450 12,622 20,621 1,891 4,343 2,218


Disposal of assets 13,891 12,583 2,077 2,028 2,962 19,729 9,293 2,841 16,837 10,309 InvestmentsProceeds/Advance from Trust/other 250 0 0 0 0 0 0 0 0 0

Net Cash Provided By (Used In) Investing Activities (73,780) (66,936) (56,703) (88,637) (70,285) (48,327) (86,922) (58,147) (46,337) (78,216)

Cash Flows from Financing Activities

Proceeds from New Debentures 12,646 17,890 8,856 30,044 18,507 0 29,405 0 0 2,002

Repayment of Debentures (6,825) (8,230) (9,212) (9,385) (12,441) (12,363) (13,642) (14,910) (13,320) (13,412)

Proceeds from Self Supporting Loans 83 104 65 69 74 79 87 0 0 0

Net Cash Provided By (Used In) Financing Activities 5,904 9,763 (291) 20,728 6,140 (12,284) 15,850 (14,910) (13,320) (11,410)

Net Increase (Decrease) in Cash Held (14,555) (3,045) (1,278) (11,453) (3,696) 6,066 (676) 3,467 19,839 (7,074)

Cash at Beginning of Year 117,613 103,058 100,012 98,734 87,281 83,584 89,650 88,974 92,441 112,280

Cash & Cash equivalents at the end of year 103,058 100,012 98,734 87,281 83,584 89,650 88,974 92,441 112,280 105,207

CITY OF SWAN2424

Reserves and Retained Funds

Loans

Proceeds from sales of assets Other revenues

Fees and Charges

Operating Grants

4%17%

1%

Rates/Service Charges

Capital Grants/Contributions

20%

3%

4%

2%

49%

Source of Funds 2017/18 to 2026/27

2.3 Financial Analysis

2.3.1 Source and Application of Funds

Gifted Assets

Outlays new assets

Increase in ReservesDebt Service Costs

50%

1%

Operations/Maintenance

Outlays asset renewal

9%17%

5%

18%

Application of Funds 2017/18 to 2026/27


2.3.2 Key Performance Indicators

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

Operating Surplus Ratio* 14.1% 11.8% 10.2% 8.5% 8.8% 9.7% 10.6% 11.0% 11.4% 11.3%

Own Source Revenue Coverage Ratio 109.0% 106.5% 104.9% 103.3% 103.8% 104.8% 105.9% 106.5% 107.0% 107.0%

Debt Service Coverage Ratio* 6.8 5.8 5.3 5.3 4.3 4.7 4.6 4.6 5.4 5.6

Financial Health Indicator 9.4 9.4 9.2 9.2 8.9 9.0 9.0 9.0 9.3 9.4

2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

Current Ratio* 116% 116% 117% 118% 119% 119% 119% 118% 119% 118%

Asset Sustainability Ratio 139% 152% 113% 176% 97% 96% 95% 92% 108% 126%

Asset Consumption Ratio 92% 90% 89% 87% 86% 84% 83% 82% 80% 79%

Asset Renewal Funding Ratio 107% 110% 107% 107% 102% 104% 108% 114% 120% 136%

* adjusted for Federal Assistance Grants (FAG’s) advance (recovery)

Key Indicators

Operating Surplus Ratio – An indicator of the extent to which revenue raised not only covers operational expenses, but also provides for capital funding. Basic Standard between 0% and 15% and advanced with ratio greater than 15%.

Debt Service Coverage Ratio – An indicator of a local government’s ability to generate sufficient cash to cover its debt payments. A Basic standard is achieved if the ratio is greater than or equal to 2. An Advanced standard is achieved if the ratio is greater than 5.

Own Source Revenue Coverage Ratio - Revenues derived from local governments operations that exclude third party grants and subsidies. A basic standard is achieved if the ratio is between 40% and 60% (or 0.4 and 0.6), intermediate between 60% and 90% and advanced greater than 90%.

