Adopted Financial Vision strives for financial sustainability

Adopted Financial Vision strives for financial sustainability

Published on 10 September 2024

The Financial Vision has been proactively created to support Council’s obligations towards financial sustainability.  It clearly outlines for the next Councillor group the parameters for the development of the Council Plan 2025-2029 and the accompanying Financial Plan.

Mayor, Cr Brian Hood, said that for many years and especially throughout this term, Council has been grappling with financial difficulties due to the sharp increase in costs of service delivery and construction; the small and dispersed population base; a very limited range of additional revenue options; recovery from numerous costly natural disasters; and a low-rate base since amalgamation.

“Our Shire has been adversely impacted by rising inflation affecting the delivery of services and infrastructure, cost shifting from other levels of government, and extraordinary costs associated with the recovery from recent flooding and storm events. As a rural council we have limited opportunities for alternate income streams, and the financial sustainability of all Councils is of concern to many,” said Cr Hood.

In 2024, Council submitted to two major inquiries initiated by Federal and State governments to assess the financial sustainability and service delivery standards of local governments – these inquiries are expected to release findings in late 2024/early 2025.

In the 2024/25 Budget, Council determined to implement reductions to operational budgets by $1.50 million, while seeking to minimise the impact on service delivery. The Budget also identified that an annual cash shortfall of approximately $4.0 million is projected from 2025/26 onward.

Councillors and Officers have conducted a number of workshops over the last 12 months to review available levers to improve the financial sustainability of Council. 

Council hosted an online survey inviting ratepayers, residents and visitors to provide feedback and share their priorities regarding service delivery, community infrastructure renewal or upgrades, and the potential for a rate increase – providing vital feedback to the input of the Financial Vision.

As the scope of capital works programs have already been curtailed to renewal works and the tight cash environment constrains the ability to service any additional borrowings, the options to address the cash shortfall are the further reduction of operation costs through service reductions and changes and seeking a rate variation from the Essential Services Commission, or a combination of the two.

“We really appreciate the feedback provided by the community on the Financial Vision, both online and in person. We provided a significant amount of background information on our engagement platform with detail on our service delivery, including a service catalogue and map, service summaries, videos outlining departments, rates information and financial modelling,” said Cr Hood.

The community engagement identified that 61.6% of the community were open to a rate variation above the rate cap (at various percentages), and 38.44% of community were not open to a rate variation. 

“The difficult task facing councillors and staff over the last few months was to find $4 million in savings for the 2025/26 financial year, and ensuring they were permanent savings or increased revenue.  We considered many options, avoiding the need for additional borrowings. We have determined to generate $1.56 million of additional revenue from rates and $2.44 million from operational and service delivery savings,” said Cr Hood.

“To ensure our financial sustainability, we have made the difficult decision to make an application to the Essential Services Commission for a rate cap variation of 10% including the applicable rate cap for the 2025/26 financial year.”

“We appreciate that this will not be a popular decision with all, and there will be concerns from many in the community about their ability to pay. To support some of the most vulnerable in our community, we will increase Council’s rebate to assist pensioners from $21 to $42. Ratepayers continue to have the ability to apply for special payment arrangements based on financial hardship.”

“The detail of the operational and service delivery changes earmarked to generate $2.44 million in savings will be determined over the coming months, as Council creates a Council Plan 2025-29,” said Cr Hood.

“We will continue to advocate to the State Government for a review of its funding of Local Government, along with the rating and revenue system in Victoria that leaves rural councils at a significant disadvantage,” said Cr Hood.

The Financial Vision and the current and projected financial outlook of Council must be a key consideration in the development of the Council Plan 2025-29 and Financial Plan 2025-34. These plans must be adopted in accordance with deliberative engagement practices by no later than 31 October 2025 in accordance with the Local Government Act. Council will begin the process of making an application to the Essential Services Commission (ESC), which is required to be submitted between 1 February to 31 March and the ESC must notify Council of their findings within 2 months of receipt of the application.

The full resolution adopted by Council was –

That Council: 

Expresses its appreciation of the work undertaken by officers and community contributions to the Financial Vision project;  Acknowledges the serious financial constraints facing Victorian Local Governments and commits to continued collaboration and advocacy with State and Federal Governments to ensure the long-term financial sustainability of the sector and Hepburn Shire Council;  Notes the important role that Local Governments play in the delivery of services and infrastructure within communities;  Adopts the Financial Vision as attached;  Notes that the Financial Vision, the current and projected financial outlook of Council must be a key consideration in the development of the Council Plan 2025-2029 and Financial Plan 2025-2034, and that these plans must be adopted in accordance with its deliberative engagement practices and by no later than 31 October 2025 per the Local Government Act;  Notes recent advocacy measures taken by Council with submissions to the recent federal and state inquires on financial sustainability for local government; 

Revenue 

Acknowledges the sensitivities inherent in any decision to increase rates, especially taking into account ratepayers’ capacity to pay;  Notes that property-based taxation, such as Council rates, may not be the best taxation system to take into account ratepayers’ capacity to pay and requests that the Mayor and Chief Executive Officer write to the State Minister for Local Government calling for a review of the Rating and Revenue systems of Victorian Councils;  Authorises the Chief Executive Officer to prepare and submit an application to the Essential Services Commission for a rate cap variation applicable for the 2025/26 financial year of 10% including the applicable rate cap to be announced by the Minister for Local Government (raising approximately $1.56 million);  For the 2025/26 financial year and subject to a successful application for a rate cap variation, resolves to double the current rebate on rate charges for pensioners who qualify under the State Government’s Pensioner Rate Remission scheme. This initiative will increase Councils rebate from $21 to $42 to assist pensioners in their rate payments;  Undertake a communications campaign to inform ratepayers that they may be eligible for the State Government Municipal Rates Concession of 50 per cent deduction on council rates up to a yearly maximum of $259.50 (2024-25) for those eligible, as well as the additional Hepburn Shire Council rebate; Authorises the Chief Executive Officer to prepare and submit an application to the Essential Services Commission for a rate cap variation for the 2025/26 financial year that ensures that waste service charges comply with the new Local Government Ministerial guidelines, noting that this will be revenue neutral to Council and of no net cost to ratepayers; 

Services 

Requests that the Chief Executive Officer work with Councillors to analyse all services offered by Council, so as to ensure that the Council Plan 2025-2029 and Budget 2025-26 identify operational saving and/or new revenue opportunities (estimated at $2.44 million per annum) needed to realise the Financial Vision;  Take into account operational savings, services changes and new revenue opportunities in the development of the 2025/26 budget, and by 30 June 2025;

Other 

Utilises the adopted Financial Vision as the basis for the updating of the Financial Plan; Authorise the Chief Executive Officer to make administrative amendments to the Financial Vision, if required, that does not change the intent of the document; and Requests that the Mayor and Chief Executive Officer write to the Federal and State Ministers for Local Government, and the Ripon and Macedon local members detailing the outcome of this resolution.  Investigates options for managing short-term accommodation in light of proposed Short Stay Levy Bill 2024. This includes assessing potential revenue opportunities, the impacts on local housing markets and local amenity with the aim of ensuring benefits for the Hepburn Shire community. Continue to explore the leasing or sale, of available land, if any, to obtain social benefits (including but not limited too social and affordable housing land use opportunities) and/or financial returns for Hepburn Shire, ensuring compliance with Councils acquisition and disposal of land policy. Continue to explore options that diversifies funding sources by exploring partnerships and other models with values-aligned organisations, and additionally, examines opportunities for shared service models with neighbouring councils and other entities to increase operational efficiency.