On Monday 16 March 2020, the Victorian Government declared a State of Emergency in Victoria due to the serious risk to public health posed by COVID-19.
On 7 April 2020, Council endorsed a $7.3 million COVID-19 Response and Recovery Package, which contains a mix of financial concessions and new initiatives for the Glen Eira community. This package aimed to provide immediate financial relief to those most at risk and to mitigate the impact of COVID-19 on the health and wellbeing of residents, particularly those more vulnerable and those already experiencing disadvantage.
The Package also provided immediate and ongoing support to local businesses, local community groups and sporting clubs and contributed to their ongoing viability post COVID-19. The Council’s Relief and Recovery Package has been designed to mitigate risks to our community and local economy arising from the impact of COVID-19 and ensures Council is providing an appropriate co-ordinated response.
In the 2019–20 financial year, it was resourced through re-prioritisation of existing budgets and the reallocation of resources (staffing and budgetary) from activities now unable to progress due to COVID-19. The value of initiatives was estimated at $3.2 million for 2019–20 and this has been reflected in Council’s financial position.
Our financial position remains sound. We’ve included detailed information about our financial performance in the Financial Statements and Performance Statement sections of the Financial Report.
Our 2019–20 operating position was a $10.94 million surplus, which is $7.37 million less than our 2019–20 budget. Factors that contributed to this include:
Our total revenue for the 2019–20 financial year was $183.85 million, $3.99 million unfavourable to budget (two per cent). The main factors contributing to the variance included:
- reduced user fees of $5.87 million; and
- increased capital grants of $1.86 million.
Rates and charges revenue was in-line with the 2019–20 Annual Budget. Our rates and charges are still much lower than the average of all inner metropolitan councils (we are the second lowest).
Statutory fees and fines were favourable to budget by $462,000, mainly due to higher than anticipated revenue from parking infringements of $1.0 million. There was also lower than budgeted planning permit income due to COVID-19 ($312,000) and a refund of the Food Act and public health fees to support businesses impacted by the pandemic ($396,000).
User fees were lower than anticipated due to COVID-19 restrictions, mainly related to the closure of Glen Eira Leisure facilities ($3.19 million), reduced fees received for Family and Children’s services ($1.4 million) and Council initiatives in response to the pandemic ($354,000).
Grants — operating were favourable to budget by $959,000 due to:
- early receipt of the 2020–21 payment from the Victorian Grants Commission. The amount of $2.08 million (50 per cent of the 2020–21 grants) was received for financial assistance and local roads funding during the 2019–20 financial year;
- increased subsidy funding of Family Day Care and Early Learning centres mainly due to government initiatives during the pandemic ($978,000); and
- the above favourable variances were offset by reduced residential aged care income due to vacant beds ($2.11 million).
Grants — capital was favourable to budget by $1.86 million due to early receipt of income for future projects.
Refer to Figure 1.
Our total expenditure for 2019–20 was $172.9 million (two per cent unfavourable to budget). Contributing factors to this unfavourable variance:
Materials and services — unfavourable variance of $2.09 million due to agency staff used to fill temporary staff vacancies ($1.0 million), increased costs of waste processing, recycling contractor costs and waste disposal ($993,000) and funding of COVID-19 Community Action Grants ($325,000).
Other expenses — unfavourable variance of $3.52 million relating to the provision for parking infringement debtors ($3.01 million) and court lodgement fees ($523,000).
These unfavourable variances are partly offset by employee costs favourable variance of $4.38 million. This is due partially to the closure of Glen Eira Leisure facilities during the COVID-19 pandemic ($1.1 million) and other savings due to staff vacancies and reduced recruitment costs.
For more information see note 1 starting on page 10 of the Financial Report.
Refer to Figure 2.
FIGURE 1. 2019–20 SOURCES OF INCOME (%)
Figure 2. 2019–20 Categories of Expenditure (%)
During 2019–20 we expended $39.3 million on capital works. Variance to budget for total capital works was $6.75 million across the following activities:
Buildings — we underspent by $952,000 in 2019–20 due to works that were not complete at Murrumbeena Park Pavilion, Murrumbeena. This will be carried forward into 2020–21.