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2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

Operating Surplus/Own Source Ratios Debt Service Coverage Ratio

Debt Service Coverage

Own Source Revenue Coverage

Opera�ng Surplus

26 CITY OF SWAN26

The sensitivity analysis shows that the plan is extremely sensitive to price movements and interest on debt. The current low inflation and interest rates means the impact of price and interest drivers is far greater when they are increased, as opposed to reduced. These potential rapid upward movements create a financial risk to the City and the projects in this plan. The potential increase in interest rates has a substantial negative impact resulting from the high borrowing in the initial 5-year period in this plan, whilst price movements provide some financial relief in the years beyond 5 years, arising from a greater gain in operating revenues than a negative impact on operating expenses.

The negative impact on these price and interest movements, in the graph above, are as follows -

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Current Plan Low Growth High Growth

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Current plan

Option 1 (Price: higher 5.0% Borrowing rate: higher 7.5% Earning rate: higher 3.5% )

Option 2 (Price: lower .3% Borrowing rate: higher 2.0% Earning rate: higher 1.0% )

Option 3 ( Borrowing rate: higher 5.0% Earning rate: higher 1.0% )

2.3.3 Scenario Modelling Scenario modelling has been undertaken to determine the level of flexibility in the Long Term Financial Plan to enable alternative considerations when meeting community expectations should variations occur in a range of factors or assumptions. Modelling has been undertaken based on high growth population, base (section 2.1.3) and low growth within the next 10 years. The impact on the base case is reflected in the graphs below.

Higher growth in the initial five years will generate a negative impact on the forecasts as the City’s capacity is utilised and the demand for additional services and facilities increase. The increased demand will place pressures on facilities and services to be upgraded and improved to meet the rapid population increases. This will manifest itself in operating and capital outlays. Conversely, a slower population growth will allow for a slower implementation of service and capital facilities to meet a relatively smaller population base within the financial resources of the City.

2.3.4 Sensitivity AnalysisAnalysis of the plan outcomes have been modelled for changes to key price drivers such as CPI estimates, employee cost increments, interest rates, annual rate increases etc. The following graph shows the impact of beneficial and negative changes compared to the current plan. The results are reflected in the overall impact on the surplus or deficit for each financial year.

Operating Surplus/Own Source Ratio Debt Service Coverage ratio/Financial Health Indicator

50% Asset Consumption Ratio75% Asset Renewal Funding Ratio90% Asset Sustainability Ratio

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2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

Financial Health Indicator

Debt Service Coverage Ratio

Own Source Revenue Ratio

Operating Surplus Ratio

The impact of borrowings in this plan will have a negative impact on the operating results as interest expenses rise to meet the new loan raisings. In addition, substantial pressures are placed on the operating expenses to manage new and gifted facilities forecast in this plan.

Asset ratios

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Asset Consumption Ratio Asset Renewal Funding Ratio Asset Sustainability Ratio

2727

2.3.5 Measuring SustainabilityThe financial sustainability of the City of Swan is measured by its ability to be financially viable whilst meeting community expectations. The table below depicts a range of indicators representing the projected outcomes over the next ten years. The population is predicted to grow by 36%, this increase is directly attributable to the additional rateable properties being built in fast growing suburbs and explains a large part of the increase in general rate revenue. The City will slowly increase the services provided and service levels to meet community expectations.

Material financial risk exists with the reliance on the funding from State and Federal governments to facilitate the outlays in the capital works program. With the difficult financial position of these levels of government the likelihood of these bodies reducing grants is high. This will facilitate a complete review of the size and scope of the capital works program proposed to be undertaken in this plan. As discussed in section 2.3.4 additional risks are forthcoming with price and construction costs rising above the provisions outlaid in this plan.

Option 1 (Price drivers: higher 5.0%, Borrowing rate: higher 7.5%, Earning rate: higher 3.5%), has a negative impact of $5.5m over the 10-year period.

Option 2 (Price drivers: lower 0.3%, Borrowing rate: higher 2.0%, Earning rate: higher 1.0%), has a negative impact of $17.2m over the 10-year period. This scenario considers a minor price reduction against an overheated economy with increases in debt financing.

Option 3 (Price drivers: no change, Borrowing rate: higher 5.0%, Earning rate: higher 1.0%), has a negative impact of $11.1m over the 10-year period. This scenario considers the City’s exposure to debt in a rising market.

CITY OF SWAN28

2.4 Key Elements2.4.1 Operating ResultsThe plan achieves a balanced budget for each financial year. Operating income and efficiency is projected to have steady growth over the next ten years. The operating surplus will provide funds for expenditure on Capital growth; renewal, replacement and provision of new assets, enhancing the long term financial sustainability of the City.

