Special Rate Variation - 2012

1. Special Rate Variation - 2012 Information for Residents 22 November 2012

2. This Presentation • Background • Rates • SRV – what is it • Council’s Finances • What do they look like • What has been done • What are the Options • What is the Process • What are your thoughts and questions

3. Rates • Rates are determined in accordance with the provisions of the Local Government Act 1993. • Provides the mechanisms to calculate rates and limits the income councils can derive from rates. • Council has 4 categories – Farmland, Residential, Business and Mining – with subcategories under those • Affected by land values and revals done every 3 years

4. Rate Pegging • Rates can only be increased each year by the rate peg amount – IPART determined – around 3% (inflation) • Can apply to IPART for a greater increase • SRV only applies to the GENERAL rate, not water, sewer, garbage • Separate funds with income only to be used for service provision and asset maintenance associated with each fund.

5. Where does Council get its Funds from?

6. Council Funding • A $24m budget in total • About $2.7m in rates • Rates on Council properties – not collectable • About $2.5m in Australian Govt grants – untied • Other funds for specific purposes • Roads grants, weeds, emergency services etc

7. Core Council Services • Set up as Roads, Rates and Rubbish • Water and Sewer added • All other services are ‘extras’ that Council can choose to provide at request of community or other levels of govt. • Some are now legislated eg weeds, emergency services • Includes youth services, tourism, sport and rec, parks and gardens, health services, airports, emergency services and more.

8. Council’s Rate Income • $2.7m in 2012/13 • $0.486m farmland (19%) • $1.067m mining (37%) • $0.27m business (10%) • $0.88m residential (34%) • 2012/13 major revaluations for mines • Farmland and residential rates fell • Mines rates received the brunt of the 3.6% increase • Mine rates increased significantly due to reval

9. Who are some of the other 24 Councils in our Group? • Blayney • Bland • Walgett • Wellington • Liverpool Plains • Lachlan • Temora • Narromine • Oberon

10. How we Compare- Group 10 Councils • Residential Rates 2009/10 • Cobar $396 • Group Av $474 • NSW Median $660 • 20% below group av • Farmland Rates • Cobar $1193 • Group Av $1984 • NSW Median $1834 • 66% below group av

11. How we Compare- Group 10 Councils • Business Rates 2009/10 • Cobar $676 • Group Av $987 • NSW Median $1841 • 46% below group av • Mining Rates • Can’t compare within group • Rate in the dollar low and fell last year to stay within the peg

12. Why is a SRV Being Proposed? • The auditor says we need to increase income and reduce expenses • The state government – DLG – is encouraging Council to apply • NSW Treasury currently looking at the financial sustainability of Council • It’s in our Financial Sustainability Action Plan that we report to DLG monthly • It’s in the LTFP • Unlikely to increase grant income significantly

13. What has been happening? • Council has been unable to balance the budget for the last two years • Operational costs continue to increase, including electricity and chemical costs • Cost shifting from other levels of government eg health services • Rate pegging and limited opportunities to raise income

14. Council’s Finances • Council has been able to maintain an operating surplus each year bar the last 2. • Getting finances back under control • To remain sustainable, need to increase income and reduce expenses • SRV is part of the plan

15. Asset Management • Council has a vast array of assets to maintain, repair and replace. • Council does not have adequate resources to do so • This is the case for most NSW councils • Council should factor into the LTFP a figure for replacement of the assets over their lifetime and an annual replacement and renewal amount

16. Lifecycle Costs - AMP

17. What does the auditor say? • Last year there was no unrestricted cash (can’t meet non budgeted expenditure) • we now have over $3m in cash. • Previous year borrowed from water and sewer (2 of the last 3 years) • Now have separate fully funded reserves established • Council must ensure expenditure is kept within budget • Deficit reduced by nearly $1m this year from last year • Council is dependent on non rates income • Rates income is low compared to other councils

18. What does the auditor say? • Council is not investing enough in asset repairs and renewal. • Of the $1.5m operating loss, Council had a $1.4m fall in value of works undertaken on state highways • Increase in plant hire rates saw the budget improve in 4th qtr last year • Borrowing costs higher • Depreciation increased due to reval of roads etc

19. What has Council done to reduce costs? • All budgets have been tightened • There was a 12 month freeze on staff replacement • Few community donations this year • Centrelink Office closed • Seeking adequate reimbursement for the RMS front office • Seeking increased funding for Regional Roads

20. What has Council done to increase income? • Sold 11 Becker St and other land on market • Develop VPAs, S94. S94A and s64 plans • Increased plant hire rates • Critically assessed all fees and charges • Do not believe there are any other income raising opportunities

21. Other Council Actions • EOI for LBV • Taken out a $1m loan to improve cash position • Improving financial reporting processes and systems • Critically analysing project costings, such as RMCC works • Written off bad debts, chased income owing • Reduced outstanding staff leave entitlements to reduce the liability to Council • Created an Employee Leave Entitlement fund

22. Options for a SRV • Only one part of the puzzle • One off increase • Annual increase over a period of time up to 7 years • Different criteria – not yet released • Need for rate rise • Community involvement • Reasonable impact on ratepayers • Sustainable borrowing strategy • Implementation of planning documentation

23. What is Being Proposed? • One off 25% increase in 2013/14 • Rates to rise by inflation in future years • Includes 3% inflation (rate peg) • Can sustain current services • Funds to be used to cover operational costs of the swimming pool and some road maintenance • Annual 13% increase for 7 years • Includes 3% annual inflation • Funds used to cover the operational cost of the swimming pool, road and asset maintenance • Assets will be improved under this model

24. How Will You Be Affected? • Cobar Residential – 25% One Off • 2013 Rate – $455 ($114 per quarter) • 2014 Rate – $571 ($143 per quarter) • 2020 Rate - $682 ($171 per quarter) • Cobar Residential - Annual 13% increase for 7 years • 2013 Rate – $455 ($114/qtr) • 2014 Rate – $511 ($128/qtr) • 2020 Rate - $1063 ($266/qtr) • With CPI, rates will be $560 by 2020 ($140/qtr) • 23% rise from this year

25. What is the Process? • Council has resolved to get community feedback on the two options • 25% one off • 13% annually for 7 yrs • Number of community forums to be held to inform and gather feedback • December Council meeting Council will consider which option to take to IPART • Application made early 2013 • IPART reports about May/June 2013 • Increase comes in from July 2013.

26. Fact Sheets • 3 Fact Sheets to take away • Rates • Get your rates notice out and see what your general rate is now • Do you know what your general rate was 10 yrs ago? • Special Rate Variation • Understand the two options and the impact on yourself • Are you happy to pay an additional $30 a quarter OR • Would you rather pay $266 a quarter to improve the services and assets in the Shire? • Understand the services Council provides and what they cost

27. Survey • Please complete the survey and put in the box tonight • Provides data and information for Councillors to consider • Your preferences are included • Your say is important