Redland City Council Budget 2019/20

 

There are so many components of a Budget that none can be considered without the other and no councillor will be happy with the entire budget. What councillors have to ensure  is the financial sustainability of the council while delivering the required services.

This year the rate rise for the average residential property is 2.66% which is slightly higher than Redlands City Council’s blended  CPI of  2.5% price increase.

2.66% does not include water wastewater or refuse (utilities) for the same average property

2.84% includes Council’s average water, wastewater and refuse charges for an average 1a residential owner occupied property.

The Redland City Council Blended CPI is calculated using a weighted methodology and reflects the fact that Council’s costs increase in line with the

 

·       agreed Enterprise Bargaining Agreement – fixed salary increase independent of the CPI

·       capital works program – influenced more by construction indices than the CPI

·       Consumer Price Index for the non-construction operational goods and services expenditure.

 
I have expanded on the words I spoke on Budget Day as I am endeavouring to explain the budget process  so all the impacts and what decisions are based upon are transparent and accountable.

 

Quick Budget Overview

Components of a Budget?

This Budget book has 12 agenda items and each gives information that leads to the final Budget outcomes.

Link to Redland City Council web page with the agenda for the Budget Special meeting, Thursday 27 June 2019

file:///C:/Users/crwendybo/Downloads/Minutes_Special_Budget_Meeting_27_June_2019%20(3).pdf

 

Council has the responsibility to deliver a budget that is financially sustainable and delivers the necessary services to the whole of the City so all aspects are carefully considered with the overall impact :- affordability to the City.

Am I satisfied with all, aspects, no I am not however I would like to quote a definition of integrity by Brene Brown.

“Integrity is choosing courage over comfort, choosing what is right over what is fun, fast and easy.  And practicing your morals, not just preaching them.” 

Keeping this in mind, though I am disappointed and frustrated on points I will support this budget as it is a budget that has been compiled with impacts on residents considered, longer-term financial sustainability for Council in mind, and will keep the services and business as usual (BAU) being delivered.   

This budget I believe has that integrity.  For this, I thank the officers who have diligently developed improved processes with transparency and good governance to ensure priority has been given to projects for the benefit of the whole of our City. 

This, of course, means all councillors have had some projects that we lobbied for, not included, for me in my division that includes lighting projects, footpath works, drainage and foreshore works.   However, though disappointed, if I can see on paper a formula has been used to prioritise projects fairly across the City I can accept the selection, as a Budget is for the whole of City best outcomes.

This budget not only focused on priorities but also on efficiencies.  Departments have driven change to ensure efficiencies were found and cutbacks were made, again based on priorities for what the whole of City requires.

I thank the officers as similar to Councilors, Officers have their passions about aspects of their work and would love to see more tree planting, more footpaths etc. whatever their particular area delivers… however across Council, each and every department has made sacrifices in their budgets plus found efficiencies to ensure council and Councilors were all working towards reducing costs and hence a more sustainable financial future.

Financial sustainability

Link to financial strategy – file:///C:/Users/crwendybo/Downloads/Minutes_Special_Budget_Meeting_27_June_2019%20(3).pdf

Previously the financial long term pathway caused me extreme concern as I did not have confidence Council was on a sustainable financial pathway. 

The Operational deficient had actually increased to $15 million and spending more than what is being earned in any budget is not responsible or good financial planning.  Yes, it can happen for perhaps a couple of years but to continue is irresponsible.

Over the past two years, every council department under the leadership of the CEO and Executive Leadership Group has changed this financial pathway and importantly the culture, and Council has this year presented a budget that remains delivering the essential services plus importantly turns around an emerging pattern of operating deficits to present a balanced budget.

This is very rewarding to be able to present a true balanced budget as the last budget for this term of council.

Nothing is more important than financial sustainability so I am very thankful as the new budget process changes that have reassured me.   I believe however that Council needs to sit down and work out future strategies and visions to ensure going forward financial sustainability is utmost in our minds and there is at least a reliable 5-year forecast. 

The figures in the budget forecasts at present are really just fillers based on presumed future year capital work programs so to cover these costs there has to be either rate increases ro debt.  This means the loan amounts in the table fo forecast haven’t been planned though they look very alarming on paper with debt blowing out to $114,000 million.   I also think it is a very stretched target to have no increase in employee number for ten years, but this keeps the table balanced and all need to be more vindicated.

