Draft 2020-2030 Long Term Financial Plan

Residents of the Lithgow local government area are invited to have their say on the 2020-2030 Long Term Financial Plan (LTFP).  The Draft LTFP will be on exhibition from Wednesday30 September 2020 to Midnight, Thursday 27 October 2020.

Please complete the submission form below to have your say on the 2020/2030 Long Term Financial Plan.

Draft Long Term Financial Plan

2020-2030 LTFP Update

The Long Term Financial Plan is one component of Council’s resourcing strategy which underpins the Community Strategic Plan along with the Workforce Management Plan and Asset Management Plan. These documents are all interrelated with Council’s four-year Delivery Program and provide inputs and outputs for one another. The suite of documents should be viewed together as Council’s overall strategy.

Long term financial plan

Council is required to update its LTFP at least annually.

Following the 2021 Council election, it is anticipated that a community engagement program will be undertaken and a draft Community Strategic Plan prepared. At that time, the Resourcing Strategy (including the LTFP) would be comprehensively reviewed and updated and a draft Community Strategic Plan and resourcing options presented to the community for further comment. Work would then commence on the Delivery Program.

Scenarios Modelled in the LTFP

A Long Term Financial Plan (LTFP) forecasts Council’s revenue and expenditure, balance sheet and cash flow for the coming 10 year period, based on a set of assumptions. The following three scenarios have been modelled:

  • Scenario 1 Base Case – represents the “status quo” where Council continues to deliver existing services without applying a range of improvement strategies. The scenario also does not allow extra asset renewal expenditure to ensure the asset ratio benchmarks are achieved. In this scenario, Council cannot be considered to be financially sustainable.
  • Scenario 2 Improvement Plan – this scenario takes the Base Case and adjusts the financial projections based on a number of ongoing improvement opportunities that have been identified. The proposed improvement opportunities were agreed in consultation with Morrison and Low in 2017 and involve a number of service reviews which would result in operating efficiency gains throughout Council.
  • Scenario 3 Sustainable Council – this scenario takes the revised financial projections in Scenario 2 but deploys asset renewal expenditure in a sustainable manner over the 10 years of the plan so that the asset benchmarks are met during the term of the LTFP for the general fund. The scenario also includes additional strategies to enable financial sustainability benchmarks to be met over the term of the 10 year plan.

Scenario 3 – Sustainable Council Case

The Sustainable Council case includes additional strategies to enable Council to meet all of the Office of Local Government’s (OLG) operating and infrastructure asset performance measures over the 10 year term of the LTFP and thus be “Fit for the Future” or financially sustainable within the OLG’s definition of the term.

The Sustainable Council Case forms the basis of a financially sustainable annual budgeting cycle. In addition, the case deploys asset renewal expenditure in a sustainable manner over the 10 years of the plan so that the asset benchmarks are met or trending toward meeting the ratios during the term of the LTFP for the General Fund.

The previous (2019-2029) LTFP Sustainable Council case included an assumption that Council’s application for a 9% Special Rate Variation (SRV) (plus rate peg) would be approved in full. The planned SRV would have enabled Council to meet all of the OLG’s financial sustainability ratios. The SRV was only partially approved at 9% including rate peg. As the approved SRV partly replaced an expiring SRV, the effective increase in rates above the rate peg was only 1.53%. As a result, Council would not meet the operating performance ratio nor the asset infrastructure performance benchmarks without additional revenue generating and/or cost constraining strategies. In preparing the 2020-2030 LTFP Sustainable Council case, Council needed to address the impact of lower rates income than was planned in the previous LTFP.

The Sustainable Council scenario includes the following strategies to enable Council to achieve financial sustainability over the term of the plan:

  • Management of employment costs: expenditure has been rising above CPI growth in recent years, following an organisational restructure and the addition of key roles for service delivery. To contain employments costs, the need to retain a position in the organisational structure will be considered when vacancies arise. Together with deferred recruitment action and productivity improvements, a saving of $100,000 p.a. has been included in this scenario from the 2021/22 year.
  • Internal plant hire rates will be increased by at least 10% from July 2021 to rebuild the plant replacement reserve.
  • Consideration of an additional permanent 5% SRV from 1 July 2023. Alternatives to a 5% SRV will continue to be explored over the next twelve months.

In its 2019 SRV determination, IPART stated: “Our decision will still enable the Council to undertake additional operating and capital expenditure to maintain service levels at acceptable standards, fund the maintenance and renewal of infrastructure assets, address the infrastructure backlog and improve its financial sustainability. If it chooses, the Council may apply for an SV in the future.

With the cost of funding asset maintenance and renewal rising faster than revenue, Council has considered options for increasing revenue, which have been included in Scenarios 2 and 3. Council is still left with a shortfall in funding required for necessary asset renewal and maintenance. A 5% SRV commencing in 2023 would provide capacity for Council to meet all of the OLG operating and asset performance indicators over the 10‐year term of the LTFP.

Summary of the 2020-2030 LTFP

Please refer to the 2020-2030 LTFP document which includes details of the following:

  • Council’s current financial position and performance against key indicators;
  • Foundations of the plan – key assumptions used to prepare the plan;
  • Council’s Loan Borrowings Policy;
  • Details of each of the scenarios modelled in the LTFP;
  • Financial reports for Council’s proposed Sustainable Council Case (scenario 3) are included as appendices..

 

Submission form

Draft 2020-2030 Long Term Financial Plan
Maximum upload size: 67.11MB