RatesThe plan includes an increase of 2.5% in 2017/18 based on the rating and budget methodology adopted by Council at the 12 April 2017 Ordinary Council Meeting. From 2018/19 to 2024/25, the rate is estimated at 3.25% (forecasted CPI of 2.25% plus 1% growth) and then CPI thereafter. This is in addition to new assessments.

Fees and ChargesFees and charges assumptions are based on the CPI Perth indicators, statutory charges and projected increase in population. Discretionary fees and charges will be increased by CPI to match estimated additional costs in service delivery. The City is working towards full cost recovery for providing services such as waste collection.

State controlled fees Application fees for building licences and planning and development approvals are limited by regulations preventing full cost recovery.

Grants and ContributionsIn developing this long term model it is anticipated that using the CPI Perth Indicator to forecast Operating Grants and Contributions is to be a reasonable estimate over the ten year period.

In 2014 the Federal Government announced that Local Government assistance grants were frozen for the three year period 2014/15 to 2016/17. As at 1 July 2017 these grants will increase in line with CPI. The City will continue to pursue grant funding for strategic capital works from the State and Federal Government.

Interest EarningsForecast on Council’s investment portfolio are based on the 90 day Bank Bill index in line with the Council’s Investment Policy and Strategy.

Employee costsEstimates for employee costs are based on requirements outlined in the Workforce Plan and associated growth drivers. Price escalation is based on the enterprise bargaining agreement of 2% per annum over the period of this plan.


Material and ContractsVarious price drivers have been used to escalate materials and contracts on a case-by-case basis. Real increases are based on growth drivers expected over the 10 year period.

Utilities (gas, electricity and water)According to the 2016/17 State Government Budget electricity tariffs will escalate by 7% in 2017/18 and 2018/19 followed by increases of 2.5% for the following years. Street lighting tariffs will increase by 2.2% in 2017/18 and should remain with CPI Perth State forecasts.

InsuranceCPI Perth Inflation rate is considered a reasonable estimate to forecast insurance expenses for the ten year period.

DepreciationProperty, plant, equipment, vehicles, infrastructure and land were all re-valued to Fair Value on 1 July 2016. Capital (except for Land) has been depreciated on a straight line method using 2015/16 depreciation rates.

Interest ExpenseForecast borrowing (interest) costs are based on the forecast 10 year Western Australian Treasury Corporation Indicative Rates.

2.4.2 Capital Works ProgramThe Capital Works Program aims to meet infrastructure service requirements of the City. Renewal or upgrade of existing infrastructure and the creation of new assets have been included in developing this plan. The City is diverse and geographically large with an established large mixed-use, both economically and culturally. Diversity suggests conflicting priorities posing implications to the planning process. The program focuses on the supply of assets and their funding sources. An analysis of the funding required to implement this plan exposes the City’s financial capability in providing the services and facilities expected by the community.

This plan provides for an ambitious capital works program of $1.3b (indexed) over the ten year period, which will require substantial leverage (borrowings) to achieve these outcomes. The largest project outlay over the 10 year period is the Midland

Oval Redevelopment involving significant investment to redevelop an area centrally located in Midland.

Table 2.4.3 identifies the funding sourcing for the capital works programs by year for this plan.

Capital Outlays by ProgramThe following chart depicts Capital expenditure by program for the period 2017/18 to 2026/27. Due to the large geographical size of the City, Transport is a key priority at 42.9% of total capital outlay; with Road infrastructure being a major priority (accounting for 95% of total Transport expenditure). Road infrastructure accounts for $608.9m and Gifted Assets account for $279.4m.

As the population grows there is an increasing need to service a wide range of sporting and recreational needs for the local community, therefore 24% of capital is dedicated to Recreation and Culture. The City aims to promote inclusion, community growth, health and wellbeing as key factors in its growth strategy. Community infrastructure addresses this need; e.g. Ellenbrook Recreation Centre building a multi-use facility for the growing number of residents.

