Long Term Financial Plan 2015/2016 - 2024/2025 by Ku-ring-gai Council

LONG TERM FINANCIAL PLAN 2015/16 – 2024/25 REVISED JUNE 2015

This Plan has been prepared by Ku-ring-gai Council to support the delivery of its long-term strategic direction. It forms part of the Resourcing Strategy for the Community Strategic Plan and Delivery Program and should be read in conjunction with these documents. For more information on this document contact: Ku-ring-gai Council 818 Pacific Hwy, Gordon NSW 2072. Locked bag 1056, Pymble 2073 Ph. (02) 9424 0000 F (02) 9424 0001 kmc@kmc.nsw.gov.au

INTRODUCTION ................................................................................................................................................................................................................. 1 OVERVIEW ......................................................................................................................................................................................................................... 3 LONG TERM FINANCIAL PLAN PRINCIPLES .......................................................................................................................................................................... 3 SCENARIO PLANNING ......................................................................................................................................................................................................... 5 HIGHLIGHTS OF THE LONG TERM FINANCIAL PLAN ........................................................................................................................................................... 18 KEY FINANCIAL INDICATORS ............................................................................................................................................................................................ 32 CONCLUSION ................................................................................................................................................................................................................... 40 APPENDIX A ‐ LTFP FORECASTS AND ASSUMPTIONS ........................................................................................................................................................ 41 APPENDIX B ‐ SCENARIO 1 ‐ FIT FOR THE FUTURE (FFTF) BASE CASE SCENARIO WITH ADDITIONAL FUNDING FOR INFRASTRUCTURE RENEWAL ............... 42 APPENDIX C ‐ SCENARIO 2 – SCENARIO WITHOUT ADDITIONAL FUNDING FOR INFRASTRUCTURE RENEWAL .................................................................... 45

i Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

INTRODUCTION A long term financial plan (LTFP) is one of the three key Resourcing Strategies required by the NSW Integrated Planning & Reporting legislation. Local government operations are vital to its community, and it is important that stakeholders can understand the financial implications arising from its Community Strategic Plan, Delivery Program and annual Operational Plan. The Integrated Planning and Reporting Guidelines guide preparation of the LTFP for Local Government in NSW issued by the Office of Local Government. The LTFP includes:       

projected income and expenditure balance sheet cash flow statement planning assumptions used to develop the plan sensitivity analysis – highlight factors most likely to affect the plan financial modelling for different scenarios methods of monitoring financial performance

The LTFP contains a core set of assumptions. These assumptions are based on CPI forecasts, interest rate expectations, employee award increases, loan repayment schedules, special price forecasts for certain Council specific items, planned asset sales and other special income and costs.

1 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

The diagram below illustrates the link between the main elements of the LTFP: service standards, levels and priorities, Capital and Operating budget, major project analysis and assumptions and scenarios.

Long Term Financial Plan Elements of the Plan

2 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

OVERVIEW Ku-ring-gai Council’s current Long Term Financial Plan (LTFP) covers the period 2015/16 to 2024/25. It recognises its current and future financial capacity, to continue delivering high quality services, facilities and infrastructure to the community while commencing new initiatives and projects to achieve the goals set down in its Community Strategic Plan (2030). Financial planning over a 10-year time horizon is challenging and relies on a variety of assumptions that will undoubtedly change during this period. The LTFP is therefore closely monitored, and regularly revised, to reflect these changing circumstances. The LTFP is the core document used to guide all financial planning within Council and is the basis for annual budgets and the preparation of the Delivery Program and Operational Plan. Ku-ring-gai Council is in a sound financial position. The LTFP provides for Operating Surpluses after allowing for the depreciation expense on Council’s $976 million portfolio of depreciable assets such as roads, footpaths, drains and buildings. If capital grants and contributions are excluded, the Operating result remains in Surplus throughout the 10 years of the LTFP. Council maintains healthy levels of working capital and reserves in the LTFP, and has a strategy in place to fund renewal of infrastructure assets and debt funding for major projects via identified sources of repayment. Council has identified increasing funding for infrastructure renewal as a key priority. Two main scenarios have been outlined in detail in the LTFP for consideration. The scenario that Council will adopt best addresses the infrastructure renewal requirements that have been identified. This scenario includes a new funding strategy for asset renewals. As per the new funding strategy, Council will be able to close the gap between the required level of infrastructure renewal funding and the actual funding available.

LONG TERM FINANCIAL PLAN PRINCIPLES Council’s overall guiding principle is to maintain a healthy financial position, underpinned by a sound income base and commitment to control and delivery of services, facilities and infrastructure demanded by the community in an effective and efficient manner. The LTFP puts these principles into action by formulating and applying specific objective tests of financial sustainability to the LTFP and its scenarios:

3 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

1. Maximise funds available for projects to upgrade or renew infrastructure by:    

Maximising the operating profit before capital items Prioritizing the use of Council cash reserves Borrowing in accordance with policy Timing project expenditure over a longer period and linking to funds availability

2. Satisfy applied tests of financial sustainability:  

     

Achieve an operating surplus (excluding capital grants and contributions). Target a minimum working capital of 5.5% of operating expenses (excluding depreciation) as recommended by Council’s external auditors. Working capital is determined by taking net current assets less internally and externally restricted reserves and adding those current liabilities to be funded from the next year’s budget. Essentially, working capital is a measure of Council’s liquidity and ability to meet its obligations as they fall due. This will allow for unforeseen expenditure or reductions in revenue or other accounting adjustments. Maintain a minimum Unrestricted Current Ratio of 2.0 (industry benchmark is 1.5 for ‘satisfactory’ and 2 for ‘good’). Maintain a sustainable debt level and debt service ratio below the industry benchmark (industry green light benchmark less than 20%). Maintain a minimum level of internal discretionary cash reserves (excluding liability cash reserves) of 10% of revenue. Only capital items to be funded from cash reserves. Proceeds of asset sales returned to reserves for expenditure on asset renewals or major asset refurbishment. Maintain all Infrastructure assets ratios at a sustainable level, meeting or outperforming benchmark.

All of the above objective tests are considered together in the overall evaluation of the LTFP and its scenarios. The tests are not necessarily strictly applied each time, particularly where an LTFP scenario only fails the test for a limited period of time. For example, during the next two years, the Infrastructure Backlog Ratio test will not be satisfied due to insufficient funding allocated to asset renewals in previous years, however Council has now adopted a new funding strategy that will address this issue. Thus, the Plan is still regarded as sustainable. The new funding strategy is discussed further in this document.

4 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

3. Borrowing Strategy Loan borrowing is a legitimate and responsible financial management tool and the use of loans to fund capital projects can be an effective mechanism of linking the payment for the assets (via debt payments) to the successive rate-paying populations who receive benefits over the life of those assets. This matching concept is frequently referred to as ‘inter-generational equity’. Borrowings are considered as a source of funding in the following circumstances:  

Capital projects that deliver long term benefit to the community Building or purchase of assets where a detailed cash flow analysis shows that full funding costs can be recovered over the life of the asset or economic investments where a new asset or service decreases existing costs or provides new revenue in excess of their funding costs (positive NPV)

As borrowings are usually the highest cost source of funds:  

Internal funding sources are considered and used first (including possible re-allocation of funds from lower priority projects or operating items) The proposed project may be re-timed to match internal funds availability

SCENARIO PLANNING The LTFP is a model to consider scenarios for the funding of operating and capital expenditure. Detailed forecasts of all sources of operating revenue and expenditure are utilised to derive the maximum surplus available to apply to Council’s rolling program of capital investments in new or refurbished infrastructure. Scenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal Scenario 2 - Scenario without additional funding for infrastructure renewal

5 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Both Scenario 1 and 2 are financially sustainable in terms of maintaining a balanced budget, sufficient unrestricted cash and available working capital, sufficient cash reserves and a permissible debt service ratio over the medium term. However, the variance between both scenarios is the level of funding allocated to asset renewals. Council’s optimal scenario is Scenario 1, which assumes increased investment in renewal of infrastructure as this will help address the asset renewal backlog. It identifies additional funding, in order to meet the identified target renewal expenditure levels. Both scenarios are modelled for a period of 10 years. Each of them considers the impact on key financial indicators in the LTFP, current service levels and asset management. The forecast income statement, balance sheet and cash flow statement for the scenarios are provided in appendices to this report. Scenario 1 – Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal The base scenario of the LTFP shows the financial results of delivering the current level of service as per the 2015/16 budget expanded out over 10 years and adjusted by various price forecast indexes as detailed in the financial assumptions section of this document. This scenario is modelled to address Council’s renewal assets gap by adopting a new funding strategy for asset renewals.  Infrastructure Assets review

Council adopted a new funding strategy for Infrastructure asset renewals which is based on the principle that all available surplus funds will be diverted towards Council’s asset renewals as a priority. Additional funding is assumed to be generated from loan funds and reinvested into Council’s renewal program for Infrastructure Assets. The new funding strategy was reinforced by a recent independent review on all Council’s Infrastructure assets. Council undertook an independent review of its infrastructure assets and financial data to ensure that there is a consistent organisational approach to infrastructure reporting. The following was reviewed: condition of Council’s assets by asset class, Council’s methodology to determine cost to bring assets to a satisfactory condition, actual asset maintenance compared to required asset maintenance, current asset renewals and required asset renewals. All asset classes reported in Special Schedule 7 “ Report on Infrastructure Assets” have been assessed as part of the review as well as the overall cost to bring infrastructure assets to a satisfactory condition. Based on revised condition assessment of Council’s infrastructure assets (i.e buildings and roads) and a new backlog methodology, the current backlog on infrastructure assets has been assessed at $32.7 million with a backlog ratio of 6.4% for 2014/15. The review also identified that Council has an annual shortfall of funding for asset renewals. If this shortfall is not addressed it is likely that the infrastructure backlog will continue to increase in future years. In addition, adequate funding also needs to be directed towards maintenance which is already incorporated in the current plan.

