New Council listening to concerns about finances
Published on 28 February 2022
With a commitment to the community of improved transparency and accountability, Council provides this summary of our financial position and the hard decisions Council needs to make to reverse this situation.
Snowy Monaro Regional Council (SMRC) has been operating with a gradually increasing deficit since 2016. A deficit of $24.8m was reported in the FY2020/2021 Financial Statements. This has now reached the point where a strong financial plan is required to provide sustainable and efficient services.
How did this happen?
Quite simply, the amount of revenue coming in is insufficient to continue to provide the current range and level of services for the community. Council has an income consisting of 40% rates and charges, with the other 60% generated by grants – meaning a strong reliance on grants to provide essential services.
The rates increase is capped by the State Government at 0.8% for FY2021/2022, which will yield a total revenue increase of $130,000. At the same time, Council’s basic operating costs are forecast to increase by more than $966,000. This means the permissible rate cap increase will only cover approximately 14% of the anticipated increase in costs.
As a part of the group of councils identified by the Office of Local Government as regional town/city councils, rates in the Snowy Monaro are at the lower end (refer Charts 1-3) of the range. However, the average area of councils in this group is 4,446km2, whereas our region is 15,163km2. Council needs to provide a proportionately larger amount of infrastructure for the size of the population, meaning much higher costs per ratepayer.
Council’s largest spending area, and arguably the most important service to the community, is roads.
SMRC has four times the length of road to maintain per residence/ farm compared to most regional councils.
The combination of low income and a higher proportion of infrastructure for its population size means that the Council has not had the funds to maintain our infrastructure.
Fast facts:
- Investment required to replace the current road network (based on the lifespan) is $9.5million per year. Funding available is $3.8million per year.
- Investment required for road maintenance is $8.3million per year. Funding available in FY2020/2021 was $5million.
- Investment required for buildings maintenance is $2.6million per year. Funding available in FY2020/2021was $1.8million.
- Investment required for general infrastructure maintenance is $3.7million per year. Funding available in FY2020/2021 was $484,000.
The current difference between required asset replacements and maintenance and funding available is $12.5million. In addition to this, an $11million allowance, mandated by the NSW Government’s EPA, has been allocated for landfill remediation. This expenditure is to be spread over the next 10 years.
What is the solution?
Part of the solution is critically reviewing how the Council operates. Are projects planned well? Are the right people with the right tools and skills in the right places?
Over the past 12 months, a review of management levels has been completed, resulting in a reduction of managerial positions across the organisation. Service reviews of roads and governance services have been undertaken. Open spaces (eg parks/gardens), information technology, fleet, development applications and building control are all currently under review.
Savings of $5.9million have been achieved to date. This has slowed the rate of deficit increase, but not entirely addressed the overall underlying financial problems of the Council.
To provide the necessary investment for roads, buildings and infrastructure maintenance from existing revenue, Council would need to stop providing important services such as community support services, libraries, aged care, pools, economic development, tourism, communications and strategic planning; a clearly unacceptable proposition.
The Commonwealth Government has implemented a scheme to equalise the disadvantages of living in rural communities. However the level of funding contributed by Commonwealth Government to date has been less than half of what is needed.
What next?
Over the next few months, the Councillors will map out a series of options for how the financial situation can be resolved. There will be no easy answers. In the short term, the new Councillors will have to make some hard decisions about funds allocation and the provision of services to the community.
Mayor Narelle Davis confirmed, “Our financial situation is very serious. We have to live within our means in the short-term and have a strong plan for monitoring our financial position and improving it over time.
“It is hard to see how rural communities with huge infrastructure such as the Snowy Monaro can stay financially viable under the current funding model. This funding model is designed to keep rural councils poor.
“As well as working with the Councillors and staff on a path forward, this Council will be advocating strongly to the Commonwealth and NSW Governments for the other levels of Government to do more to ensure that all communities can have a reasonable level of service at a reasonable cost in rates,” she said.
Supporting charts follow, noting:
- Average residential rates 2019-20
- Average farmland rates 2019-20
- Average business rates 2019-20
- Operating revenue (excluding capital grants) available for general activities versus operating expenses
Chart 1: Average residential rates 2019-20
Chart 2: Average farmland rates 2019-20
Chart 3: Average business rates 2019-20
Chart 4: Operating revenue (excluding capital grants) available for general activities versus operating expenses ($000’s) [2009-22]