 

Debt policy

file:///C:/Users/crwendybo/Downloads/Minutes_Special_Budget_Meeting_27_June_2019%20(3).pdf

In 5.3 Debt policy, 2019-2020 statement you can read that Council is committed to only using long term borrowing for capital works and when the interest and debt principal repayments can be serviced with all relevant ratios and measure maintained. 

Loans are aligned for specific projects rather than pooled for transparency and accountability and the life of the loan cannot exceed the life of the related works.

Plus council will use existing constrained reserves for capital first.

This Policy gives reassurance to residents that Debt is carefully considered, plus,in 2016, Council under the CFO commenced paying interest yearly which of course is another saving.

I asked councils CFO to explain the forecasted debt shown on page 21 Attachment 1 as these figures did concern me.  The explanation was the figures are aligned with predicted capital expenditure in years to come where Council may use debt to cover costs. If predictions do not happen this debt naturally will not occur.

Going forward Council does have a few large projects on the books such as our new Sports precinct in Heinemann Road and it is the intergenerational projects such as this one that debt may be used.

You can see in the tables debt at present is $41m but in the table debt is shown to be $114m in the ten year forecast, which is very rubbery and just forecasts.(page 21 of special budget meeting agenda)

 

   Water and Waste

The most important vital services to be delivered by Council has to be Water and Waste, as without these services meeting health regulations any City would be shut down.

I have had concerns regarding these areas as with an ever-increasing population, spare capacity in the City’s ageing pipes, supplying new infrastructure, the pressure of increasing waste and the reduction and disposal of waste is also an increasing challenge for not only engineering solutions but also financially.

I welcome the review that is currently happening as this will give answers to my concern of required new works and ongoing maintenance to ensure the continuation of quality service to an ever-expanding population and for the sustainability of the business.

This might forecast some more tough future financial decisions but as the quote said…Integrity is choosing right over what is fun, fast and easy.  I look forward to these future discussions and transparent outcomes.

While Councillors ensured that essential services were to be “business as usual”, the impact of the cost of delivering services and projects was always uppermost in our minds when making decisions.

 

State Government land valuations

A challenging impact this year on rates was the first State Gov. land valuations in three years.  Rates by legislation are based on these valuations… so after three years, there was a sharp increase significantly across the City on average 10%.    Councillors were very cognizant of the impact this would have and directed our finance team to mitigate this impact.

To reduce the impact changes were made to the rating categories and the formula, which the rate in the dollar that is used, to have a fairer and more palatable rate increase.

For an example, I have again compared various properties to previous years. 

One property that received a land valuation increase of $60,000, a variance of 10.53% without any changes to the “rate in the dollar” this property would have had a rate increase of 6.85% due to the changes by our decisions the increase will be is 2.90% – that is a difference of nearly 4% our changes made to the impact of the valuation increases.

I have stated this example as I wanted residents to be reassured both Councillors and council officers worked hard to offset the land valuation.

Of course, some residents who didn’t receive an increase in land valuations may receive no rate rise.  It is impossible to introduce any changes that have the same impact on all properties.

With the work council calculated to alleviate the land valuation increase and increasing costs, Council has been able to keep the rate increase on an average residential home to 2.84% including the State Governments charges for bulk water and emergency levy.

Of note, some Councils we would normally benchmark rate increases :-

1.     currently have administrators

2.     may not have had valuations by the State Government (GCCC for example), or weren’t as high valuation increase – which impacts on the increase, … unless it is completely offset (hard to offset an average 10.97% valuation increase).

The link below gives the average movement at LGA level for the last few years, this might be of interest :

http://Historical trends in land valuations | Environment, land and water | Queensland Government

 

What CPI does Redland City use?

The Redland City Council Blended CPI of 2.5%  is calculated using a weighted methodology and reflects the fact that Council’s costs increase in line with the

·       agreed Enterprise Bargaining Agreement – fixed salary increase independent of the CPI

·       capital works program – influenced more by construction indices than the CPI

·       Consumer Price Index for non-construction operational goods and services expenditure.