6 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

In light of the infrastructure assets review Council considered funding strategies that prioritises asset maintenance and renewal expenditure over new and upgraded assets expenditure.  New Funding Strategy for Asset renewals

In light of the infrastructure assets review Council considered a new funding strategy that prioritises asset maintenance and renewal expenditure. Council previously resolved to fund a specific project - Relocation of staff to a new Administration Building (Service Relocation project) through asset sales. These funds will discharge the current outstanding loan for the acquisition of this building and under the new funding strategy an equivalent amount of loan funds will be drawn for the purpose of Infrastructure asset renewals. These infrastructure loan funds will be used solely on the asset renewals program and will have an identified repayment source as described below. The acquisition of the Administration Building in 2012/13 was funded by external borrowing with the borrowing to be subsequently discharged by future asset sales. Under the new funding strategy the Administration Building will be fully leased out generating enough net revenue over the life of the plan to discharge the outstanding debt for infrastructure renewals over a longer period of time. This principle aligns with the matching concept of ‘inter-generational equity’. The relocation of staff to the new administration building is also deferred for a period of 10 years. The asset renewals funding strategy will increase expenditure on asset renewals by $43.9 million for 10 years (or $22.6 million in the first two years of the LTFP) in addition to the standard renewal expenditure and allocate $13.5m on average in maintenance each year as required by the Asset Management Plan. Additional funding will also have a positive impact on Council’s infrastructure backlog, with a reduction in backlog of $22.2 million by 2016/17, from 6.4% in 2014/15 to 2% in 2016/17 meeting the current industry benchmark for the backlog ratio. The low level of backlog will be maintained over the long term by investing all additional surplus funds into asset renewals and providing sufficient asset maintenance in future years to prevent the backlog from growing. This scenario is financially sustainable according to the recognised financial sustainability measures and the one that Council will consider for adoption. It is estimated that proceeds from asset sales will produce the following increase in Council revenue over the next 2 years (see table below). These proceeds will be used to fully repay the current outstanding loan for the acquisition of the Administration Building and an equivalent amount of loan funds will be drawn for the purpose of asset renewals. This additional loan funding is sufficient to decrease the backlog to the benchmark of 2% by 2016/17. Future backlog will be further decreased and later maintained by additional funding from Council’s Investment property at 828 Pacific Highway, once the loan is discharged in future years.

7 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Proceeds from Asset Sales 2015/16

$11.58M

2016/17

$12.92M

Total

$24.50M

Pending the sale of assets, Council will receive $24.5 million in total over a 2-year period. If the sale of assets does not eventuate and additional funding is not received, only the base funding will be available for asset renewals, leading to increased backlog in future years. The new asset renewals funding strategy ensures that Council has the capacity to provide additional funding to reduce the infrastructure gap, and continue to bring Council’s infrastructure assets to a satisfactory standard within an established timeframe. The benefits of bringing Council’s infrastructure assets to a satisfactory standard will help reduce the annual maintenance requirements as well as the cost of future infrastructure works. The table and charts below display the planned asset renewal expenditure in future years, highlighting the standard renewal program and additional funding provided. The additional income from the new funding strategy has a positive impact on the size of the future asset renewal gap, reducing it in just two years to 2% by 2016/17. Asset Renewal Expenditure $ '000

R equired R enewal Total - I nfrastructure Assets R enewal Standard Renewal Additional Renewal Program

Projected 2015/16 17,013

Projected 2016/17 17,182

Projected 2017/18 17,685

Projected 2018/19 19,815

Projected 2019/20 20,050

Projected 2020/21 20,516

Projected 2021/22 20,929

Projected 2022/23 21,266

Projected 2023/24 21,339

Projected 2024/25 21,468

27,719

28,761

25,005

19,858

21,698

20,557

21,480

21,504

21,802

22,245

16,919

16,961

24,005

17,758

20,698

16,357

16,980

16,504

18,302

22,245

10,800

11,800

1,000

2,100

1,000

4,200

4,500

5,000

3,500

8 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

How Council's Infrastructure Backlog Is Being Managed ($M)

10% 9%

8% 7%

6% 5%

4% 3%

2% 5

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

0% Year

2015/ 16

2024/ 25

2023/ 24

2022/ 23

2021/ 22

Renewal Backlog

2020/ 21

$M 25

2019/ 20

Infrastructure Assets ‐ Backlog Ratio Target

2018/ 19

Standard Renewal Expenditure Program

Total Infrastructure Assets ‐ Backlog Ratio

2017/ 18

Backlog Renewal Program

2016/ 17

($M)

Infrastructure Assets Backlog

Additional loan funding is diverted into asset renewals in the first years of the LTFP, contributing to a reduction in the asset renewals backlog to 2% by 2016/17. The industry benchmark for the backlog ratio is 2% as defined by T-Corp and the OLG. As Council injects more funding into asset renewals in the first two years of the LTFP the funding gap decreases significantly. Over 10 years of this financial plan a total of $229 million is invested into infrastructure asset renewals and the backlog is eliminated by the end of this financial plan (from $32million in 2014/15 and $22 million in 2015/16 to nil in 2024/25). As part of the infrastructure review, it was identified that some asset classes have a larger backlog than other asset classes. The condition of assets was assessed in terms of service potential and funding redirected to those asset classes that have a larger backlog. This will ensure that all infrastructure assets provide an adequate level of service in future. The allocation of renewal funding will be reviewed annually to make sure that assets conditions do not degrade beyond an objective threshold. The allocation of additional funding into assets classes is shown below. Asset Class

Buildings Roads Footpaths Kerb and Gutter Stormwater Drainage Open Space/Recreational Assets

Percentage of additional funding

20.0% 10.0% 10.0% 25.0% 20.0% 15.0%

9 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Asset maintenance and Infrastructure funding Council’s Asset Management Strategy identifies a shortfall in expenditure on maintenance of infrastructure assets compared to required annual maintenance estimates. Inadequate asset maintenance may result in a shortened useful life and the need for earlier than planned renewal. The current LTFP addresses this issue and allocates adequate funding towards asset maintenance in future years. Council budgeted for $11.5 million (compared to $11 million required expenditure) in maintenance costs for infrastructure assets in 2015/16 budget with further increases in future years. Total maintenance expenditure increases in line with other operating expenses (by an average of 3%), however in 2017/18 to 2018/19 the maintenance expense will increase due to capital projects planned on new assets. The actual asset maintenance expenditure versus required maintenance, as well as the increasing trend of maintenance expenditure and total operational expenditure are shown below. Infrastructure Maintenance Expenditure Projected

Projected

$ '000

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

R equired M aintenance

11,043

11,151

11,478

13,233

13,399

13,710

13,973

14,186

14,237

14,320

Actual M aintenance

11,508

11,842

12,126

13,392

13,713

14,042

14,380

14,725

15,078

15,440

Increase in Actual Maintenance Expenditure vs Total Operating Expenditure Over 10 Years

Infrastructure Asset Maintenance $M

Required Maintenance

Actual Maintenance

Actual Maintenance Increase (Cumulative)

18 16

40%

35%

30%

25%

20%

15%

10%

‐

Total Operating Expenditure Increase (Cumulative)

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

2015/16

10 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

The current LTFP under Scenario 1 allocates adequate funding towards Infrastructure assets in terms of assets maintenance, renewal and new/upgrade as shown in the chart below. A total of $136 million will be allocated to asset maintenance over 10 years, $229 million to asset renewals and $226 million to build new or upgrade existing assets. The new/upgrade expenditure includes new or existing projects largely funded by s94 developer contributions, such as for community facilities to meet the needs of the growing community. Major capital initiatives are planned for the early years of the LTFP (2015/16 to 20118/19) which are listed further in the report.

Funding for capital works is allocated into the following categories listed below (note that these figures also include expenditure on new assets funded by s94 development contributions). The largest capital expenditure goes to Roads & Transport with 33% of total expenditure for the forecast period, followed by Parks & Recreation (24%) and Streetscape & Public Domain (21%). Parks & Recreation, among others, includes acquisition of Community land, which is funded by s94 contributions. Projected Capital Expenditure Scenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal

Capital Works Project Exp $'000

Planning, Community & Other Roads & Transport Streetscape & Public Domain Parks & Recreation Stormwater Drainage Council Buildings Trees & Natural Environment

Total Projects

Projected 2015/16 2,101 15,292 2,127 19,460 2,706 4,625 1,358 47,669

Projected 2016/17 2,148 23,130 14,614 13,923 2,986 4,618 999 62,418

Projected 2017/18 2,358 23,567 27,239 16,212 986 57,070 851 128,283

Projected 2018/19 2,451 11,853 4,976 10,972 1,313 1,708 997 34,270

11 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

Projected 2019/20 2,233 18,720 2,015 40,208 1,117 1,152 0 65,445

Projected 2020/21 2,291 18,681 16,526 7,167 1,780 1,817 0 48,262

Projected 2021/22 2,353 16,859 15,545 3,770 1,866 1,903 0 42,296

Projected 2022/23 2,414 14,843 3,094 3,349 1,991 2,029 0 27,720

Projected 2023/24 2,477 16,228 4,660 11,239 1,717 1,756 0 38,077

Projected 2024/25 2,541 13,313 20,441 3,446 1,043 1,084 0 41,868

Scenario 2 - Scenario without additional funding for infrastructure renewal This scenario shows the financial results of delivering the current level of service as per the forecast 2015/16 budget expanded out over 10 years without additional funding for infrastructure asset renewals in the short term. The scenario is modelled to address Council’s renewal assets gap in future years only when funding becomes available. The main difference between the two scenarios is the pattern of capital expenditure and the total amount of funding available for asset renewal. This scenario assumes relocation of staff to the new Administration building (Services Relocation Project) mentioned under Scenario 1. The funding strategy under this scenario allocates proceeds from divestment of assets towards discharging Council’s outstanding debt originally drawn to fund the acquisition of this building and no loan funds are drawn for infrastructure asset renewals. Additional borrowing would also be required for extensive capital expenditure to refurbish the administration building before staff relocation. This scenario does not provide funding for asset renewals in the early years of the forecast period. This means that the current infrastructure backlog will not be addressed and with insufficient funding into renewals the backlog will continue to increase in future years. Funding becomes available in the latter part of the LTFP years. This scenario is sustainable according to the recognised financial sustainability measures and can be delivered, however, since it does not address the asset renewal backlog and community concerns about the infrastructure assets it is not the preferred option. Capital expenditure Under this scenario additional renewal funding is not available from infrastructure loan funds, however, funding becomes available in later years from rates growth. The infrastructure backlog remains above FFTF benchmark in the earlier years of the plan and is gradually decreasing by the last year of the plan. It takes significantly more years to reduce the infrastructure backlog. Asset renewals expenditure is less than Scenario 1 mainly because loan funds are not drawn in earlier years for reinvestment into asset renewals. Similar to Scenario 1, the proceeds from asset sales ($24.5 million) are being used to discharge the current total outstanding loan for the administration building. While remaining within the acceptable limits, other financial indicators are also affected, mainly: reduced operating ratio, higher debt service ratio due to higher principal and interest repayments. The impact on financial ratios is further examined under the “Key financial indicators” section of this report.