Community Amenities

Law, Order, Public Safety/Health and Welfare

Governance

Other Property & Services

Economic Services

42.9%

10.9%

Transport

Recreation/Culture

9%0.6%

10.8%

24%

1.8%

Capital Outlays 10 years to 2026/27

CITY OF SWAN30

Asset Acquisition by CategoryAsset acquisitions can be classified according the below categories:

• New – acquisition of new assets to meet additional service level requirements• Renewal – works to upgrade, refurbish or replace existing facilities with facilities of equivalent capacity or performance capability.• New DCP – acquisition of new DCP assets to meet additional service level requirements.• Gifted – assets that have been gifted or contributed to the City.

The below table shows the proportional allocation between the types of asset acquisitions:

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Outlays asset renewal Outlays new assets

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40

2.4.3 Capital Works – by ProgramOUTLAYS by PROGRAM 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27

Governance 8,272 4,045 1,464 1,651 1,159 1,172 1,655 1,234 1,273 1,201

Law, Order & Public Safety 1,613 242 111 76 276 80 82 84 86 88

Education & Welfare 983 976 244 433 361 393 509 468 865 417

Community Amenities 13,270 13,852 10,203 12,355 14,182 10,529 11,029 14,648 12,604 15,196

Recreation & Culture 23,476 39,849 55,156 50,295 33,514 32,975 18,037 23,859 21,637 18,617

Transport 64,190 96,157 78,180 51,200 57,187 49,366 45,570 48,283 44,366 42,851

Economic Services 9,089 4,334 2,753 33,668 13,749 4,781 53,056 9,284 4,384 14,287

Other Property & Services 6,802 6,531 6,098 5,306 13,557 18,213 27,188 21,109 31,492 35,637

127,694 165,985 154,207 154,984 133,987 117,509 157,126 118,969 116,707 128,295

FUNDING SOURCES

Grants 8,137 34,423 50,789 23,198 19,645 11,883 5,663 1,301 3,748 1,618

Asset Sale 11,560 10,924 0 0 0 17,465 5,610 0 12,675 7,013

Trade-in 2,331 1,658 2,077 2,028 2,962 2,264 3,683 2,841 4,161 3,296

Contribution 817 1,170 841 852 805 739 14,958 590 595 601


Gifted Assets 18,250 25,868 24,776 25,319 22,821 23,285 23,736 24,197 24,668 25,150

Gifted Assets (DCP) 4,879 12,193 6,479 1,990 5,207 1,592 3,752 4,667 0 616

Transfers to Reserves (16,167) (24,559) (13,383) (13,812) (13,067) (30,159) (33,370) (27,816) (37,794) (19,400)

Funding Sources 37,497 74,490 84,121 52,535 50,635 39,024 36,834 33,006 32,577 30,679

Council Resources

Reserves 43,821 43,034 31,410 43,125 36,831 46,826 55,932 48,730 42,782 46,576

Rates 23,391 30,571 29,820 29,281 28,014 31,659 34,956 37,233 41,349 49,038

Cfwd Funds 10,339

Council Resources 77,550 73,605 61,230 72,405 64,845 78,486 90,888 85,963 84,131 95,613

Loan 12,646 17,890 8,856 30,044 18,507 0 29,405 0 0 2,002

Total 127,694 165,985 154,207 154,984 133,987 117,509 157,126 118,969 116,707 128,295

Capital Acquisition - New and renewal

2.4.4 Debt ManagementThe use of long-term borrowings is strongly influenced by the competing needs of building new community assets, upgrading infrastructure, investment decisions, and funding urban growth corridor projects where insufficient funds are available to meet the capital outlays.

This plan requires borrowings of $119.3 million in the ten-year term of this plan. New Debt and Long-Term Debt Balance (Indexed values) are shown in the graph below.

The plan provides for the following –

• Borrowings of $11.6 million to fund developments in Ellenbrook over the period 2017/18 to 2021/22.

• Borrowing to leverage Midland Oval Redevelopment of $67.2 million. Repayments will be met from land sales.

• Other borrowings include funding for Operations Depot, Place Offices, Road works, and Recreation Facilities.

Whilst this plan has a greater emphasis on raising long-term borrowings to meet the capital demands of the City it does not exceed the base borrowing thresholds applied to the local government industry. This plan will see the City’s debt peak at $92.3 million in 2023/24.

