FAQs - Long Term Financial Plan
Provide a transparent account of our financial position and forecasts to the community
Identify the financial risks and opportunities arising in the short, medium and long term
Measure the financial impacts of change through sensitivity testing of key assumptions
Model the financial effects of our other strategic plans and initiatives including other resourcing strategies (asset management and workforce management)
Provide early warning of potential risks to our financial sustainability and provide a framework for decision making and corrective action
Provide a basis to make sound strategic decisions to best meet community expectations and aspirations.
Using the draft 2024/25 Operational Plan and Budget as year one of the ten-year model
Updating assumptions and projections based on most recently available data
Updating the environmental scan and articulating current financial and economic challenges facing Council
Updating the model for changes in timing and/or cost of specific events or projects.
In the three years between 2020/21 and 2022/23, inflation (CPI) has increased by 15.9% while Council’s average rates have fallen by 0.6% (including the discontinuation of Council’s Infrastructure levy in 2022/23). This has created a 16.5% cumulative gap between Council’s cost growth and the growth in Council’s major revenue source.
It is becoming far more expensive to renew and repair Council’s assets, with this cost rising from $12.8m in 2017/18 to $19.9m in 2022/23 (an increase of $7.1m or 55% over 5 years), in part because of the significant cost increases in material and labour.
The Council was required to absorb $20.6m in lost revenue due to the COVID-19 pandemic. COVID-19 losses came about from Council providing rent relief, supporting community and sporting groups and businesses, closing facilities, waiving fees and from changes in consumer behaviour.
User pays revenue streams have partially recovered in 2022/23 and 2023/24 but have not returned to pre-pandemic levels. In addition, there is no way to predict whether the behavioural changes arising from three years of lockdowns and restriction periods (such as working from home) will be permanent or temporary.
In June 2015 an organisational review was approved, resulting in reduced numbers of Directors and Managers, and savings of $2.0m/year without a change in service standards.
A staff cost efficiency dividend equating to $3.25 million in 2024/25, ensuring the budget for labour costs is not unrealistically high while continuing to deliver for the community.
Ceased the loss-making Loop Bus services from 1 July 2022 due to very low patronage, saving $345,000 in 2022/23 (the 2024/25 saving will be higher due to inflation).
Resolved to close two Out of School Hours (OOSH) children’s care services, at Bales Park in June 2022 and Chatswood at December 2023 – due to falling demand (as more parents worked from home), and increased competition from both not-for-profit and commercial providers which will continue to provide local services.
Reduce the costs of our events program from 2020/21, by discontinuing small festivals and switching from Vivid to Culture Bites (with a 2024/25 benefit of $181,021). Council continues to attract significant grant funding for this program.
Outsourcing the Devonshire Street child care service to a private operator, which will increase Council’s revenue and reduce historic and projected future losses.
For the financial year 2023/24, moving to a zero-based budgeting approach, whereby Managers cannot assume any operational expenditure levels for the coming year and must build and justify their budgets.
Working to win significant grants from other levels of government to allow Council to continue to deliver programs and projects without driving Council further into deficit. These grants totalled more than $16.0m in 2022/23.
In 2023/24, increasing general fees and charges by 7.0% (in line with inflation to address administration costs to Council).
As part of the CONNECT project, replacing 18 disparate technology platforms with a modern single, cloud-based platform, making it easier for staff to find, record, share and use information which empowers their service to the community and other customers.
The preferred and assumed budget based on 15% rate rise commencing in 2024/25, comprises a 10% Special Rate Variation (SRV), and the standard 5% pate peg approved for all Councils by the Independent Pricing and Regulatory Tribunal (IPART), to underpin our financial sustainability. It will provide ongoing budget surpluses, strengthening our reserves for community projects and asset renewal, and provide a buffer for future financial shocks, extreme weather and growth and enhanced services and assets. We’ve also set ourselves a $2m efficiency target to achieve more savings.
An alternative, non-preferred budget if IPART rejects Council's SRV proposal, rates income would only be allowed to rise by the annual rate peg (5% for 2024/25). This would result in reduced services, no surplus for additional projects or growth, and no buffer for shocks or weather events. To ensure sustainability, this scenario requires Council to reduce services by $2m and find $500,000 of additional revenue annually.
What is a Long Term Financial Plan?
A Long Term Financial Plan (LTFP) analyses the Council’s forward financial capacity to deliver the strategies, initiatives and works identified in the Community Strategic Plan, Our Future Willoughby 2032. The objectives of the LTFP are to:
What is the difference between this draft Long Term Financial Plan 2024-2034 and the January 2024 LTFP?
The January 2024 out of cycle Long Term Financial Plan (LTFP) was constructed to thoroughly model and canvass Council’s adopted Special Rate Variation (SRV) proposal, showing the impact of the SRV on Council’s financial path, the impact on average ratepayers and to highlight productivity and cost containment measures. Year one of the January 2024 LTFP (the starting point for forward projections), was the 2023/24 Budget.