12 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

The impact of reduced funding for asset renewals under Scenario 2 is demonstrated in the charts below. Both Asset renewals expenditure goes down and infrastructure backlog deteriorates. The infrastructure backlog under this Scenario is higher in 2015/16 at $30 million compared to ($22 million in 2015/16 under Scenario 1) due to less renewal expenditure on infrastructure assets in the first year of the LTFP. The infrastructure backlog is eliminated by 2024/25. Infrastructure Assets Backlog

How Council's Infrastructure Backlog Is Being Managed ($M)

($M)

Backlog Renewal Program

Standard Renewal Expenditure Program

Total Infrastructure Assets ‐ Backlog Ratio

Infrastructure Assets ‐ Backlog Ratio Target

Renewal Backlog

$M 35

10%

8% 25

5% 15

2% 5

2024/25 Year

Scenario 2 allocates capital funding as follows: Projected Capital Expenditure Scenario 2 - Scenario without additional funding for infrastructure renewal

Capital Works Project Exp $'000

Planning, Community & Other Roads & Transport Streetscape & Public Domain Parks & Recreation Stormwater Drainage Council Buildings Trees & Natural Environment

Total Projects

Projected 2015/16 3,058 10,432 2,127 17,840 546 4,511 1,358 39,872

Projected 2016/17 2,148 19,079 14,614 12,573 1,185 1,492 999 52,090

Projected 2017/18 2,358 23,632 27,239 16,236 1,059 55,709 851 127,084

Projected 2018/19 2,451 12,683 4,976 11,283 1,728 2,226 997 36,344

13 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Projected 2019/20 2,233 20,563 2,015 40,823 1,936 1,971 0 69,541

Projected 2020/21 2,291 19,576 16,526 7,465 2,178 2,215 0 50,251

Projected 2021/22 2,353 17,881 15,545 4,111 2,320 2,357 0 44,567

Projected 2022/23 2,414 15,950 3,094 3,718 2,483 2,521 0 30,180

Projected 2023/24 2,477 18,073 4,660 11,854 2,537 2,576 0 42,177

Projected 2024/25 2,541 16,839 20,441 4,622 2,611 2,651 0 49,705

2024/25

2023/24

2022/23

2021/22

2020/21

2019/20

2018/19

2017/18

2015/16

2016/17

2017/18

0% 2015/16

2016/17

LTFP ASSUMPTIONS & SENSITIVITY ANALYSIS The Long Term Financial Plan contains a wide range of assumptions, including assumptions about interest rates, potential effect of inflation on revenues and expenditures, current service levels and others. Major assumptions in the current version of the LTFP are listed below and a detailed list is attached to this report. Some of these assumptions have relatively limited impact if they are inaccurate; some have a major impact on Council’s future financial plan. The LTFP is a dynamic financial model and is updated quarterly to ensure the assumptions are continually updated with the latest information available. The Plan is also tested by varying the amounts of the moderate to significant assumptions and the impact is analysed. CPI Forecast: An annual 2.9% increase in CPI has been built into the LTFP for both income and expenditure in line with Access Economics forecast for CPI. The Reserve Bank’s target for inflation remains between 2% and 3%. Income from Rates is limited to rates pegging set by IPART (2.4% for 2015/16) averaging an annual increase of 3% from 2015/16 onwards. In addition, the LTFP assumes an increase of 0.7% annually resulting from population and property growth. The LTFP assumes continuation of the Environmental special rate variation for the ten-year period. Fees and charges are expected to increase by 2.9% annually. Charges for domestic and trade waste have been increased to reflect cost increases in providing the service. Investment revenue has been estimated based on current cash levels and future expected earnings of BBSW + 0.7% over the 10 year period. The annual interest rate is estimated to 3.2% for 2015/16, 4.1% for 2016/17 and 4.3% for the remaining years to 2024/25. Grants for both Recurrent and Capital purposes have been increased by 2.9% as per CPI (if relevant for grant), except for the Financial Assistance Grant, which is not indexed in the LTFP. Proceeds from Asset Sales are projected in the LTFP mainly in the early years of the plan. The next 2 years are the most critical as the proceeds from sale will be used for infrastructure asset renewals. These properties have previously been identified and reported to Council. Employee costs have been estimated based on agreed award increases. Workers compensation has been factored by the same rate, which is an average of 3.7% per year. Operational materials and contracts expenditure are estimated to increase by 2.9% as per CPI for 2015/16 and 2016/17, and 2.4% for the remaining years. Capital materials and contracts expenditure is assumed to increase by an average 2.6% annually based on ABS infrastructure index.

14 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Borrowing Costs have been estimated based on 135 basis points over 90 day BBSW per annum. The annual interest rate is estimated at 3.9% for 2015/16, 4.8% for 2016/17, and 5% for the remaining years to 2024/25.

Sensitivity Analysis The following table lists the major assumptions affecting the LTFP results and shows the impact of varying them. This impact is classified as Low, Moderate or Significant in terms of quality and quantum of service delivery to constituents. Impact

Comment

Revenue Inflation/CPI

Low

Changes in inflation will affect both revenue and expenditure, but increases in the assumption are likely to be negative for the projected operating surplus.

Rates Income – Rate Peg

Moderate to Significant

The rate peg for 2015/16 announced by IPART is 2.4%. Rates income also assumes rates growth of 0.7% per annum through increased development. Changes in rate pegging will affect revenue forecasts, and these will have a moderate impact on the LTFP Model, compared to the calculations using the average LGCI. Nonachievement of property and rates income growth forecasts will directly affect provision of new infrastructure and the rate at which existing infrastructure can be renewed.

Investment Earnings and Interest Expense

Moderate

Investments are placed and managed in accordance with the Council’s adopted Investment Policy in compliance with the Local Government Act. Council’s investments portfolio is subject to fluctuations in interest rates. An adverse movement in interest rates will reduce investments income and impact on capital expenditure and service levels, with only a minor offset through savings in variable interest loan costs.

Proceeds Sales

from

Asset Significant

The LTFP assumes sale of assets for the 10 years. Proceeds from asset sales will be used to discharge current outstanding loan for the Administration Building and an equivalent amount of loan funds will be redrawn for infrastructure asset renewal leading to a reduction in Councils infrastructure backlog. If the proceeds and timing of sales are not realised as per the plan, this will have a major impact on Council’s key infrastructure

15 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Impact

Comment

Revenue assets indicators. There will be insufficient funding available to address the current assets backlog. The Asset’s Renewal Ratio will deteriorate together with the Infrastructure backlog ratio. Asset sales are also planned to fund Council’s co-contribution in its s94 Developer Contributions plan. If these asset sales are not realised, either cuts to services and other capital would have to be made or alternatively the s94 projects requiring Council co-contributions would have to be deferred or deleted from the program. Grants

Low for specific The LTFP model includes operational grants and capital grants that have already been awarded. The Council does not have a strong reliance on specific purpose grants purpose grants. revenue in comparison with other sources of revenue. Programs funded by specific Moderate/Significant purpose grants may not be offered by the Council if the grants were eliminated. for general purpose The general purpose component of the Council’s Financial Assistance Grant is currently $3.5 million. If this grant were reduced or eliminated, the Council would need to consider grants significantly reducing capital expenditure and operating service levels.

Expenditure Employee Costs

Significant

This is Council’s largest cost. The number of employees in operating activities is assumed to remain constant with cost increases in line with forecast or known Award changes. This volume assumption is at risk from possible future changes to conditions, further devolvement of functions from other levels of government and from growth in Council services requiring additional staffing. The Award increase assumptions are at risk as Council has no direct control over this. Employees engaged in capital projects may increase slightly with increased funding for infrastructure, however this would be met from the new budget allocations.

Borrowing costs

Moderate

Council’s outstanding loan balance is expected to decrease to $25.1 million by 2015/16. This includes a line of credit loan where interest capitalises and is discharged by future net revenue generated from leasing out the new Administration building. This carries a moderate risks in term of delays in realising income if the current building is not fully leased out as predicted in the LTFP assumptions.

16 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

The following table illustrates monetary sensitivity to variations in the assumptions.

Income & Expenditure Categories

Assumption

2015/16 Base $'000

Sensitivity to a 10% Variation in the Assumption $

Sensitivity to a 20% Variation in the Assumption $

INCOME: Rates Annual Charges

3.2% 8.5%

57,647 20,740

184,470 176,290

368,941 352,580

Fees & Charges

2.9%

16,991

49,274

98,548

Operating Grants

2.9%

7,566

21,941

43,883

Interest on Investments Other Income

3.2% 2.9%

4,183 10,723

13,386 31,097

26,771 62,193

EXPENDITURE Employee Costs

3.2%

37,534

120,109

240,218

Borrowing Costs

3.9%

1,093

4,208

8,416

Materials & Contracts

2.9%

35,617

103,289

206,579

Depreciation Other Expenditure

1.8% 2.9%

19,155 20,930

34,629 60,697

69,257 121,394

The sensitivity analysis shows that Rates income and Employee costs would have the greatest impact if there is a future variation from the LTFP assumptions. If there are adverse variations in the future from the LTFP assumptions, adjustments will need to be made to operations and capital programs to maintain financial sustainability. The sensitivity analysis brings into sharp focus the need to manage employee numbers and costs.