The need to finance major capital works sees a substantial weakening of the City’s key performance indicator relating to debt. The ratio falls below 5 for the first time in 2021/22 and remains under 5 until 2025/26. However while there is a deterioration in this ratio it still remains above the industry benchmark of two.

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Debt Service Coverage RatioDebt Service Coverage Ratio @ 2xDebt Service Coverage Ratio @ 5x

Debt Service Coverage Ratio 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/246.9 5.8 5.3 5.3 4.4 4.7 4.6

2024/25 2025/26 2026/27Debt Service Coverage Ratio4.6 5.4 5.6

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CITY OF SWAN32 CITY OF SWAN32

2.4.5 Cash ReservesThe City maintains the following Reserves:

Aged Services Asset Replacement ReservePurpose - to fund the replacement of assets used for the provision of Aged Care services.

Funds are maintained by an annual transfer of unspent HACC capital and operating grants and a plant replacement component for plant used on Aged Care services.

Established in 2001/02.

Midland District Drainage Development ReservePurpose - to fund the renewal and upgrade of the stormwater drainage system in Koongamia, Bellevue, Midland, Woodbridge, Middle Swan, Viveash and Midvale.

Funds are collected by a Specified Area Rate matched by a 30c per $1 contribution by the City, and Developer contributions of $65,760 per hectare as per Policy POL-C-040.

Established in 1982/83

General Insurance ReservePurpose - to fund both general insurance claims against the City that are under the excess and the difference between standard workers compensation premium paid and the estimated maximum.

General Insurance contributions to the value of the difference between the standard premium payable and the actual premium paid.

Workers Compensation Insurance contributions to the value of the difference between the estimated maximum and the actual premium paid; varying dependant on the number of claims.


Gravel Pit Rehabilitation ReservePurpose - to fund the remediation of the existing quarry and to acquire land for future quarries.

Contributions are made to the value of gravel extracted from the quarry for use on the City's works.

Plant & Equipment ReservePurpose - to fund motor vehicles, plant and equipment associated with the City's works and services.

Funds are maintained by an allocation to the value of the plant replacement component on all City's works and services.

Hazelmere/Guildford Drainage ReservePurpose - to fund the renewal and upgrade of the stormwater drainage system in Hazelmere and Guildford.

Funds are collected by a Specified Area Rate matched by a 30c per $1 contribution by the City, and Developer contributions of $65,760 per hectare as per Policies POL-C-062 and POL-C-096.


Waste Management ReservePurpose - to fund the operations and development of the City's sanitation service, including capital acquisitions.

Funds are maintained by an annual allocation to the value of the net 'surplus' in the sanitation operations and a plant replacement component for plant used by Waste Management services.


Formed by the amalgamation of the Sanitation Reserve and West Midland Rehabilitation.

City Asset Replacement ReservePurpose - to fund the renewal and replacement of City's infrastructure and capital assets.

Funds are maintained by an annual contribution equivalent to 3% of Rate Revenue.



Ellenbrook Community Facilities ReservePurpose - to provide community facilities and services within the Ellenbrook Estate

Contributions from the Ellenbrook Joint Venture matched 1:1 by City contributions.


Aveley Community ReservePurpose - to provide community facilities and services within Aveley and the region.

Contributions from the Developers of Aveley matched 1:1 by City contributions.


Employee Entitlements ReservePurpose - to fund Long Service Leave requirements.

Funds are maintained by an annual contribution equivalent to the Long Service Leave entitlements of the City's employees.

Urban Growth Corridor Sub-Regional ContributionsPurpose - to fund land acquisition, construction of infrastructure and administration costs in the Swan Urban Growth Corridor, which comprises the Development Contribution Areas of Brabham, Caversham, Dayton and West Swan West.

Funded by Developers contributions.


Hazelmere Industrial Area Infrastructure ReservePurpose - to fund the renewal and upgrade of infrastructure in the Hazelmere Industrial Area.

Funds are maintained by a Specified Area Rate charged to properties in the area, matched by a $3 to $1 City's contribution.


Ellenbrook Bridge ReservePurpose - to fund the construction of a bridge over the Ellen Brook (Ellenbrook Bridge) in the vicinity of Lot 9000 Railway Parade, Upper Swan.

Funded by Developers contributions.