This draft Long Term Financial Plan 2024-2034 updates the January 2024 LTFP by:
What are the cost increase and financial challenges which are impacting the Council as it heads into 2024/25?
The Council finds itself entering 2024/25 with significant financial sustainability headwinds, primarily due to cost increases outpacing income, namely:
How has the Council been managing these financial challenges in recent times?
Until the last financial year, Council has consistently delivered operating surpluses while delivering services and new projects, along with maintaining assets. We’ve been making difficult but necessary decisions to reduce costs and have successfully sought external grants and funds to supplement our revenue. Council has acted with care and diligence in our financial management and forecasting. We have used, and continually monitored, the best available data to ensure we understand our financial position, now and into the future.
Historic measures:
Council has been able to quantify around $10.5-11.0 million in savings, which will apply in the financial year 2024/25, as a result of productivity and cost containment work which has been undertaken since 2014/15. This includes the following:
Other measures are also in place to find efficiencies to support financial sustainability, including:
In recent years, overall community satisfaction with Willoughby City Council has remained high, indicating the Council’s ongoing commitment to high-quality service delivery.
The 2022 Community Perception Survey, prepared by independent researchers Micromex, found that overall satisfaction with council stood at 95% in 2022. This satisfaction level is well above the 89% overall satisfaction level recorded by Micromex for 11 comparable metropolitan LGAs.
How does the Council intend to manage financial issues in coming years?
The draft Long Term Financial Plan 2024-2034 proposes a range of measures to build on the Council’s work in recent years, and to ensure Council can continue to deliver high-quality services, maintain our assets and parks and deliver significant new community projects over the next decade.
To address historical and forecast future challenges to financial sustainability, on 5 February 2024 Council applied to the Independent Pricing and Regulatory Tribunal (IPART) for a 15% rate increase, which is proposed to commence in 2024/25. This increase includes the NSW Government’s 5% rate peg announced in November 2023, and a 10% Special rate variation (SRV). IPART is expected to finalise a decision on this application in May 2024, after considering community submissions.
As part of the Special Rate Variation (SRV) proposal, Council has committed to deliver a $2.0m efficiency target, to be met via expenditure savings and finding new non-rate revenue in 2024/25. These savings and revenue measures would then remain in Council’s budget on an ongoing basis.
We are proposing to meet this target in 2024/25, through new non-rate revenue measures. Council is committed to further expenditure savings in future years to mitigate any reduction in non-rate revenue sources and/or to further improve financial sustainability. Additional expenditure saving benefits are forecast to flow from Council’s Service Review Framework, to commence in 2024/25.
In addition, Council will continue to advocate against decisions by other levels of government which cause an unreasonable cost burden for the Council and Willoughby community. This includes an unexpected $487,000 increase in the NSW Government’s Emergency Services Levy in 2023/24, a $100,000 increase to run the September 2024 election and a $59,000 (61%) increase in the cost of the Audit Office of NSW annual audit fee for the 2023/24 financial year. Reduced funding for library services and the imposition of pool safety compliance responsibilities are other recent examples.
This draft Plan outlines two potential future rating scenarios:
What is a Special Rate Variation?
Councils in NSW are mandated by law to only increase rates income by the annual "Rate Peg” set by the Independent Pricing and Regulatory Tribunal (IPART). By IPART's own analysis, over time the Rate Peg increases have failed to keep pace with rising costs. If a council wishes to increase rates by more than the Rate Peg they must undertake a rigorous and extensive application to IPART for a Special Rate Variation.
Special Rate Variations are an important means of providing additional funding to councils to allow them to deliver services and infrastructure that the community has requested, and the council is unable to fund within its existing revenue.
A council may need a Special Rate Variation (SRV) to either maintain current service levels or to increase service levels. A SRV requires an application to the Independent Pricing and Regulatory Tribunal (IPART) https://www.ipart.nsw.gov.au/
The draft LTFP says that Council may implement a Special Rate Variation (SRV) in 2024/25, is this subject to consultation?
No, Council has already undertaken and finalised extensive community engagement activity on a SRV between September 2023 and January 2024. This activity included delivering 30,067 letters to ratepayers, issuing 73,000 emails, generated 229,500 social media post impressions, receiving 2,349 survey responses including 1,585 comments, and hosting 14 community information sessions. Following this engagement activity, Council resolved in January 2024 to apply for a SRV. Council is currently waiting for a decision from IPART on its SRV application. If the SRV is approved, it will be implemented in the 2024/25 financial year.
What would be the outcome if the Independent Pricing and Regulatory Tribunal (IPART) approve the Special Rate Variation application?
This is Council’s preferred scenario which enables the Council to continue to provide a noticeable uplift in public area maintenance, recover from recent inflation impacts and continue to provide other highly valued services by increasing rates by 15.0% from 1 July 2024.