17 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

HIGHLIGHTS OF THE LONG TERM FINANCIAL PLAN

Financial Performance Summary – Forecast Ku-ring-gai Council’s LTFP details Council’s expected income, operational and capital expenditure within the external environment that Council is expected to face in future. Council is forecasting a strong operating result with operating surpluses in each year. All key financial ratios are predicted to meet or outperform benchmarks. The following forecast summary on financial performance is based on Scenario 1. This Scenario represents the new funding strategy with additional income from divestment of assets for Infrastructure asset renewals. This is Council’s optimal scenario and is financially sustainable in terms of key financial measures.

Operating Result The operating result after accounting for capital items is a surplus in all projected years. The overall trend in operating result is improving over the forecast period due to revenue growth (averaging 3.1% p.a.) outstripping expenditure growth (averaging 2.5% p.a.). Revenue growth is driven by rates and annual charges, user fees and charges and other revenue including rent income. Another factor in increased revenue is the inflow of additional funds from the property development activity that is expected to grow the rates base. The strong results in 2016/17 to 2018/19 are primarily due to forecast gains from sale of assets to fund infrastructure renewal works as well as capital income from partner contributions partly funding major projects (such as Lindfield Village Green mentioned further in the report). Planning for these projects, should consider the inclusion of commercial opportunities of sufficient return to cover ongoing operational costs of the public spaces in the precinct. The proceeds from asset sales are restricted and will be solely used for asset renewals. The charts below show the forecast operating result before and after capital grants and contributions items and income from sale of assets. The Net Operating Result for the year includes capital grants and contributions as well as asset sales revenue. As these items are capital in nature, it is useful to focus on the operating result that excludes capital items and assets sales. The elimination of these items are made to focus on analysis of core operating council’s results. In 2015/16 Council achieves an operating surplus of $27.2 million after allowing for the depreciation expense. If capital grants and contributions are excluded, the operating result remains in Surplus, with a result of $9.1 million.

18 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Projected Income Council obtains revenue from a variety of sources including rates and annual charges, user charges and fees for services, interest and investment revenue, other revenue and grants and contributions for both operating and capital purposes. Councilâ&#x20AC;&#x2122;s revenue has been forecast to increase from $141.5M in 2015/16 to $175.5M over the ten years, which is an average of 3% increase per year. The projected income for the forecast period is detailed in the chart below.

19 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

Projected Income ‐ 10 Year Total ($M) Rates & Annual Charges 33.6 , 2.0%

User Charges & Fees

252.0 , 15.3%

Interest & Investment Revenue 71.7 , 4.3%

141.2 , 8.6% 40.0 , 2.4%

Other Revenues 917.0 , 55.5%

Grants & Contributions for Operating Purposes Grants & Contributions for Capital Purposes Other Income:

195.9 , 11.9%

Net gains from the disposal of assets

Rates Income & Annual Charges Council’s dependence upon rates income and annual charges is approximately 56%. The rest of the costs of Council’s operations are funded from non-rates income. Part of the increased income from rates is due to the forecast development activity leading to additional dwellings, which will be allocated to asset renewals from 2015/16 onwards and have been incorporated into the LTFP scenarios. Two special rate variations are included in the LTFP:  

The SRV for Infrastructure is a permanent levy from 2014/15 onwards granted by IPART in 2013/14 based on Council’s application for a continuation of this SRV. Environmental SRV - an 8-year environmental levy is in place for a special environmental program. This formally expires in 2018/19, although it is likely that Council seeks renewal of this levy. Accordingly, the LTFP assumes continuation of the program of works that it funds and continuation of the levy.

20 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

User Charges & Fees Charges Council derives approximately 12% from user charges & fees and these are forecast to increase by an average of 4.5% per year over the forecast period primarily driven by expected rent revenue from the services relocation project.

Interest Income Council has forecast an earning rate on its investments of the expected BBSW rate + 0.7% over the forecast period. Interest revenue changes in line with cash and investment balances.

Operating Grants & Contributions Operating grants and contributions increase by an average of 1% p.a. Council’s main form of grant assistance is the financial assistance grant, which is a federal untied grant that is distributed between the States based on their percentage of the total population. Financial assistance grants consist of two components both of which are distributed to councils: general-purpose component and a local road component.

Capital Grants Capital grants and contributions are volatile over the forecast period as they can relate to specific one-off major projects.

Developer Contributions Council collects contributions from Developers (s94 Contributions) to help pay for new infrastructure and facilities for the growing population of the area. The Long Term Financial Plan includes the works listed in the Ku-ring-gai Contributions Plan 2010, which came into effect on 19 December 2010. This Contributions Plan applies to development in Ku-ring-gai that gives rise to a net additional demand for infrastructure identified in the Contributions Plan. This period accounts for both the estimated pattern of receipt of Section 94 contributions as well as the delay between contribution receipt and Council’s ability to complete works. Some of the works to be undertaken in the s.94 plan cater for the existing population and these works require a co-contribution from Council’s general funds. Revenue from divestment of Council property assets will be used to meet Council’s commitment in its s.94 Developer Contributions Plans for co-contributions of general revenues to accompany developer contributions. The amount of funding required from property asset divestment over the 10 years of the LTFP is $15 million.

21 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Income from Asset Sales This income from asset sales is from rationalisation of property assets that will start in 2015/16. Planned asset sales are to fund:  

Infrastructure Asset renewals Council’s co-contribution for projects identified in the Development Contributions Plan 2010. These sales are planned to commence in 2017/18 and continue over a 4-year period as Contribution Plan projects proceed. The total proceeds from asset sale will be used for projects commencing in this financial plan ($15 million) and the rest will be restricted to the Assets Sales Reserve available for projects commencing beyond 10 years.

The chart below provides projected asset sales over a 10 year period and identifies the categories to which the funding will be allocated.

Projected Asset Sales $M

Infrastructure Renewal Program

CP2010

14 12 10 8 6 4 2 ‐ 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

Projected Operational Expenditure Council incurs the following expenditure in the course of its operations: employee benefits and on-costs, borrowing costs, materials and contracts, depreciation, other expenses. Total operating expenses are projected to increase by an average annual increase of 2.5% over the forecast period. The projected operational expenditure for the 10 year forecast period is detailed in the chart below.

22 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Projected Expenditure ‐ 10 Year Total ($M) 45.3 , 3.5%

221.0 , 17.0% 446,644 , 34.4%

Employee Benefits & On‐Costs Borrowing Costs Materials & Contracts

219.7 , 16.9%

5.3 , 0.4%

360.8 , 27.8%

Depreciation & Amortisation Other Expenses Other Operational Projects Expenses

Employee Costs Employee costs increase by an average of 4% p.a. over the forecast period. Employee related expenditure is the largest expense type incurred by Council. The LTFP reflects the Workforce Strategy. With the allocation of additional funding to Council’s infrastructure asset renewals program, workforce resourcing allocation will require review and adjustment in order to meet increased workload demands. Other employee related issues such as maintaining/improving workforce capacity are dealt with in the Workforce Strategy and have therefore not been addressed in the LTFP.

Workers compensation Workers compensation insurance premium payments are based on previous claims history. Projected premiums therefore take the most recent premium and increase it by CPI.

Capitalisation rate for employee related expenditure Council capitalises a portion of employee related expenditure that relates to the construction of assets per the requirements of AASB 116 – Property, Plant and Equipment. The percentage of employee related expenditure capitalised has been assumed to stay constant from year to year for the purpose of the LTFP.

23 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Superannuation Contributions by Council to both defined benefit and defined contribution superannuation plans have been forecast to increase per the increase in salaries and wages plus the expected increase in the superannuation guarantee. The Government has announced an increase in the superannuation guarantee rate from 9% to 12% between the 2013/14 and 2019/20 financial years.

Employee benefits Employee leave entitlements such as annual leave and long service leave have been projected to increase at the same rate as general salaries expenditure.

Borrowing costs Borrowing costs incurred include interest on loans held by council. Borrowing costs form 0.4% of the total expenditure incurred by Council. Borrowing cost projections are based on current loans, including the loan facility for the services relocation project and a $2M loan for the Local Infrastructure Renewal Scheme that Council took in 2012/13. This loan was used for Gordon Library upgrade and public toilet upgrades and will involve a ten year repayment schedule. The LTFP plans no further borrowings in future years.

Materials & Contracts Materials and contracts expenses increase by an average of 2% p.a. over the forecast period. Materials and contractors is the second largest cash expense item incurred by council (28% of total expenditure in the 2015/16 financial year). Materials and contracts payments include contractor and consultancy costs, which also relate predominantly to Councilâ&#x20AC;&#x2122;s maintenance program. Other materials and contracts costs include operating lease expenses, legal expenses, and auditor fees.

Depreciation and Amortisation Depreciation and amortisation expenses increase by an average of 2% p.a. Depreciation and amortisation are dealt with in the Asset Management Strategy (AMS), and details on all assumptions used in depreciation/amortisation calculations can be found in the AMS.

Other expenses Other expenses increase by an average of 5.1% per year from 2015/16.

24 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

Projected Capital Expenditure A significant highlight of the LTFP is its commitment to capital works program. The LTFP forecasts delivery of a total capital works and other major projects program over 10 years totalling over $536 million (at future prices). A portfolio of all project proposals has been developed, including estimates of costs and funding sources to determine current and future funding requirements. This project portfolio has been linked to the LTFP. Some significant projects included in this and delivered in the next year are listed below:

Major capital projects initiatives for 2015/16 Council considers a range of available projects competing for resources each year and evaluates major ones based on their financial sustainability and potential contribution to Community needs. During 2015/16, the following projects will be commenced or progressed: 

Local Infrastructure Renewal Scheme (LIRS) – this initiative, funded by loans at subsidised interest rates, allowed the renewal and upgrade of Council’s main library and continues to fund many Public Toilet amenity buildings.



The Waste Less, Recycle More (Waste and Resource Recovery Initiative) – is a continuation of last year’s initiative which provides a range of new waste related project initiatives funded by payments received form the State Government following increased recycling of domestic waste



Implementation of Koola Park Master Plan – the first two stages of the redevelopment of this significant recreation area have been completed over the last 3 years. These include the stormwater harvesting system from Rocky Creek, a 600,000 litre underground storage tank, the relocation and expansion of cricket practice nets, store room and plant room addition to the amenities building, and a sewer connection to replace the old septic system. In 2015/16 we will see the construction of stages 3 & 4. These stages include field levelling, drainage, irrigation, an extension of the playing fields to gain an additional full size sports ground for the Ku-ring-gai community, sports field floodlights, as well as a children's play space, outdoor exercise equipment, perimeter exercise path and additional car parking facilities.