Strategic Development ReservePurpose - to fund the acquisition, construction and development of freehold properties for the purpose of the City's strategic development.

Funds are maintained by contributions from the City and the proceeds from asset sales at the Council's discretion.


Restricted Cash ReservePurpose - to hold the City's received restricted cash contributions; to fund works of the same purpose for which the contributions were given.

Funds are maintained by transfer of unspent contributions.


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2017/18 Reserve Accounts

The accumulation of funds in reserve accounts over a ten-year period provides the City with capacity to meet community demands.

Reserve Accounts – transfers and balancesA significant number of the reserve are restricted under DCP legislation and are not generally available for use.

This plan requires substantial use of accumulated reserves in the initial 5 years. At the end of the 10 year period the reserves are for the following purpose at 5 year intervals:

CITY OF SWAN34

3.0 ConclusionThe City spans a large geographical area with diverse economic and cultural priorities, which has the potential to pose conflicting implications to the planning process. A key element of the financial strategy is to minimise the financial burden placed on ratepayers whilst also maintaining tight control of costs so as to achieve zero deficit year on year.

This plan is set against economic uncertainty and will be reviewed every twelve months to reflect the prevailing economic conditions and changing community demands placed on the City. Consideration has been given to the economic drivers that will influence the future cost of providing infrastructure, facilities and services for the period 2017/18 to 2026/27. The values disclosed in this plan represent estimated future prices and costs.

This plan represents a financial solution to meeting the competing demands of services and facilities to the community. There are numerous ways in which the City can achieve its objectives. This plan balances the funding needs of renewal and new infrastructure assets, existing services against rating expectations, reasonable fees, debt leverage and the use of accumulated funds held in reserve accounts. This plan provides for an ambitious capital works program of $1.3b (indexed) over the ten-year period, which will require substantial leverage (borrowings) in order to deliver its proposed outcome.

Whilst this plan has a greater emphasis on raising long‐term borrowings to meet the capital demands of the City it does not exceed the borrowing thresholds applied to the local government industry. A significant number of the reserves are restricted under DCP legislation and are not available for use. This plan requires substantial use of accumulated reserves in the initial 5 years.

The City’s activities are subject to a variety of risks that have been considered in preparing the Long Term Financial Plan. Users of this information should be aware that there are inherent risks associated with the outcomes reported, as circumstances (i.e. change in legislative requirements) may bring about changes that could materially affect the outcome and projected results of the plan. This plan is extremely sensitive to price movements and interest on debt. The current low inflation and interest rates means the impact of price and interest drivers is far greater on upward movements, as opposed to reductions. These potential rapid upward movements create a financial risk to the City and the projects in this plan. The potential increase in interest rates has a substantial negative impact upon the high borrowing in the initial 5 year period in this plan, whilst price movements provide some financial relief in the years beyond 5 years, arising from a greater gain in operating revenues than a negative impact on operating expenses.

3.1 Implementation and Review of the Long Term Financial Plan

The Council considered the content of the Long Term Financial Plan when preparing the Annual Budget for 2017/18 and will for subsequent years. It is expected that the adopted Annual Budget will be closely aligned with the proposals in the Long Term Financial Plan and assumptions underpinning this plan. A review of the Long Term Financial Plan will occur each year as the Annual Budget is prepared to account for performance information and changing circumstances.

The Council is confident that the Long Term Financial Plan will allow the City to set priorities within its resourcing capabilities to sustainably deliver the assets and services required by the community.


CITY OF SWAN36


ATTACHMENTS AND SUPPORTING DOCUMENTSATTACHMENT 1 - Glossaryannual operating surplus before interest and depreciation means operating revenue minus net operating expense;1

AAS – Australian Accounting StandardsAASB – Australian Accounting Standards BoardABS - Australian Bureau of Statisticsasset consumption ratio means the ratio determined as follows

depreciated replacement cost of assetscurrent replacement cost of depreciable assets,1

asset renewal funding ratio means the ratio determined as follows NPV of planned capital renewals over 10 years

NPV of required capital expenditure over 10 years;1

asset sustainability ratio means the ratio determined as followscapital renewal and replacement expenditure

depreciation expense; 1

Building construction index - Building construction for WA (411) ABS Publication 6427.0 Producer Price Indexes, Australia

