Council's 10 year financial roadmap to be 'fit for the future'
The 'Big Picture'
The Shoalhaven is at a critical point in its transformation. There is a renewed focus on improving the Nowra CBD as a priority and focal point for the Shoalhaven with it being the second largest economy on the south coast.
The Shoalhaven has been included in the Illawarra owing to its strong manufacturing, economic, health, education, road and rail links to the north with Nowra highlighted in the recently released draft Illawarra regional plan as a 'transformative' place within the region.
The Local Environmental Plan (LEP) has been approved creating a number of new investment opportunities including new long term urban release areas in the Nowra-Bomaderry area, an extension of Flinders Estate industrial area and increased zoning flexibility for the Nowra CBD recommended by the Nowra CBD Master plan.
Major projects are underway across the Shoalhaven such as:
- $135M hangar and simulated training facilities at HMAS Albatross (under construction)
- $35M Maintenance Repair Operation and Logistics Warehouse (under construction )
- $9.8M Ulladulla Civic Centre (recently completed)
- $8.5M Quest Apartments complex (under construction)
- $5.3M GP Super Clinic in Nowra (under construction)
With further projects planned including:
- $1.5M commercial office project North Street (DA approved)
- $12M Shoalhaven Motorsports Complex (DA lodged)
- $13.6M Berry tourist and function centre (DA lodged)
- $6.5M Woollamia Education Facility (DA lodged)
Things are changing in the Shoalhaven. Council is changing too.
Over the past two years Council has acted to address its financial situation and the delivery of better services to support these initiatives through the commencement of the Transformation Program and the special rate variation. This has laid the foundation for an organisation that will be sustainable into the future and a city that will be vibrant and activated in line with the Community Strategic Plan.
The 2012 TCorp report showing a 'negative' financial outlook for the future, operational cost increases outstripping revenue growth, asset deterioration and failure with a backlog of over $40M and growing community dissatisfaction for example with failing roads leading to an increasing number of complaints.
Council took immediate action under the Transformation Program to implement a staff freeze, undertake a restructure and establish project teams to deliver stronger governance, a culture of 'can do', increased efficiencies and effectiveness, better customer services, improved community engagement and financial sustainability.
This has delivered savings in the order of $2.5M in 2013/14 as well as creating an organisation better aligned to achieving the objectives of the Community Strategic Plan as well as being in line with contemporary local government service delivery. Further savings are planned for the next two financial years as we progress with the transformation program.
In essence, Council acted early, made tough decisions, and as a result has placed the organisation in a better position to tackle the challenges that lay ahead.
More Action Needed
Whilst action has been taken, with the shifting focus of the Local Government sector to change from within, and the State Government's recently announced 'Fit for the Future' program, more action is needed to ensure Council continues to deliver financial savings and more efficient and targeted services.
The challenge for the sector as a whole is to manage an environment of reduced revenue and increasing demands for services. SCC also has the added challenge, in comparison to similar sized Councils in NSW, to manage more pools, more libraries, more sports fields and more assets that any other city with a rate revenue that is much less (37% of total income).
There is no one 'silver bullet'. To be 'Fit for the Future' Council must ensure it builds on the foundation it has already laid and adheres to the continuous improvement it has embarked upon.
Council's Financial Sustainability Roadmap
In order to be financially sustainable into the future Council's engagement with the community will be a key part as to how this is achieved.
Recommendations have been proposed to ensure a sustainable financial footing for Council whilst ensuring our City remains liveable. Discussions with the community about what the 'levers' are, and how they may be activated is key and the following provides a framework for those discussions.
Council levers for discussion with the community
Conversations with the community around the following levers will be critical in terms of the actions Council takes:
- Rate increase: During the next Council term, there will need to be discussions around an increase possibly in the range of 5,10 or 15% depending on the objectives of Council and the mix of levers used
- Fee review: A review to fee structures may include discounts to rate payers - when fees proposals are submitted next year consider increases in some areas for casual users and discounts to locals
- Continuous improvement: Continue the TTF theme and the embedding of continuous improvement principles throughout Council, including shifting the culture into one that is 'can do' and customer-focused
- Outsourcing: Where practical and where it supports financial sustainability principles look at options
- Smarter use of technology: Optimisation of the use of technology to enable reengineered processes - look at all options for use of technology to gain efficiencies
- Procurement savings targets: implementation of these targets to drive procurement savings in all areas
- Review conditions of employment: eg. spread of hours, reduced overtime, reduced use of casuals etc to increase savings and efficiencies
- Improved energy management: look at solar options, improved efficiencies in lighting, heatpumps etc across Council
- Asset rationalisation: where possible consolidate facilities, better utilisation of facilities and sale of surplus assets - use asset rationalisation principles when making decisions on new assets
- Is there a need for the asset? Is the asset still providing a required service to the community? Is the service provision what the customers expect?
- Is there a more cost effective way to provide that service?
- If an asset is underutilised, then prior to any decisions to construct another similar asset, the potential for using the existing under-utilised asset, should be considered. What does demand forecasting look like?
- Where an asset is under-utilised or under-performing, an assessment must be made about continuing to fund the asset.
- Any rationalisations should be undertaken within the IPR framework that takes account of service delivery needs, corporate objectives, financial and budgetary constraints and the Council's overall resource allocation objectives.
- Are there alternate methods of service delivery through other Council facilities, providers and levels of government or the private sector or regional opportunities?
- Are there disposal options including transfer for alternative use, rental, sale and/or leaseback? Demolition should be considered when reviewing acquisition plans.
- Does the asset have high operational costs with little income producing opportunity, if so a review of similar assets close by should be carried out before any further monies are sunk into the existing asset?
- Service reviews: the continuation of service reviews across Council to reduce costs eg SEC/VIC/catering
- Review of the Pensioner deferral scheme: to improve our cash position
- Improved debtor management: to improve our cash position
- Business case for new assets: a requirement for all capital proposals and to address the following questions if the community is requesting new assets:
- Is it work required for statutory purposes?
- Is it to address emergency situations?
- Is it to eliminate hazards or eliminate risks?
- Is it to meet contractual obligations?
- Is it to perform necessary renovations or repairs (which will reduce ongoing operating expense)?
- Is it to replace equipment?
- Is it funded by state or federal government departments?
- Is it a continuation of an existing project which cannot be deferred?
- Is it to satisfy a community need or provide an improved level of customer service?
If not and not funded then it is a desirable project for non-essential reasons and should be deferred until funds are in place to pursue.
- Improved processes around Delivery Program and project management: if a community request does get through then at "budget bid" stage a "business case" will be required, covering the following:
- A delivery program, identifying each phase of the project
- A detailed cost estimate for each phase of the project
- A cashflow forecast to reflect the delivery program, so funds are allocated to the appropriate year
- Anticipated lead times for the supply of critical components
- Project relationship to the Strategic Plan or Asset Management Plan
- Design development phase needs to be undertaken preceding the financial year to which they are scheduled to be delivered
- Whole of life costs, particularly recognising any increase in future years operational expenditures need to be considered from the outset of a capital request.