Implementation of St Ives Village Green Master Plan – 2014/15 saw the demolition of the old scouts and girl guides halls, with the groups relocated newly renovated facilities at Warrimoo Oval St Ives Chase. This will enable the construction of the new youth precinct, including skate and bike park, basketball court and performance space, as well as a new and expanded children’s playground, picnic and BBQ facilities, commencing in mid-2015/16. The following years will see other parts of the master plan being implemented, including a perimeter exercise path, terraced seating around William Cowan Oval, relocation of the tennis courts to be adjacent to the bowling club, additional car parking in Cowan Road and Memorial Avenue, and an additional footpath on the park side of the Village Green. This path will provide much improved safety and access to and around the park.

25 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)



Lindfield Village Green – this project will involve constructing a new public park on the site of Council’s car park on Tryon Road Lindfield. The existing car parking will be relocated to a new basement car park under the park. The park will become a focus for community events, markets and outdoor dining.



Lindfield Community Hub – the community hub is planned to be located on Council’s car park off Woodford Lane on the western side of Lindfield, the project will deliver a new park and town square, as well as a new branch library and community centre. The hub will become a focus for community activities for the southern part of the Ku-ring-gai LGA.



St Johns Avenue, Gordon streetscape upgrade works – this project will involve the reconstruction of the footpath areas on St Johns Avenue between the Pacific Highway and the railway station. The footpaths will be made wider to cater for outdoor dining; the work will also include new high quality paving, street furniture, street trees and LED street lighting.



Gordon Cultural Hub – The Cultural & Civic Hub is proposed to be located in the heart of Gordon on Council’s land at 818 Pacific Highway and 9-17 Dumaresq Street. The new cultural precinct will be designed to address the cultural needs of the local community; it will be a sub-regional facility that is a focal point for the Ku-ring-gai LGA. The project will also deliver a new civic plaza as a site for outdoor civic ceremonies.



Turramurra Community Hub - the community hub is planned to be located on Council’s car park on the northern side of the Pacific Highway between Ray Street and the rail line. The project will deliver a new park and town square, as well as a new branch library and community centre. The hub will become a focus for community activities for the northern part of the Ku-ring-gai LGA.



Construction of St Ives Showground Regional Play Space – During 2015/16 we will be constructing the regional play space and accessible toilet at St Ives Showground. The regional play space is partly funded by a $250,000 grant from the NSW Metropolitan Greenspace Program and the accessible toilet facility is partly funded by a $50,000 grant from the NSW Crown Lands Public Reserves Management Fund Program.

26 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Assumptions around capital expenditure, asset valuations and asset management are covered in the Asset Management Strategy and have been incorporated into the LTFP. A summary of future capital expenditure by asset category is provided below: Projected Capital Expenditure Scenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal

Capital Works Project Expenditure

Projected 2015/16 2,101 15,292 2,127 19,460 2,706 4,625 1,358 47,669

$'000

Planning, Community & Other Roads & Transport Streetscape & Public Domain Parks & Recreation Stormwater Drainage Council Buildings Trees & Natural Environment

Total Projects

Projected 2016/17 2,148 23,130 14,614 12,836 2,986 4,618 999 61,331

Projected 2017/18 2,358 23,567 27,239 17,328 986 57,070 851 129,399

Projected 2018/19 2,451 11,853 4,976 10,972 1,313 1,708 997 34,270

Projected 2019/20 2,233 18,720 2,015 40,208 1,117 1,152 0 65,445

Projected 2020/21 2,291 18,681 16,526 7,167 1,780 1,817 0 48,262

Projected 2021/22 2,353 16,859 15,545 3,770 1,866 1,903 0 42,296

Projected 2022/23 2,414 14,843 3,094 3,349 1,991 2,029 0 27,720

Projected 2023/24 2,477 16,228 4,660 11,239 1,717 1,756 0 38,077

Projected 2024/25 2,541 13,313 20,441 3,446 1,043 1,084 0 41,868

The largest capital expenditure will go to Roads & Transport with 33% of total expenditure for the forecast period, followed by Parks and Recreation (24%) and Streetscape & Public Domain (21%). Parks & Recreation includes acquisition of Community land, which is funded by Section 94 Contributions. The chart below provides the breakdown of capital expenditure by category for the next 10 years and the sources and use of funds for capital projects Capital Expenditure by Asset Category ($M)

Year 2024/25 2023/24 2022/23 2021/22 2020/21 2019/20 2018/19 2017/18 2016/17 2015/16 $10

$10

$30

$50

$70

$90

$110

Planning, Community & Other

Roads & Transport

Streetscape & Public Domain

Parks & Recreation

Stormwater Drainage

Council Buildings

Trees & Natural Environment

27 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

$130

Working Capital & Cash Reserves Working Capital Working capital is a measure of Council’s liquidity and ability to meet its obligations as they fall due. It is one of the primary measures of the overall financial position of Council, which allows for unforeseen expenditure, reductions in revenue or other accounting adjustments. Council’s current policy is to maintain a minimum working capital of 5.5% of operating expense. This equates to a projected amount of $4.6M for 2015/16. The working capital is gradually increasing by an average of 4% annually in future years. The level of working capital highlights an adequate liquidity position with Council being able to meet its short term liabilities when they fall due.

Cash Reserves Council has a number of cash reserves which are held for the following reasons:   

legal constraint (externally restricted) - e.g. Section 94 Developer Contributions to manage cash flow for abnormal items and thus reduce impact on service delivery specific revenue - e.g. contribution to works

There are three (3) types of cash reserves, namely: 1. 2. 3.

Statutory (externally restricted) - eg S94 Developer Contributions, Specific Purpose Unexpended Grants, Domestic Waste Management, Infrastructure Levy and Environmental Levy Internal Liability Reserves – to provide for future liabilities e.g. employee entitlements Internal Project Reserves – to provide for future expenditure on Projects

External reserves can only be used for the purpose for which funds were collected. Internal projects reserves are used solely to fund capital items. One of the targets identified in the LTFP is to maintain a minimum level of internal discretionary cash reserves (excluding liability cash reserves) of 10% of revenue. Any surplus cash funds are allocated towards future asset renewals. Cash reserves are carefully managed to achieve optimum investment income and to be available when needed for planned expenditures.

28 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Charts below illustrate the level of working capital and internal cash balances reserves (projects reserves) for the 10-year forecast period Working Capital ($M)

($M)

Available Working Capital

Target Working Capital

4 2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25 Year

Summary of Borrowings One of the major underlying principles incorporated into Council’s Long Term Financial Plan is the Borrowing and Debt Strategy. As per this Strategy Council considers borrowings as a source of funding for:  

Capital projects that deliver long term benefit to the community Building or purchase of assets where a detailed cash flow analysis shows that full funding costs can be recovered over the life of the asset and economic investments where a new asset or service decreases existing costs or provides new revenue in excess of their funding costs (positive NPV)

Using this strategy, the LTFP identifies a permissible level of borrowing in each year to ensure that the required level of borrowing is below this level. This is a borrowing level that the Plan regards as sustainable, principally because;  

sources of debt repayment have been identified and modelled into overall cash flows, and the Debt Service Ratio (DSR) is within the Fit for the Future benchmark of less than 20 %

29 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Maintaining a maximum Debt Service Ratio below the industry benchmark of 20% in any one year is one of the key financial sustainability tests applied by the LTFP. During the current planning period, this test will be satisfied. Council's ability to service its debt remains strong for the entire period of the LTFP. As per Council’s new funding strategy, the outstanding debt is fully discharged by the end of this financial plan from net revenue generated through leasing out Council’s new Administration Building. The acquisition of the Administration Building in 2012/13 was originally funded by external borrowing with the borrowing to be subsequently discharged by future asset sales. Under the new funding strategy, this building will be fully leased out generating enough revenue over the life of the plan to discharge the outstanding debt for infrastructure asset renewals over a longer period of time. This principle aligns with the matching concept of ‘inter-generational equity’. The relocation of staff to the new administration building is also deferred for a period of 10 years. Council’s Debt Service Ratio will remain in the range of 3% to 6% during the life of the plan. The Debt Service Ratio for the next 10 years is provided in the table below:

Borrowings Summary and Debt Service Ratio $'000 Financial year

Borrowings Proposed Borrowings

Debt Service Ratio

Principal Repayments

Interest Component

Principal Repayment

Total

2015/2016

2,228

0.9%

1.9%

2.8%

2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025

4,070 1,994 5,626 7,322 4,660 4,808 408 -

0.9% 0.8% 0.7% 0.5% 0.3% 0.1% 0.0% 0.0%

3.3% 1.6% 4.4% 5.5% 3.4% 3.4% 0.3% 0.0%

4.2% 2.4% 5.1% 6.0% 3.7% 3.5% 0.3% 0.0%

TOTAL

31,116

30 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

How Council’s Debt is being managed The LTFP includes a dynamic capital management strategy which continuously monitors:     

Actual need for loan funds based on actual expenditure occurring within projects designated for loan funding Obtaining loans under terms which not only offer the best interest rate but also offer maximum flexibility for repayment timing and/or further loan drawdown Updated forecasts of sources of loan repayment Updated reviews of operating budgets, and Quoted interest rates on loans compared to interest being earned on invested funds

Currently no borrowings are proposed beyond 2014/15. The LTFP provides for repayments of debt to occur on either a schedule specified by the terms of individual loans or at a time where funds are available and the overall cost of debt can be reduced by making opportunistic repayments. This results in all loans being discharged by 2023/24. The following charts show Council’s projected outstanding debt and the Net debt service cost for the next 10 years. Total Debt Service Cost includes total interest plus principal repayments.

