Financial Models Overview Model 1 – Current situation (without corrective action) based on historical trend Council had an adopted forecasted operating deficit (before capital grants) for 2021/22 of $12 million. In order to significantly reduce the adopted operating deficit and address financial sustainability, reductions include $6 million worth of operational programs project, services and $350 million in capital projects being deferred, reduced or deleted. The model outlines the forecast result based on the reduced 2021/22 budget. Based on this approach the adopted forecast deficit of $12 million has been reduced to a projected deficit of $4.5 million in 2021/22. Model 2 – New Rates 2021 Proposal (Special Rate Variation (SRV) of 5.8% each year over a 5 year period commencing in 2021/22 plus a further $12 million in savings identified over a number of years) Model 1 highlights the deteriorating financial results of current operations. Increasing deficits (sans Capital Grants income), if left unaddressed, will inevitably lead to council being unable to fulfil its mandated obligations. In addition, Council’s income is to be adversely affected by the termination of a current Special Rate Variation (from the former Hurstville City Council) with effect from 1 July 2021. This will reduce income by $2.3 million. Consequently, Model 2 outlines the impact of a proposal to implement a permanent Special Rate Variation at 5.8% per annum (commencing 2021/22) for 5 years, to generate additional income of approximately $24 million over 5 years. This will be a permanent increase which its cumulative benefits will improve the financial sustainability of Council. An application has been made to IPART in this regard. Model 2 also includes a proposition to reduce Council’s costs by $12 million over 3 years from 2020/21. The combined effect of these 2 measures is projected to resolve the unprofitable financial position of council and instill sustainable positive financial outcomes over the 10 years of the current Long Term Financial Plan. Special Rate Variation Proposal 2021/22
2022/23
2023/24
2024/25
2025/26
5.8%
5.8%
5.8%
5.8%
5.8%
Model 3 – No Special Rate Variation: Expenditure Savings through Service reductions from 2021/22 onwards Model 3 presents a potential scenario, where the application for a Special Rate Variation, as proposed in Model 2, is not approved by IPART or Council resolves to, not implement the increase. As an alternative, Council will be compelled to discontinue some services and/or reduce levels of service in many areas, in an attempt to decrease the cost burden on its operations. This is expected to reduce costs by approximately $43 million while income is also projected to reduce by around $7 million over the 5 year period. While there will be some improvement in council’s financial performance as compared to the current position, these measures are not expected to sustainably resolve the financial problems. In addition, services to the community will be discontinued and/or delivered at a reduced level, contrary to feedback received during the community consultation on the proposal.
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Georges River Council // Long Term Financial Plan 2021/22