Plant, machinery and equipment — was under budget due to a delay in receipt of ordered vehicles and plant as a result of COVID-19 ($977,000). This will be carried forward into 2020–21.
Roads — was underspent by $1.05 million mainly due to progress of works at Coorigil Road, Carnegie $976,000 and Neville Street, Carnegie $186,000. These funds will be carried forward to the 2020–21 financial year.
Streetscape works — relates to development and beautification of Council’s streets and shopping precincts. These projects are under budget by $959,000 due to works delayed by COVID-19 restrictions ($470,000) and the narrow nature strip program $321,000. Funding for these projects will be carried forward to the 2020–21 year.
Carried forward expenditure from 2018–19 — under budget by $1.76 million and relates to projects that were either incomplete or not commenced due to planning issues, weather delays, extended consultation etc. Council approved carried forward projects of $4.77 million in July 2019 of which $4.24 million was spent as at 30 June 2020.
Refer to Figure 3.
ASSET EXPENDITURE CATEGORIES
The major asset expenditure categories of capital works were:
- buildings $9.39 million;
- plant and equipment $5.48 million;
- roads $6.02 million;
- footpaths $2.27 million;
- drainage $3.97 million;
- open space and recreation $5.29 million;
- car parks $883,000;
- streetscape works $1.77 million; and
- projects carried forward from 2018–19 $4.24 million.
For more information see note 1.2 starting on page 13 of the Financial Report.
The $39.30 million comprised:
- renewal 38.29 per cent ($15.05 million);
- upgrade 34.46 per cent ($13.54 million);
- expansion 6.86 per cent ($2.7 million); and
- new expenditure 20.39 per cent ($8.02 million).
Refer to Figure 4.
FIGURE 3. CAPITAL WORKS EXPENDITURE 2009–10 TO 2019–20 ($M)
Figure 4. 2019–20 Capital Works expenditure — by type (%)
To bridge the infrastructure gap, we invested $28.59 million in renewing, upgrading and expanding assets in 2019–20. This was funded from operations.
Our asset renewal ratio, measured by comparing asset renewal and upgrade expenditure to depreciation was 120 per cent.
Refer to Figure 5.
Our net asset base increased from $2,220 million to $2,263 million. This was mostly due to a decrease in the value of our fixed assets from $2,205 million to $2,251 million.
The movement in our property, infrastructure, plant and equipment value is due to:
- the impact of our assets revaluation;
- the net result of the Capital Works Program;
- asset depreciation; and
- the sale of property, plant and equipment.
Refer to Figure 6.
Working capital is the excess of current assets above current liabilities. This calculation recognises that although we have current assets, some are already committed to settling liabilities in the following 12 months. Therefore, they’re not available for discretionary spending.
Cash and cash equivalents (including financial assets) was $87.74 million as at 30 June 2020. This is enough to cover our short-term restricted liabilities, which include $40.41 million in trust funds and aged care deposits, and $24.2 million in Public Open Space Reserve funds.
We must ensure we maintain working capital and we have enough cash reserves to meet normal cash flow requirements. We’ll continue to have a large investment in capital works projects. The liquidity ratio expresses our level of current assets for meeting current liabilities.
We should hold enough cash to cover restricted assets, such as residential aged care deposits, Public Open Space Reserve, contract deposits and the Fire Services Property Levy.
Refer to Figure 7.
FIGURE 5. ASSET RENEWAL RATIO (INCLUDING UPGRADE) 2015–16 TO 2019–20 (%)
FIGURE 6. PROPERTY, INFRASTRUCTURE, PLANT AND EQUIPMENT AND INTANGIBLES 2015–16 TO 2019–20 ($M)
FIGURE 7. LIQUIDITY RATIO (WORKING CAPITAL) 2015–16 TO 2019–20 (%)
PUBLIC OPEN SPACE STRATEGY
Contributions to the Public Open Space Reserve during the financial year relate to public open space levies that were received under Section 18 of the Subdivision Act 1988.
We received contribution income of $8.71 million during the 2019–20 year. This can be used to fund projects that meet the conditions of the Open Space Strategy, which is mainly focused on increasing open space in identified gap areas. We spent $3.1 million on projects that met the conditions and the remainder will be held in the reserve for future years.