Councils Financial Planning Unit has undertaken a benchmarking exercise to provide insight into the inflationary indices applied by other South East Qld Councils.

The following table outlines the results:

 

To confirm, our Redland City Council Blended CPI is calculated using a weighted methodology and reflects the fact that Council’s costs increase in line with the

·       agreed Enterprise Bargaining Agreement – fixed salary increase independent of the CPI

·       capital works program – influenced more by construction indices than the CPI

·       Consumer Price Index for non-construction operational goods and services expenditure.

Rate in the dollar

Not only did council change the “rate in the dollar” but also the categories to ensure and increase in number of residential properties were included in the 1a category to assist mitigate the land values impacts.  There is no blanket approach but each rather there are 28 differential rating categories with each one having a different rate in the dollar. Council reviews these categories each year and this year there were seven new categories for the Aquatic Paradise Canal Estate. Council continued a principal based differential general rate model whereby the rate in the dollar for all rating categories, excluding rating category 1a, is determined by the multiplier applied against the rate in the dollar for residential owner-occupied rating category 1a.  This methodology maintains consistency across financial years.

An example of rating categories and the difference in rate in the dollar per category.

We also considered our Commercial properties and they have been treated the same residential by offsetting their valuations. There has been a consistent treatment for all rating categories.

 

 

Water costs

Councillors also discussed in depth the challenge of increasing water prices. In the budget book, there is also a table that explains this year’s water pricing.  Water access charge and the Retail Redland City Council controlled parts of the water costs have increased by 1.91%

The State government charges the Council for water, and this costs approximately $4,.000,000- per year, a rise of 6.80%.

 

file:///C:/Users/crwendybo/Downloads/Minutes_Special_Budget_Meeting_27_June_2019%20(3).pdf

Council has absorbed the increases since 2015 but this was not sustainable as the State Gov. by 2020/21 wants all councils to have a common water price.  As Redlands is still the lowest in SEQ there will be price rises for the next two years also until Redlands reaches the common price.

Rates and charges fund approx. 31% of the year’s full budget which is $305 million. Often people compare rate increases to other Cities but what is actually in their CAPEX and OPEX programs should also be compared and their revenue streams.  One should only compare apples to apples and not oranges. 

 Redlands is the only City in South East Queensland, that is a City of islands, and the costs involved in providing infrastructure, services and transport to these communities is a continual challenge to Council and also the State Government.   Redlands also has a coastal foreshore of 325 kilometers, more than other coastal councils and the foreshore erosion is another challenge to name just one in regards to our foreshore.

Redlands also doesn’t have a large commercial or industrial sector that offsets the pressure on residential rates…Gold Coast Council has a Tourism levy on businesses for example.

It is very difficult to compare a whole budget and even sections of budgets.  Some Councils report differentially so it is hard even to get the same figures as I have found when attempting to do so in the past.

One section of the Budget that everyone is also interested in is the CAPEX program which delivers what our residents see, such as park infrastructure and roads, so there is always an interest in the programed works.

As I stated previously Councillors are all disappointed that some of their various divisional projects did not make it “above the line” however the Capital works Program this year at $58 million is a realistic and hopefully a deliverable program.

 This year there is again a forecast carryover of works of approx. $20 million, to add to the predicted 2019/2020 works program.

 It is tough for Councillors to agree on a smaller works program as everyone wants to deliver to our Redlands community however it is totally financially irresponsible and unrealistic to year after year go out with a media release based on statements such as “the largest CAPEX program ever” if it isn’t going to be delivered and there are continual carry over projects to the next financial year.

Agreeing on a smaller deliverable CAPEX, as I previously stated, made for some tough calls for Councillors who had lobbied for projects in their divisions and when some projects fell below the line due to Citywide prioritization, gave all Councillors disappointments and frustrations….but agreeing on a smaller CAPEX to me, brings me back to the integrity quote and in regards to the budget document, doing what is right and not what is fun and easy.

I will continue the conversations on various projects and look forward to hopefully in next year’s budget having more funds allocated to projects Citywide in areas as footpaths, lighting and foreshore work.