The other benefits of this approach are that Council will be able to:
• Deliver surpluses all ten years between 2024/25 and 2033/34, with an average annual surplus of $5.16m. These surpluses, subject to future financial shocks, could be re-invested in community services and projects
• Increase responsiveness to resident and business enquiries
• Increase Council’s ability to absorb future financial, extreme weather and growth shocks
• Provide capacity to maintain and renew community assets
• Provide a stable work environment for staff attraction and retention.
Council will allocate an additional $2.0 million a year to allow it to invest in additional cleaning, care and beautification projects in parks, cycling and walking routes and town centres, and planting programs to boost Council's urban tree canopy. These initiatives have been strong priorities in this term of Council and feature among the services rated as most important in Council’s Community Perception Survey.
What would be the likely outcome if the Independent Pricing and Regulatory Tribunal (IPART) rejects the Special Rate Variation application?
This non-preferred LTFP scenario will lead to a number of significant disadvantages, including both an overall reduction in services to the community and the Council being in a ten-year financially fragile state. The Council will record in a balanced (or "break even") average Operating Result in the ten years to 2033/34, recording six slim surpluses and four deficits between 2024/25 and 2033/34.
The advantage of this approach is that rates will stay low and in line with NSW Government rate peg. Council will try to match income with expenditure, while noting it will be in deficit in four out of the ten years between 2024/25 and 2033/34.
The disadvantage of this scenario is that it will involve:
• A significant reduction in services provided by Council. While Councillors have been briefed on a range of potential service reductions, the actual proposed service reductions would only be made public as part of the usual budget process and after consultation with any affected staff.
• No accumulation of funds for increased community services, projects or future growth.
• No buffer to manage future extreme weather events or financial shocks, including Council being unable to meet its 2-4% Operating Performance Ratio target. In fact, Council will not meet the Office of Local Government (OLG) minimum Operating Performance Ratio of 0% in any of the ten years. The average Operating Performance Ratio under this scenario will be -0.8%.
• The Unrestricted Current Ratio would not meet the OLG minimum target of 1.5 times in 8 of the ten years. It will however stay above the minimum target of 1 times, meaning Council can meet obligations, though this scenario would need close monitoring to ensure financial sustainability.
• Given the need to reduce services, and the internal disruption caused in driving this outcome, a work environment which is less conducive to staff attraction and retention.
Given the above, this no-SRV scenario does not represent Council’s preferred future financial state, but would be implemented if the application for a SRV was unsuccessful.
What would be the impact of the Special Rate Variation on residential rates?
A 15% variation would result in Council’s minimum residential rate (paid by the majority of residential ratepayers) increasing by $132 a year in 2024/25. The average residential rate will be increased by $163 a year in 2024/25 with the 15% rate increase.
How much does the Council spend on infrastructure assets in the draft LTFP?
During the 10 year period of the draft Long Term Financial Plan 2024-2034, under either preferred (SRV) Scenario, or the non-preferred (No SRV) scenario, Council will spend $338.9 million on infrastructure assets (an average of $33.9 million per year), comprised of $244.6 million on renewals to existing assets and $94.3 million on new assets.
The breakdown of asset expenditure by major infrastructure categories can be found in the draft Long Term Financial Plan 2024-2034 page 42 and 43 and Figure 6.2.
How will Willoughby’s residential rates compare to other nearby Councils, after the Special Rate Variation?
The Council currently has a comparatively low residential rates cost, with our average residential rate (in 2020/21) being the second lowest among all councils who are part of the Northern Sydney Regional Organisation of Councils (NSROC).
This means that, even with a Special Rate Variation, the Council’s average residential rate is likely to remain close to the average rating cost among all NSROC councils.
How does Willoughby’s Special Rate Variation compare to rate increases being sought by, or obtained, by other Sydney councils?
The proposed 15% variation is modest compared to rate increases either proposed by, or approved for, a number of other Sydney councils – indicating that the financial issues facing Willoughby are common to many other councils.
For instance, Strathfield is proposing a 93% increase over four years, Canada Bay is proposing a 32.52% increase over four years and Hornsby is proposing a 28% increase over four years. In recent years, councils to receive Special Rate Variation approvals for rate increases include Canterbury Bankstown (36.34%), Georges River (32.6%) and Hunters Hill (26%).
Given existing cost of living issues, why are you considering increasing our rates?
Unfortunately, the Council – just like community members – is being significantly impacted by inflation and cost increase issues.
The Council will continue to examine ways to increase efficiencies and reduce costs, along with generate additional non-rate revenue sources and advocate against unreasonable cost burdens imposed by other levels of government.
However, the draft Long Term Financial Plan 2024-2034 finds that – alongside these actions - a Special Rate Variation needs to be examined to allow the Council to have a sustainable financial future and be able to deliver high-quality services and renew community assets to benchmark levels.