Mildura Rural City Council’s 2007–2008 budget brings home the benefits of Council’s long term financial planning to the community. Council took on long term financial planning with the production of its first ten year Strategic Financial Model in 2003. This allowed Council to set strategies for rating, asset renewal and debt management that would set Council on the way to financial sustainability.
As a result, over the last four years, Council has been able to cap rate rises at five per cent at a time when many Victorian municipalities are recording rises well in excess of this.
Council is predicting a surplus of $8.53 million this year, including $7 million capital grants funding. This has been possible through the reining in of operational expenditure, with a $1.7 million, or 7.34 per cent decrease on last financial year. This decrease has been achieved through efficiencies in operations, rather than cuts to services.
Under Section 126 of the Local Government Act (1989), Victorian Councils are required to have a Strategic Resource Plan (SRP) for at least the next four financial years. The 2007–2011 SRP is Mildura’s fourth, as the plan is revised each financial year.
In conjunction with Council’s Strategic Financial Modelling, the SRP is a starting point for annual budgets. It establishes a detailed financial framework over a five year period and combines and integrates financial strategies to achieve a planned outcome.
Mildura CEO Phil Pearce said Council’s ten year Financial Model’s dynamic nature allows Council to test a number of strategies for asset renewal and ensure community infrastructure and services could be delivered over the long term in a financially responsible manner.
“Because of the model’s dynamic nature, Council can test a limitless range of ‘what if’ scenarios to measure financial impact over future periods,” he said. “Small changes in any part of the model flow through to all other relevant parts. Effects on cash flow, bottom line, balance sheet and so on can therefore be predicted and planned for.”
In formulating the 2007–2011 SRP, Council adopted the following key assumptions:
- debt level targeted at 40 per cent of total rate revenue in the long term
- rates to increase by five per cent or CPI plus two per cent, whichever is greater in 2006–2007 and each financial year thereafter
- a one percent reduction in operating expenditure in 2006–2007, then maintained at CPI increases thereafter
- an additional $1 million expenditure allocated for the Nowingi (toxic waste site proposed by the State Government) Fighting Fund.
Phil Pearce said it is important to note that the SRP is not about deciding what individual projects Council will spend its funds on.
“Long term financial planning is about the various financial strategies that, in effect, will determine the amount of funds that Council will have at its discretion to apply,” he said. “The SRP is typically prepared in conjunction with the Council Plan and ensures the affordability of that document. It is intended to establish a framework against which Council can benchmark its performance and strive to exceed these targets”.
For further information contact Council’s General Manager Corporate Services, Cheryl Wood, on (03) 5018 8161.