Division 1 Projects

Across the City there are various CAPEX projects that affect only specific local residents and I am pleased to announce in Division 1, Wellington Point/ Ormiston that funds have been budgeted for various

  • Road re-seals,
  • Bus stops,
  • Plantings along Hilliard’s Creek to increase the Wildlife Corridor 
  • Park infrastructure. Hilliard’s Street Park, Liner Street and Bibury and …

like the Three Paddocks Park delivered this year which has been a huge success with local families I am excited about the delivery of the park infrastructure in APEX Park and Raby Bay Esplanade on a larger scale.

APEX Park preliminary design

A small project….having a seat and table placed in Skinner Park next to the playground is one of my favorites.  I know the number of Grandparents that use that park and they will now be able to extend their visits with their grandchildren as they will have a seat and be able to relax while watching and playing with their children.…small project but immense community impact and very satisfying.

I have been assured the funding is in the budget for CCTV Wellington Point after receiving the recent State funding also.  This has been a long hard marathon to reach this point but I can reassure residents the time is nearly here.  It is very rewarding to have come to this stage of the project.

Council has two main working areas within the budget CAPEX with the concrete and building and Operational works…..this is a program of works also of great interest to residents as it contains

·       Fire management across our City which our officers are extremely diligent maintaining and the budget has been increased in this area….

·       Coastal Hazard work

·       Dredging – one work program alone for dredging this year at Redland Bay is costing $800,000

·       And importantly for the community passions …their bush care programs, tree plantings, weed control etc.

Again there are various works that councillor’s would have liked to have seen in the OPEX program of works however as we were determined to deliver a responsible budget we have all made sacrifices.

Each year for the past 4 or 5 years I have lobbied for the Tourist information Centre to be returned to Raby Bay Harbor area and today I visited the new Tourist Information Centre and it is efficient and wonderful!  A great job has been done in the planning and layout and I would like to thank the officers involved.

Another favorite of mine is the library bus….I can’t not mention the new bus at the budget meeting after lobbying to save the bus for a number of years and then to securing funding each year. This morning I was able to see the new bus and it looks great.  Thought totally different this project has evolved to deliver a very serviceable vehicle that will be able to expand community services beyond the normal library services.

I thought it was very fitting and so very rewarding that on Budget day I was able to see these two projects completed!

As your representative, I would like to take this opportunity to say that I will support this budget as it is responsible, however that is the reason why I am supporting it this year.

I do not support the forecasts and will continue to not only keep advocating for works in my division but across the City at Budget Reviews and workshops as there are several points, as I have stated that, I am “not happy about” and require many more discussions.

 

 

A couple of projects important to residents and myself I haven’t mentioned yet….City wide our residents are very passionate, and rightly so as we all live in the most beautiful area, about our environment.   At present council is working on our strategic Wildlife Connection Corridors and I am concerned that funds have not been specifically allocated for the work to include the Wildlife Connection Corridors Amendment package into the City Plan  or for the Heritage  Amendment Package to be included in the City Plan.  

Both of these amendments packages are vital to protect what I hear continually in the community..the love of our environment both in our urban and rural areas and the need to protect such areas.  Also Redlands Heritage is so amazing dating back to the Quandamooka people, through to our farmers and early farming history, then the War and Redlands place in history during these times through to now.   Our community want our heritage preserved.

Willard’s Farm is one such example where future use planning has also not progressed though monies were allocated in last year’s budget.  Now this project is being included in a holistic planning approach with the Birkdale land, my concern with this project is there doesn’t appear to be sufficient funds for protection work to prevent further deterioration on the home at Willard’s Farm so while the waiting continues for the Birkdale land to be finalised.  As a community I don’t believe we want to lose valuable aspects or the house completely falls into an even worst state of affairs. 

Funds required to complete necessary reports on Birkdale land also haven’t been included.  Admittedly council doesn’t know yet what the gap will be between the existing Federal reports and what is required but as these reports and the previous Amendments are necessary, to reassure our community what they have stated very loudly they value will be protected, I will be monitoring closely this space and discussing at future budget reviews… as I will also be in relation to the highly valued Bligh Street conservation land.

 

As I previously stated the Redlands community highly value our environment and the Environment separate charge has increased this year by $6.44 to $122.00 per annum.  This levy covers both operational and capital works and included but isn’t limited to:-

·       Bushland and fire management

·       Foreshore and catchment rehabilitation and maintenance

·       Aquatic weed control

·       Track and tail maintenance and repairs

·       Koala habitat restoration

·       Environmental education.

