Uncertainty tempers budget decisions
I WILL focus this month on demystifying our local government – let us clear some clutter.
The new Toodyay Recreation Centre water bill of $71,000 included start-up usage, the initial establishment of new turf and filling the pool and flush back.
Currently, we are searching for a possible leak because the last account showed an unexpected jump in usage.
A February water account of $872.09 for the old Harper Road works depot listed in the March council agenda, was investigated.
It appears unauthorised use has occurred.Read more
The scope of a governance review ordered by last year’s State Government Inquiry into the Shire of Toodyay and former council has been reduced which lessens the time involved and therefore reduces costs.
A State grant of $79,818 has increased the shire’s water storage capacity.
The Shire Works Depot in Railway Road now has two new tanks, Darwinia Crescent in Coondle and McKnoe Drive, Morangup, will receive relocated fire shed tanks and a new pump and backup power installed at Julimar Fire shed.
The Shire of Toodyay is in effect a community-owned service business run by rates, user pays fees and charges and government funding sought to meet the budget shortfall.
All supplies (utilities, equipment, contractors and stationery, etc.) are subject to market change.
Consequently, the shire’s annual budget always includes a degree of uncertainty, and prudent management is required to ensure we can meet our commitments.
All financial decisions require an absolute majority vote – five out of nine elected councillors.
The shire’s annual budget is set by the council and covers estimated income and operating costs.
The council also determines a delegation register which gives senior shire staff authority to approve day-to-day spending within limits set by the council.
The shire budget cannot be altered without an absolute majority council vote.
The budget undergoes a mid-year review every March and is adjusted to keep it on track.
Cost items may be added, deferred or removed if over or under budget.
Monthly income and spending are listed in council meeting agendas and minutes (a record of council decisions) to keep local community members informed about how their money is being spent.
Shire accounts use ‘activity-based costing’ to group all expenses incurred for each item of activity or service.
This enables councillors to know the true cost when making strategic decisions.
Now to explain the Toodyay Recreation Centre loans.
Two State Treasury Corporation short-term interest-only loans totalling $4.5 million were used to fund the construction phase.
The plan was always to convert the two smaller loans into a single long-term loan of 20 years before the loan termination date of 23 June 2021 to avoid having to repay $4.5 million back this financial year.
At last January’s monthly council meeting, a full six months before the short-term loan deadline expired, the Manager of Finance recommended:
‘That Council in accordance with the requirements of section 6.20(2) of the Local Government Act 1995, confirms by absolute majority, the Shire’s Intention to Borrow – Conversion of Existing Short-Term Facilities into Long-Term Facility of $4.5 million and authorises the CEO to provide public notice of this intent for at least one month.’
Councillors had three options to consider:
- Repay the $4.5 million construction-phase borrowing in full, which was never envisaged and financially impossible.
- Keep the two short-term loans until June 23 which meant interest only in this financial year, or
- Convert the two smaller loans to a single long-term borrowing over the next 20 years and start paying off the amount borrowed.
The January council meeting voted 6-0 to defer any action until after the March budget review, which meant delaying a loan decision until the March 23 council meeting.
The State Treasury then advised Council in February to act as soon as possible because of the time needed to convert the shire borrowings.
Because at least an additional month was required to advertise the intention to borrow, State Treasury could not start processing the application until May.
Therefore, by March we did not have time to complete the conversion and pay any principal, so there was no reason to delay or discuss at the Budget Review.
Council needed to act expeditiously to ensure that everything was in place for June 23.
Proper process was followed, and a decision was finally made last month when the council voted 8-0 to approve the loan conversion and advertise it for 30 days.
Now the challenge for council is to increase the use of the Shire’s excellent facilities to attract local and outside use and reduce the cost burden to the community.
Toodyay’s security and future prosperity lies in ensuring every council decision produces an outcome that justifies the cost and is based on strong forward planning.