Capital Grants/Contributions - Payments made to, or "revenues" received for the specified purpose of acquiring, constructing non-current assets. These can be provided by way of grants from governments or contributions from the private sector.

capital renewal and replacement expenditure means expenditure to renew or replace existing assets1

CBD - Commercial Business District

CPI A – Australia - Consumer Price Index for All Capital Cities in ABS Publication - Catalogue No 6401.0

CPI P – Perth - Consumer Price Index for Perth in ABS Publication - Catalogue No 6401.0

current assets means the total current assets as shown in the balance sheet;1

current liabilities means the total current liabilities as shown in the balance sheet;1

current ratio means the ratio determined as follows

current assets minus restricted assetscurrent liabilities minus liabilities associated with restricted assets;1

current replacement cost of depreciable assets means the cost of replacing assets at current prices;1

debt service cover ratio means the ratio determined as follows —

annual operating surplus before interest and depreciation principal and interest;principal and interest

depreciable assets has the meaning given in the AAS;1

Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Accounting Standard AASB 116 Property, Plant and EquipmentDepreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciation method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. Accounting Standard AASB 116.60 Property, Plant and Equipmentdepreciated replacement cost of assets has the meaning given in the AAS;1 depreciation expense has the meaning given in the AAS;1

Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. Accounting Standard AASB 116 Property, Plant and EquipmentGeneral Funds - As defined in Section 6.21 of the Local Government Act 1995 being: general funds means the revenue or income from (a) general rates; (b) Government grants which were not given to the local government for a specific purpose; and(c) such other sources as are prescribed.

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General purpose financial statements (referred to as ‘financial statements’) are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs. Accounting Standard AASB 101 Presentation of Financial StatementsGross Domestic Product (GDP) - Economic trend serries as shown in the Australian Bureau of Statistics Publication 5206.0 - Australian National Accounts: National Income, Expenditure and ProductGross state product - Table 1. Gross State Product, Chain volume measures and current pricesIncome Statement - General purpose Financial Statements prepared in accordance with the Australian equivalents to International Financial Reporting Standards, issued by the Australian Accounting Standards Board. Previously referred to as the Statement of Financial Performance, Operating Statement or Profit and Loss Statement.LG - Local GovernmentLTFP - Long Term Financial Plan liabilities associated with restricted assets means the lesser value of a current liability or the cash component of restricted assets held to fund that liability;1

net interest expense means interest expense less interest received from self-supporting loans;1

net operating expense means operating expense excluding net interest expense and depreciation expense;1

NPV means net present value;1

operating expense means the expense that is operating expense for the purposes of the AAS, including net interest expense and depreciation expense;1operating revenue means the revenue that is operating revenue for the purposes of the AAS, excluding —(a) grants for the development or acquisition of assets; and(b) contributions for the development or acquisition of assets; and(c) other comprehensive income;1

operating surplus ratio means the ratio determined as follows —operating revenue minus operating expense

own source operating revenue;1

other comprehensive income has the meaning given in the AAS;1

Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other Australian Accounting Standards. Accounting Standard AASB 1017 Presentation of Financial StatementsThe components of other comprehensive income include:(a) changes in revaluation surplus (see AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets);(b) actuarial gains and losses on defined benefit plans recognised in accordance with paragraph 93A of AASB 119 Employee Benefits;(c) gains and losses arising from translating the Financial Statements of a foreign operation (see AASB 121 The Effects of Changes in Foreign Exchange Rates);(d) gains and losses on remeasuring available-for-sale financial assets (see AASB 139 Financial Instruments: Recognition and Measurement); and(e) the effective portion of gains and losses on hedging instruments in a cash flow hedge (see AASB 139).own source operating revenue means revenue from rates and service charges, fees and user charges, reimbursements and recoveries, interest income and profit on disposal of assets;1

own source revenue coverage ratio means the ratio determined as follows —own source operating revenue

operating expense;1

planned capital renewals means capital renewal and replacement expenditure as estimated in the long-term financial plan;1

principal and interest means all principal and interest expenses for borrowings under section 6.201

required capital expenditure means capital renewal and replacement expenditure as estimated in the asset management plan;1