Pensioner rebate

This year the Pensioner rebate has stayed the same, the last rise of $5-00 was in the 2016/17 budget. The discussion concerning the pensioner rebate surrounded the facts on Redlands ageing population.

As displayed in the chart below, all age groups above 45 (in particular 50 through to 75 years) have grown faster than the greater South east Queensland.

·       Analysis of the five year age groups of Redland City in 2016 compared to South East Queensland shows that there was a similar proportion of people in the younger age groups (under 15) and a higher proportion of people in the older age groups (65+).

 

·       From 2011 to 2016, Redland City’s population increased by 8,349 people (6.0%). This represents an average annual population change of 1.18% per year over the period.

 

·       The largest changes in age structure in Redland City’s between 2011 and 2016 were in the age groups:

  • 65 to 69 (+2,320 persons)
  • 70 to 74 (+1,949 persons)
  • 55 to 59 (+1,213 persons)
  • 75 to 79 (+1,128 persons)

In this 2019/2020 Budget on page 16 of the budget booklet operating statement, the Rates discount and rebates given to Pensioner presently in total is $3,333,000-.  With an ageing population council is aware that not only is the rebate amount to be considered but also the number of people that will be eligible for the rebates.

It was decided this year, due to the increasing edible population to have the rebates remain the same.

The concessions available to eligible pensioners on the differential General Rate for 2019-20 are:

·       For rate payers in receipt of a maximum pension     $335.00 per financial year

·       For ratepayers NOT in receipt of maximum pension  $167.50 per financial year

Redlands SES Administration separate charge is again set at $7-00 and covers the cost of a SES Administrator and support to deliver operational costs of the Redlands SES to the order of $484,000.

Redlands Investment Corporation

As page 36 of the budget book states “In recent years, Council has looked to shift the burden from ratepayers and diversify its portfolio with the creation of a wholly owned subsidiary Redlands Investment Corporation (RIC). Returns from RIC are classified as investing and not operating.

In the Statement of Comprehensive Income and the Long Term Financial forecast table in Councils Financial Strategy on page 51, it can be seen there are no predicted dividends to Council in the next ten years. This is an unacceptable position as RIC was established as an alternate source to alleviate pressure on rates.  I am requesting a frank and accountable discussion on the continuance of RIC as the reason for establishing RIC has not been successful.

In Conclusion.

In conclusion – yes I voted to approve this budget as I believe it is a budget that is the final turn around for council’s finances to ensure there is sustainable financial pathway forward.   In recent years there have been budgets I didn’t vote for as, as I said then, they were not financially responsible budgets for Redlands City Council’s sustainable financial future. 

There were warnings given back then that large CAPEX Programs etc. couldn’t continue and it has now under the new processes taken two years to, in my opinion, get to a position that is financially sustainable and responsible.   

“Integrity is choosing courage over comfort, choosing what is right over what is fun, fast and easy.  And practicing your morals, not just preaching them.”

I look forward to further work being completed on long term financial strategies, increasing communication regarding both CAPEX and OPEX work programs, this I hope will also include a Vision for the City to ensure Redlands is sustainable in all areas going forward as I feel now that financially council has turned a path, with increasing governance and priorities being involved in all decisions.

With all aspects considered…council has $2.6 billion in assets, $40 million in debt hence we are in a very strong financial position.

We hold more cash than debt.

I again sincerely thank the council officers who have worked so hard to deliver the budget Councillors requested that would be responsible, delivering the required services and projects while keeping in the mind the impact of rate rises on our residents.

The impact on individual households of the State Government’s land valuations and Council’s increase of 2.66% is going to be varied.  Areas with larger valuation increase will be affected more and knowing this Councillor as always considered the final increase.  Many households are struggling under the current financial stresses as are many of our local small businesses.  To be able to deliver a budget with no rises would be wonderful but not possible.

I am satisfied that we are delivering a final budget for a term of council that is responsible and conservative, I have thought of the community’s money as it was my own, and also importantly ensured that  Council is in a strong financial position for the future and with those end goals in mind, I support this budget.