31 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

KEY FINANCIAL INDICATORS The key financial indicators are an industry accepted measures of financial health and sustainability. This section provides the financial ratios for the two sustainable Scenarios presented in this Long Term Financial Plan. Council’s future financial performance and position is measured against the Fit for the Future (FFTF) performance indicators. A summary of these indicators and their benchmarks is provided below. Key Financial Indicators

Purpose of indicator

Benchmark

SUSTAINABILITY Operating Performance Ratio (Operating revenue excluding capital grants and contributionsoperating expenses divided by Operating revenue excluding capital grants and contributions)

To measure Council's ability to contain operating expenditure within operating revenue

Own Source Revenue Ratio (Total Operating revenue less grants and contributions divided

To assess the degree of Council’s dependence upon

by total Operating revenue)

grants and contributions

Building & Infrastructure Renewal Ratio (Asset renewals expenditure divided by

To assess the rates at which assets are renewed relative to

depreciation, amortisations & impairment expenses)

the rate at which they are depreciated (consumed)

>=break-even average over 3 years >60% average over 3 years >100% average over 3 years

INFRASTRUCTURE AND SERVICE MANAGEMENT Infrastructure Backlog Ratio (Estimated cost to bring assets to a satisfactory condition (from Special Schedule 7) divided by total infrastructure assets

To measure the proportion of assets backlog against total value of Council's infrastructure assets

Asset Maintenance Ratio (Actual maintenance expenditure divided by required annual

To asses the actual asset maintenance expenditure relative

asset maintenance)

to required asset maintenance

Debt service ratio (Net debt service cost divided by revenue from continuing operations)

To assess the impact of loan principal and interest repayment on the discretionary revenue of Council

<2% >100% average over 3 years <20% average over 3 years

EFFICIENCY Real Operating Expenditure per capita (Operating expenditure divided by total population)

32 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

To asses real operational expenditure per capita

Decreasing

The projected key financial indicators for each scenario for the next 10 years are presented below. Scenario 1 – Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal

Key Performance Indicators - Scenario 1 Description

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

2.3%

3.5%

4.5%

5.2%

4.9%

4.5%

4.6%

4.8%

5.3%

5.5%

82.6%

81.4%

74.2%

72.4%

71.7%

78.4%

80.7%

82.2%

83.4%

84.1%

106.4%

125.7%

157.3%

136.3%

118.3%

102.9%

103.7%

101.3%

102.0%

102.3%

0.5%

0.2%

0.1%

0.0%

SUSTAINABILITY

Operating Performance Ratio Own Source Revenue Building & Infrastructure Asset Renewal Ratio

INFRASTRUCTURE AND SERVICE MANAGEMENT Infrastructure Backlog Ratio 4.1%* 2.0%

Asset Maintenance Ratio Debt Service Ratio

100.9%

104.7%

105.4%

104.4%

103.1%

102.0%

102.6%

103.0%

104.2%

105.8%

7.0%

6.8%

3.2%

3.9%

4.5%

4.9%

4.4%

2.5%

1.3%

0.1%

891

877

864

855

849

840

828

822

816

813

EFFICIENCY

Real Operating Expenditure

(per capita) *Council has a new funding strategy to address the current backlog and decrease it in future years as detailed under Scenario 1 in this document.

Scenario 1 highlights Council’s strong future financial position and performance as indicated by the financial ratios above. All FFTF Financial indicators are meeting current industry benchmarks in all forecast years, except for the Infrastructure Backlog Ratio in 2015/16. Council adopted a new funding strategy for asset renewals, which will see this ratio significantly decrease in the first two years of the LTFP with further reduction in future years. Council forecasts no Infrastructure backlog by 2021/22. The new funding strategy is discussed in detail under Scenario 1.

33 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Sustainability Ratios: Operating Performance Ratio, Own Source Revenue Ratio and Infrastructure Backlog Ratio Operating Performance Ratio is an important financial indicator for Council. Our long-term financial sustainability is dependent upon ensuring that on average over time this indicator is positive, making sure that Council’s expenses are below its associated revenue. This indicator excludes capital income and gain or loss on sale of assets. Council's current performance ratio is above the benchmark of break even or higher, which means that Council can easily contain operating expenditure (excluding capital grants and contributions) within its operating revenue. The ratio outperforms benchmark for the entire forecast period of the LTFP with an increasing trend starting from 2015/16 onwards. Own Source Revenue Ratio measures fiscal flexibility. It is the degree of reliance on external funding sources such as operating grants and contributions. Council’s Own Source Operating Revenue Ratio remains above the benchmark of ( >60%) in all future years. Council forecasts a sufficient level of fiscal flexibility, in the event of being faced with future unforseen events.

Building & Infrastructure Asset renewals Ratio This indicator assesses Council’s rate at which buildings and infrastructure assets are being renewed against the rate at which they are depreciating. An indicator of 100% indicates that the amount spent on asset renewals equals the amount of depreciation. Council’s ratio stands at 106.4% in 2015/16.

34 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Council is continuing to focus on appropriate asset standards for renewal and maintenance.

Infrastructure and Service Management: Infrastructure Backlog Ratio, Assets Maintenance Ratio and Debt Service Ratio The Infrastructure Assets Ratios measure Council’s ability to renew and maintain its asset base to decrease the infrastructure asset backlog in future years. Asset Ratios have been incorporated into Council’s Asset Management Strategy and Asset Management Plans and are monitored within Council's Long Term Financial Plan. Council continues its commitment to maintain financial sustainability and decrease the infrastructure backlog. Infrastructure Backlog Ratio measures what proportion the backlog is against the total value of Council’s infrastructure. Council’s Infrastructure Backlog Ratio has a positive downward trend in the first 3 years, recording a decrease of 3.6% from 4.1% in 2015/16 to 0.5% in 2017/18. The infrastructure backlog will achieve the benchmark of 2% by 2016/17. Council’s Asset Maintenance Ratio is above benchmark at 100.9%. An indicator above 100% indicates Council is investing enough funds to stop the Infrastructure Backlog from growing. Council is committed to increase expenditure on asset maintenance in future to stop the increase in infrastructure backlog.

35 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Debt Service Ratio: The purpose of the Debt Service Ratio is to assess the impact of loan principal and interest repayments on the discretionary revenue of Council. In accordance with Council's Long Term Financial Plan, borrowing is only undertaken in accordance with Council's borrowing principles outlined in this document. Council's ability to service its debt remains strong for the entire period of the LTFP. As per Council’s new funding strategy, the outstanding debt for infrastructure renewal is fully discharged by the end of this financial plan from net revenue generated through leasing out Council’s new administration building for 10 years. The level of Council’s borrowing is discussed in more detail under Summary of Borrowing section of this document.

36 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Efficiency Ratio: Real Operating Expenditure per Capita

This indicator compares operational expenditure to population and is a ratio that measures efficiency. Council forecasts a downward trend in all future years of the financial plan. A decrease in the operating expenditure per capita of approximately 1% per year will be achieved while maintaining the same level of service. It is worth mentioning that this can be achieved while maintaining a strong operating surplus in all future years after funding depreciation on infrastructure assets.

37 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

Scenario 2 - Scenario without additional funding for infrastructure renewal - Key Performance Indicators Overall, financial indicators under Scenario 2 will deteriorate, even though most indicators will still meet or outperform benchmark. The main ratios impacted are Building & Infrastructure Renewal ratio and Infrastructure Backlog Ratio. Both these ratios deteriorate due to reduced funding for asset renewals. The Building & Infrastructure Renewal Ratio is expected to drop to below benchmark levels at 89.4% in 2015/16 and 92.8% in the following year. This means that assets infrastructure renewal expenditure will not keep pace with the depreciation of assets. This will contribute to a higher backlog in future years of the LTFP as shown below. The Infrastructure Backlog Ratio remains above benchmark in the first 4 years of the LTFP peaking at 5.9% in 2015/16. Under this Scenario it will take longer to reduce the backlog as there is a shortfall in asset renewals funding.

Key Performance Indicators â&#x20AC;&#x201C; Scenario 2 Description

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

SUSTAINABILITY

Operating Performance Ratio Own Source Revenue Building & Infrastructure Asset Renewal Ratio

2.4%

3.2%

3.9%

4.2%

3.8%

3.2%

3.0%

3.1%

3.4%

82.6%

81.3%

73.9%

72.0%

71.3%

78.0%

80.4%

81.9%

83.0%

83.8%

89.4%

92.8%

123.0%

122.7%

127.4%

116.6%

117.6%

112.2%

116.1%

125.0%

5.9%

5.3%

3.2%

2.8%

1.9%

1.5%

1.1%

0.7%

0.1%

0.0%

100.9%

104.6%

105.3%

104.4%

103.3%

102.3%

102.8%

103.3%

104.5%

106.1%

9.5%

11.7%

7.6%

4.5%

0.8%

0.6%

0.4%

0.3%

0.2%

0.1%

INFRASTRUCTURE AND SERVICE MANAGEMENT

Infrastructure Backlog Ratio Asset Maintenance Ratio Debt Service Ratio EFFICIENCY

Real Operating expenditure (per capita)

891

870

853

846

38 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

842

835

824

819

813

810

The impact on Building & Infrastructure Ratio and infrastructure Backlog Ratio under Scenario 2 is demonstrated below. Both ratios do not meet benchmark in earlier years of the LTFP, however are improving in the later years. The Infrastructure Backlog Ratio is on a downward trend and forecast to meet benchmark of 2% by 2019/20 from 6% in 2015/16. It will take approximately 4 years to reduce the backlog under this scenario due to insufficient funds for asset renewals in the first years of LTFP.

39 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

CONCLUSION Council’s Long Term Financial Plan ensures financial sustainability, whilst maintaining service delivery to the community, renewing ageing assets, and providing for new facilities. As part of the long term planning, Council has developed strategic asset management plans and is continuously reviewing and quantifying the renewal gap for infrastructure assets, identifying opportunities to broaden the revenue base, and reviewing its borrowing strategies. The LTFP (Scenario 1) provides for the following: 

meets all Fit for the Future KPIs by the target year 2016/17



operating surpluses in all years



affordable loan borrowing



fully catching up on the infrastructure assets backlog and provision of ongoing renewal expenditure to match depreciation



capital expenditure to provide new open space and community facilities for our growing community.