Road/bridge construction index - Road and bridge construction index for WA. (4121) ABS Publication 6427.0 Producer Price Indexes, Australiaself-supporting loans means money borrowed for a work or undertaking in respect to which persons or organisations are required to repay all or part of the principal or interest.1

UCL - Unallocated Crown LandWALGA - Western Australian Local Government AssociationWALGGC - Western Australian Local Government Grants Commission

References1 Local Government (Financial Management) Regulations 1996


ATTACHMENT 2 – Informing Documents and Policies

Integrated Planning Framework Documents • Community Strategic Plan

• Corporate Business Plan

• Long Term Financial Plan

• Asset Management Plans

• Workforce Plan

Policies

Community Services • POL-C-153 - Community Engagement (Approved OCM 10/09/2014)

• POL-C-010 – Disability Access (Approved OCM 10/09/2014)

Grants, Donations & Governance• POL-C-146 - Rating Exemption under the Heritage Act WA (Approved OCM 02/03/2016)

• POL-C-026 - Farmland Rating Concession (Approved OCM 02/03/2016)

Organisational Administration• POL-M-156 – Fixed Asset Accounting (Approved 24/01/2013)

• POL-C-157 – Commercialisation (Approved OCM 07/09/2016)

• POL-C-142 - Public Art (Approved OCM 15/06/2016)

• POL-M-144 - Public Art Collection Acquisitions, Commissions & Management (Approved Executive 28/07/2016)

• POL-C-067 - Risk Management (Approved OCM 02/03/2016)

• POL-M-137 - Risk Management Framework (Approved 29/11/2012)

Parks, Community Facilities and Public Open Space• POL-C-100 - Asset Management (Approved OCM 15/06/2016)

• POL-C-108 - Building Facilities Management (Approved OCM 16/12/2015)

• POL-C-158 – Closed Circuit TV and Video Surveillance Devices Management (Approved OCM 02/03/2016)

• POL-C-147 – Sports Floodlighting (Approved OCM10/09/2014)

Planning and Development• POL-TP-125 - Building and Development Standards - Commercial Zones (Approved OCM 10/09/2014)

• POL-TP-122 - Building and Development Standards - General (Approved OCM 10/09/2014)

• POL-TP-124 - Building and Development Standards - Industrial Zones (Approved OCM 10/09/2014)

• POL-TP-123 - Building and Development Standards - Midland Strategic Centre (Approved OCM 10/09/2014)

• POL-TP-127 - Building and Development Standards - Other Zones (Approved OCM 10/09/2014)

• POL-TP-128 - Building and Development Standards - Residential Zones (Approved OCM 10/09/2014)

• POL-TP-126 - Building and Development Standards - Rural Zones (Approved OCM 10/09/2014)

• POL-TP-129 - Building and Development Standards - Vehicle Parking (Approved OCM 15/02/2016)

• POL-C-083 - Commercial Centres Strategy (Approved OCM 10/09/2014)

• POL-C-105 - Community and Economic Planning (Approved OCM 10/09/2014)

• POL-C-104 - Environmental Planning (Approved OCM 10/09/2014)

• POL-C-087 - Gidgegannup Rural Strategy (Approved OCM 10/09/2014)

• POL-C-096 - Guildford and South Guildford District Drainage Fund (Approved OCM 15/06/2016)

• POL-C-106 - Guildford Conservation Precincts (Approved OCM 10/09/2014)

• POL-C-062 - Hazelmere (Residential Areas) Drainage Improvement Fund (Approved OCM 15/06/2016)

• POL-C-103 – Neighbourhood Planning (Approved OCM 10/09/2014)

• POL-LP-1.10 Provision of Public Art (Approved OCM – 17/08/2016)

• POL-C-112 - Public Open Space - Residential Areas (Approved OCM 10/09/2014)

• POL-C-088 - Subdivider Contributions - Henley Brook and Millhouse Road (Approved OCM 10/09/2014)

• POL-C-084 - Sustainable Environment (Approved OCM 12/04/2017)

• POL-C-102 - Urban Growth (Approved OCM 10/09/2014)

• POL-C-111 - Woodbridge Conservation Precincts (Approved OCM 10/09/2014)

COS04083

City of Swan 2 Midland Square Midland

PO Box 196 Midland WA 6936 9267 9267

This document can be made available in alternative formats on request.

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w.sw

an.wa.gov.au