Services that we deliver for every $100 of rates and charges revenue (2019–2020):
- Capital Works Program $35.36
- Planning for growth and the future $4.83
- Urban maintenance $13.01
- Recycling and waste $12.82
- Services for families and the community $6.84
- Services for the aged $5.33
- Parks and recreation $15.68
- Glen Eira Libraries $4.05
- Community safety $0.75
- Cultural services $1.33
Please note: this represents the services that are funded by rates and charges, including the waste charge.
We’ve prepared a 2020–21 Annual Budget, which is aligned to the vision in the Council and Community Plan 2017–2021. It seeks to maintain and improve services and infrastructure as well as deliver projects and services that are valued by our community and do this within the rate increase mandated by the State Government. The strategy in the 2020–21 Annual Budget is to:
- mitigate risks to our community and local economy arising from the impact of the COVID-19 pandemic;
- manage finances appropriately within the constraints set by the State Government’s Rate Capping regime;
- renew and upgrade our ageing assets and community facilities;
- maintain essential services at not-less-than current levels;
- set fee increases that are manageable and sustainable;
- invest in continuous improvement, technology and other enablers to efficiency and embrace customer outcomes; and
- keep day-to-day costs manageable and rates below our peers.
The 2020–21 Annual Budget is based on a rate increase of two per cent. This is in-line with the Fair Go Rates System (FGRS), which caps Victorian council rate increases to forecast movements in the Consumer Price Index.
Our focus for the next year is to provide community leadership throughout the pandemic and for the recovery process that follows, while continuing, as much as possible, to deliver on the projects and services that make our City a great place to live, work and do business. Our challenges for 2020–21 include:
- Redirecting significant resources into response and recovery associated with COVID-19.
- Continuing to operate and enhance our Residential Aged Care service in a way that responds to the recommendations of the Royal Commission for the aged care sector, despite declining income and increased cost of operation.
- Reducing our reliance on self-sourced income through parking revenue due to a shift in philosophy to one that prioritises community education over infringements to achieve behaviour change.
- Responding to the general slow-down in economic activity that will impact income streams.
- Topping-up funding for local services we provide on behalf of the State and Federal Governments (such as school crossing supervision and Home and Community Care services). These funds have not increased in-line with real cost increases, leaving a gap.
- Increasing investment in maintaining our ageing community and infrastructure assets.
- Responding to growth and increasing diversity in our population.
To support our $2,251 million of community assets, we projected an investment of $35.68 million in new capital expenditure for asset renewals, upgrades and expansions.
Highlights of the 2020–21 Capital Works Program included:
- Renewal Projects — this includes the renewal and upgrade of Council’s major infrastructure assets such as: road reconstruction; drainage improvement; footpaths; local road resurfacing and car parks. Other renewals include: building improvements and upgrade of community facilities; replacement of plant and machinery; furniture and equipment; information technology and telecommunications; and library collections ($15.41 million).
- Recreation and Open Space — this includes open space initiatives; parks; playing surfaces; and playground equipment. Construction works on the Murrumbeena Park Pavilion and Community Hub facility will start during 2020–21 ($9.32 million).
- Community facilities — this comprises buildings and building improvements, upgrade and renewal of community facilities; municipal offices; sports facilities; and pavilions. Major upgrade works to Bentleigh Library will also start in 2020–21 ($5.34 million).
- Sustainability — installation of photovoltaic systems to generate renewable energy, double glazing and insulation on Council assets and other building sustainability improvements ($493,000).
- Community safety — this includes safety projects: cross-intersection, pedestrian and safer speed limits; school safety; shopping centres; sustainable transport and disabled parking upgrades ($510,000).
- Strategic projects — activity centre streetscape works, Integrated Transport Strategy implementation and structure plan designs (Elsternwick, Bentleigh, Carnegie) and Carnegie sports precinct ($3.35 million).
- Great@GlenEira — includes technological solutions to enable customers to better transact with Council. Customer-focused projects include a single customer view and increased online presence to make it easier for you to do business with us without needing to come to the Town Hall ($1.25 million).