40 Ku-ring-gai Council Long Term Financial Plan 2015/16 – 2024/25 (revised June 2015)

Appendix A - LTFP Forecasts and Assumptions Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected 2015/ 16 2016/ 17 2017/ 18 2018/ 19 2019/ 20 2020/ 21 2021/ 22 2022/ 23 2023/ 24 2024/ 25 F OR ECAS TS - ACCESS ECON OM ICS Consumer Price Index ( CPI)

2.9%

2.4%

Average Weekly Ord Time Earnings

2.5%

3.4%

3.6%

BBSW - 90 Day

2.7%

I N COM E AS S UM PTI ON S R ates Rates Pegging Forecast

2.4%

3.8%

3.2%

3.3%

3.2%

3.3%

Rates Growth

0.8%

0.7%

Total R ates Change F ees and Charges

3.2%

4.5%

3.9%

4.0%

3.9%

4.0%

2.9%

3.0%

2.6%

Domestic Waste Price Increase

8.5%

2.5%

0.0%

Pensioner Rebate Growth

1.7%

1.6%

1.5%

Stormwater Management Charge (rates growth only)

0.7%

0.6%

0.5%

Trade Waste - Annual Charges (DWM increase rate)

8.5%

2.5%

0.0%

3.2%

4.1%

4.3%

Recurrent Grants (CPI)

2.9%

2.4%

Capital Grants (CPI)

2.9%

2.4%

11,587

12,922

9,981

9,938

2,787

5,648

3.2%

3.3%

3.8%

3.7%

3.8%

3.7%

9.5%

10.0%

10.5%

11.0%

11.5%

2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%

2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 3.0%

2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.7%

2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.6%

2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.7%

2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.6%

3.9%

4.8%

5.0%

I nterest I ncome Interest Income - Rate Grants I ncome

Proceeds from Assets S ales Asset Sales EXPEN DI TUR E ASSUMPTI ON S Labour Costs Super - new scheme compulsory increase phased in. [Old Scheme employees at set rates] M aterial & Contracts - Operational Expenditure Operating Expenses (CPI ) Street Lighting Charges (IPART Decision) Building Electricity Charges (IPART) Water Charges (IPART Determination) Fire Levy (CPI) Planning Levy (CPI ) M aterials & Contracts - Capital Expenditure B orrowing Costs Loan Rate (135 bps over 90 BBSW)

41 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

Appendix B - Scenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal 10 Year Financial Plan for the Years ending 30 June 2025

Projected Income Statement Scenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal

$'000

Projected 2015/16

Projected 2016/17

Projected 2017/18

Projected 2018/19

Projected 2019/20

Projected 2020/21

Projected 2021/22

Projected 2022/23

Projected 2023/24

Projected 2024/25

Income from Continuing Operations Rates & Annual Charges

78,387

81,683

84,589

87,227

90,025

92,925

95,929

98,856

101,963

105,414

User Charges & Fees

16,991

17,894

18,596

19,043

19,512

19,993

20,487

20,994

21,497

22,047

4,183

4,114

3,535

3,454

3,649

3,338

3,485

4,094

4,902

5,425

10,723

13,188

13,898

14,285

13,801

14,203

14,624

15,050

15,497

15,958

Interest & Investment Revenue Other Revenues Grants & Contributions for Operating Purposes Grants & Contributions for Capital Purposes

7,566

7,188

6,733

6,370

6,931

7,075

7,219

7,399

7,527

7,684

18,162

20,039

63,240

26,085

24,489

20,087

21,189

20,091

19,616

18,974

Other Income: Net gains from the disposal of assets

Total Income from Continuing Operations Total Income excluding Proceeds from Asset Sales & Capital Income

5,587

5,422

8,781

7,438

2,237

4,148

141,599

149,528

199,372

163,902

160,644

161,769

162,933

166,484

171,002

175,502

117,850

124,067

127,351

130,379

133,918

137,534

141,744

146,393

151,386

156,528

37,534

38,770

40,232

41,750

43,285

44,876

46,725

48,767

51,065

53,640

1,093

1,127

1,052

905

620

350

133

35,617

32,620

33,484

33,395

35,252

36,156

37,114

38,066

Expenses from Continuing Operations Employee Benefits & On-Costs Borrowing Costs Materials & Contracts

39,043

40,045

Depreciation & Amortisation

19,155

19,349

19,863

22,017

22,252

22,802

23,227

23,564

23,637

23,796

Other Expenses

16,302

20,654

21,175

21,573

22,117

22,675

23,248

23,834

24,407

24,992

4,628

5,120

4,609

4,264

4,305

4,678

4,039

4,305

4,440

4,893

Total Expenses from Continuing Operations

114,329

117,640

120,415

123,904

127,831

131,537

134,486

138,546

142,592

147,366

Net Operating Result for the Year Net Operating Result for the year before Grants & Contributions provided for Capital Purposes

27,270

31,888

78,957

39,998

32,813

30,232

28,447

27,938

28,410

28,136

9,108

11,849

15,717

13,913

8,324

10,145

7,258

7,847

8,794

9,162

Other Operational Projects Expenses

42 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

10 Year Financial Plan for the Years ending 30 June 2025

Projected Balance Sheet Scenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal

$ '000

Projected

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

ASSETS Current Assets Cash & Cash Equivalents

9,464

3,065

17,515

32,553

43,682

Investments

58,251

28,436

57,500

42,597

45,655

50,907

57,500

Receivables

9,852

10,575

16,328

11,628

11,601

11,209

11,600

11,769

12,046

12,286

121

111

114

120

123

126

129

133

136

1,414

1,460

1,482

1,481

1,542

1,588

1,610

1,655

1,697

1,748

Inventories Other Non-Current Assets Held for Sale

7,500

1,200

2,500

550

1,500

86,602

74,662

48,859

71,272

57,360

58,575

64,242

88,569

103,930

115,353

Investments

34,211

Receivables

226

235

244

251

259

268

276

285

294

304

1,001,873

1,043,815

1,149,724

1,161,513

1,203,274

1,228,789

1,247,901

1,252,092

1,266,560

1,284,631

Total Current Assets

Non-Current Assets

Infrastructure, Property, Plant & Equipment Intangible Assets

805

732

743

657

589

534

491

456

428

429

Total Non-Current Assets

1,037,115

1,078,993

1,184,922

1,196,632

1,238,333

1,263,802

1,282,879

1,287,044

1,301,493

1,319,575

TOTAL ASSETS

1,123,717

1,153,655

1,233,781

1,267,905

1,295,693

1,322,377

1,347,122

1,375,613

1,405,423

1,434,928

15,745

16,298

16,779

LIABILITIES Current Liabilities Payables

13,650

14,283

15,932

14,231

15,282

15,356

15,590

Borrowings

1,560

1,069

1,026

672

360

408

Provisions

11,691

12,276

12,890

13,534

14,211

14,922

15,668

16,451

17,274

18,137

Total Current Liabilities

26,902

27,627

29,847

28,437

29,853

30,638

31,666

32,196

33,572

34,917

Non-Current Liabilities Payables Borrowings Provisions

23,808

21,116

20,048

15,565

9,105

4,751

517

333

350

367

386

405

425

447

469

492

Total Non-Current Liabilities

24,142

21,466

20,415

15,951

9,510

5,177

447

469

492

517

TOTAL LIABILITIES

51,043

49,093

50,262

44,388

39,363

35,814

32,112

32,665

34,065

35,434

1,072,673

1,104,561

1,183,519

1,223,517

1,256,330

1,286,562

1,315,010

1,342,948

1,371,358

1,399,494

1,082,006

Net Assets EQUITY Retained Earnings

755,185

787,073

866,031

906,029

938,842

969,074

997,522

1,025,460

1,053,870

Revaluation Reserves

317,488

Council Equity Interest

1,072,673

1,104,561

1,183,519

1,223,517

1,256,330

1,286,562

1,315,010

1,342,948

1,371,358

1,399,494

Total Equity

1,072,673

1,104,561

1,183,519

1,223,517

1,256,330

1,286,562

1,315,010

1,342,948

1,371,358

1,399,494

43 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

10 Year Financial Plan for the Years ending 30 June 2025

Projected Cash Flow Statement Scenario 1 - Fit for the Future (FFTF) Base Case Scenario with additional funding for infrastructure renewal Projected

Projected

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

Rates & Annual Charges

77,465

80,950

78,828

91,919

90,044

93,308

95,530

98,678

101,677

105,164

User Charges & Fees

16,991

17,894

18,596

19,043

19,512

19,993

20,487

20,994

21,497

22,047

4,183

4,114

33,350

- 25,610

18,552

280

- 1,766

- 2,500

4,902

5,425

25,728

27,227

69,973

32,455

31,420

27,162

28,408

27,490

27,143

26,658

$ '000

Cash Flows from Operating Activities Receipts:

Investment & Interest Revenue Received Grants & Contributions Bonds, Deposits, Retention amounts received

10,744

13,152

13,873

14,286

13,734

14,154

14,598

15,002

15,452

15,904

Employee Benefits & On-Costs

- 36,853

- 38,169

- 39,600

- 41,086

- 42,589

- 44,144

- 45,959

- 47,960

- 50,219

- 52,751

Materials & Contracts

- 35,174

- 31,987

- 31,835

- 35,096

- 34,201

- 36,082

- 36,880

- 37,912

- 38,490

- 39,564

- 355

- 241

- 170

- 116

- 70

- 44

- 28

- 10

Other Payments:

Borrowing Costs Bonds, Deposits, Retention amounts refunded Other

- 20,930

- 25,774

- 25,784

- 25,837

- 26,422

- 27,353

- 27,287

- 28,139

- 28,847

- 29,885

41,798

47,166

117,231

29,958

69,980

47,274

47,103

45,643

53,115

52,998

11,587

12,922

9,981

9,938

2,787

5,648

Purchase of Infrastructure, Property, Plant & Equipment

- 47,669

- 62,418

- 128,283

- 34,270

- 65,445

- 48,262

- 42,296

- 27,720

- 38,077

- 41,868

Net Cash provided in Investing Activities

- 36,082

- 49,496

- 118,302

- 24,332

- 62,658

- 42,614

- 42,296

- 27,720

- 38,077

- 41,868

Net Cash provided (or used) in Operating Activities Cash Flows from Investing Activities Receipts: Sale of Infrastructure, Property, Plant & Equipment Payments:

Cash Flows from Financing Activities Receipts: Proceeds from Borrowings & Advances

Payments: Repayments of Borrowings & Advances

- 2,228

- 4,070

- 1,994

- 5,626

- 7,322

- 4,660

- 4,808

- 408

Net Cash provided in Financing Activities

- 2,228

- 4,070

- 1,994

- 5,626

- 7,322

- 4,660

- 4,808

- 408

Net Increase/(Decrease) in Cash & Cash Equivalents

3,488

- 6,399

- 3,065

17,515

15,038

11,129

Plus: Cash & Cash Equivalents - beginning of year

5,976

9,464

3,065

17,515

32,553

Cash & Cash Equivalents - end of year Plus: Investments on hand - end of year

Total Cash, Cash Equivalents & Investments

9,464

3,065

17,515

32,553

43,682

92,462

62,647

91,711

76,808

79,866

85,118

91,712

91,711

101,926

95,527

62,647

91,711

76,808

79,866

85,118

109,227

124,265

135,394

44 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

Appendix C - Scenario 2 â&#x20AC;&#x201C; Scenario without additional funding for Infrastructure renewal 10 Year Financial Plan for the Years ending 30 June 2025

Projected Income Statement Scenario 2 - Scenario without additional funding for infrastructure renewal

$'000

Projected 2015/16

Projected 2016/17

Projected 2017/18

Projected 2018/19

Projected 2019/20

Projected 2020/21

Projected 2021/22

Projected 2022/23

Projected 2023/24

Projected 2024/25

Income from Continuing Operations Rates & Annual Charges

78,387

81,683

84,589

87,227

90,025

92,925

95,929

98,856

101,963

105,414

User Charges & Fees

16,991

17,894

18,596

19,043

19,512

19,993

20,487

20,994

21,497

22,047

4,162

4,062

3,468

3,388

3,586

3,270

3,399

3,879

4,412

4,523

10,723

10,909

11,242

11,524

10,939

11,235

11,546

11,859

12,188

12,527

Interest & Investment Revenue Other Revenues Grants & Contributions for Operating Purposes Grants & Contributions for Capital Purposes

7,566

7,188

6,733

6,370

6,931

7,075

7,219

7,399

7,527

7,684

18,162

20,039

63,240

26,085

24,489

20,087

21,189

20,091

19,616

18,974

Other Income: Net gains from the disposal of assets

Total Income from Continuing Operations Total Income excluding Proceeds from Asset Sales & Capital Income

5,587

5,422

8,781

7,438

2,237

4,148

141,578

147,197

196,649

161,075

157,719

158,733

159,769

163,078

167,203

171,169

117,829

121,736

124,628

127,552

130,993

134,498

138,580

142,987

147,587

152,195

37,534

38,770

40,232

41,750

43,285

44,876

46,725

48,767

51,065

53,640

1,096

649

170

116

35,617

32,620

33,484

33,395

35,252

36,156

37,114

38,066

Expenses from Continuing Operations Employee Benefits & On-Costs Borrowing Costs Materials & Contracts

39,043

40,045

Depreciation & Amortisation

19,155

19,368

19,854

21,979

22,214

22,763

23,188

23,525

23,598

23,758

Other Expenses

16,302

20,133

20,642

21,164

21,698

22,246

22,808

23,384

23,946

24,520

4,628

5,120

4,609

4,264

4,305

4,678

4,039

4,305

4,440

4,893

Total Expenses from Continuing Operations

114,332

116,660

118,991

122,668

126,824

130,763

133,902

138,057

142,092

146,856

Net Operating Result for the Year Net Operating Result for the year before Grants & Contributions provided for Capital Purposes

27,246

30,537

77,658

38,407

30,895

27,970

25,867

25,021

25,111

24,313

9,084

10,498

14,418

12,322

6,406

7,883

4,678

4,930

5,495

5,339

Other Operational Projects Expenses

45 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

10 Year Financial Plan for the Years ending 30 June 2025

Projected Balance Sheet Scenario 2 - Scenario without additional funding for infrastructure renewal

$ '000

Projected

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

ASSETS Current Assets Cash & Cash Equivalents

8,322

1,562

11,374

19,046

18,600

Investments

58,251

27,058

56,320

41,507

44,247

48,970

56,320

Receivables

9,849

10,272

15,974

11,260

11,221

10,815

11,188

11,326

11,552

11,723

121

111

114

120

123

126

129

133

136

1,414

1,447

1,468

1,471

1,531

1,577

1,599

1,644

1,686

1,736

Inventories Other Non-Current Assets Held for Sale

7,500

1,200

2,500

550

1,500

85,457

72,843

47,115

69,715

55,879

56,762

61,884

80,793

88,737

88,516

Investments

34,211

Receivables

226

235

244

251

259

268

276

285

294

304

994,076

1,025,671

1,130,390

1,144,291

1,190,186

1,217,729

1,239,151

1,245,841

1,264,448

1,290,394

Total Current Assets Non-Current Assets

Infrastructure, Property, Plant & Equipment Intangible Assets

805

732

743

657

589

534

491

456

428

429

Total Non-Current Assets

1,029,318

1,060,849

1,165,588

1,179,410

1,225,245

1,252,742

1,274,129

1,280,793

1,299,381

1,325,338

TOTAL ASSETS

1,114,775

1,133,692

1,212,702

1,249,125

1,281,125

1,309,503

1,336,013

1,361,586

1,388,118

1,413,854

15,660

16,235

16,769

LIABILITIES Current Liabilities Payables

13,525

13,985

15,774

14,153

15,233

15,271

15,506

Borrowings

1,560

1,069

1,026

672

360

408

Provisions

11,691

12,276

12,890

13,534

14,211

14,922

15,668

16,451

17,274

18,137

Total Current Liabilities

26,777

27,330

29,690

28,360

29,804

30,553

31,582

32,111

33,508

34,907

Non-Current Liabilities Payables Borrowings Provisions

15,016

2,826

1,800

1,128

768

408

517

333

350

367

386

405

425

447

469

492

Total Non-Current Liabilities

15,349

3,176

2,168

1,514

1,173

833

447

469

492

517

TOTAL LIABILITIES

42,126

30,506

31,858

29,873

30,977

31,386

32,028

32,580

34,001

35,424

1,072,649

1,103,186

1,180,845

1,219,252

1,250,147

1,278,117

1,303,985

1,329,006

1,354,117

1,378,430

1,060,942

Net Assets EQUITY Retained Earnings

755,161

785,698

863,357

901,764

932,659

960,629

986,497

1,011,518

1,036,629

Revaluation Reserves

317,488

Council Equity Interest

1,072,649

1,103,186

1,180,845

1,219,252

1,250,147

1,278,117

1,303,985

1,329,006

1,354,117

1,378,430

Total Equity

1,072,649

1,103,186

1,180,845

1,219,252

1,250,147

1,278,117

1,303,985

1,329,006

1,354,117

1,378,430

46 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

10 Year Financial Plan for the Years ending 30 June 2025

Projected Cash Flow Statement Scenario 2 - Scenario without additional funding for infrastructure renewal Projected

Projected

2015/16

2016/17

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

Rates & Annual Charges

77,467

81,251

78,879

91,933

90,057

93,323

95,546

98,710

101,728

105,233

User Charges & Fees

16,991

17,894

18,596

19,043

19,512

19,993

20,487

20,994

21,497

22,047

4,162

4,062

34,661

- 25,874

18,399

530

- 1,324

- 3,471

4,412

4,523

25,728

27,227

69,973

32,455

31,420

27,162

28,408

27,490

27,143

26,658

$ '000

Cash Flows from Operating Activities Receipts:

Investment & Interest Revenue Received Grants & Contributions Bonds, Deposits, Retention amounts received

10,744

10,886

11,218

11,522

10,872

11,186

11,521

11,811

12,143

12,473

Employee Benefits & On-Costs

- 36,853

- 38,169

- 39,600

- 41,086

- 42,589

- 44,144

- 45,959

- 47,960

- 50,219

- 52,751

Materials & Contracts

- 35,299

- 32,160

- 31,695

- 35,016

- 34,172

- 36,118

- 36,879

- 37,913

- 38,469

- 39,510

- 355

- 241

- 170

- 116

- 70

- 44

- 28

- 10

Other Payments:

Borrowing Costs Bonds, Deposits, Retention amounts refunded Other

- 20,930

- 25,253

- 25,251

- 25,428

- 26,003

- 26,924

- 26,847

- 27,689

- 28,386

- 29,413

41,655

45,497

116,611

27,433

67,426

44,964

44,926

41,961

49,849

49,260

11,587

12,922

9,981

9,938

2,787

5,648

Purchase of Infrastructure, Property, Plant & Equipment

- 39,872

- 52,090

- 127,084

- 36,344

- 69,541

- 50,251

- 44,567

- 30,180

- 42,177

- 49,705

Net Cash provided in Investing Activities

- 28,285

- 39,168

- 117,103

- 26,406

- 66,754

- 44,603

- 44,567

- 30,180

- 42,177

- 49,705

Net Cash provided (or used) in Operating Activities Cash Flows from Investing Activities Receipts: Sale of Infrastructure, Property, Plant & Equipment Payments:

Cash Flows from Financing Activities Receipts: Proceeds from Borrowings & Advances

Payments: Repayments of Borrowings & Advances

- 11,024

- 13,090

- 1,069

- 1,026

- 672

- 360

- 408

Net Cash provided in Financing Activities

- 11,024

- 13,090

- 1,069

- 1,026

- 672

- 360

- 408

Net Increase/(Decrease) in Cash & Cash Equivalents

2,346

- 6,761

- 1,562

11,374

7,672

- 445

Plus: Cash & Cash Equivalents - beginning of year

5,976

8,322

1,562

11,374

19,046

Cash & Cash Equivalents - end of year Plus: Investments on hand - end of year

Total Cash, Cash Equivalents & Investments

8,322

1,562

11,374

19,046

18,601

92,462

61,269

90,531

75,718

78,458

83,181

90,531

100,785

94,024

61,269

90,531

75,718

78,458

83,181

101,905

109,577

109,132

47 Ku-ring-gai Council Long Term Financial Plan 2015/16 â&#x20AC;&#x201C; 2024/25 (revised June 2015)

June 2015