By Nigel Waistell, Councillor for Division 1, Scenic Rim Regional Council
Questions to be Considered.
- How much revenue should be raised?
- Should the cap system be used to manage rate rises?
- How should revenue be expended?
- To what degree should the community be informed on expenditure?
Budget Values
The Council is required to prepare an annual budget in accordance with the requirements of Part 3 of the Local Government Act 2009. There are three relevant measures of financial sustainability that all Queensland local governments must report on and these are:
- Asset Sustainability Ratio;
- Net Financial Liabilities Ratio; and
- Operating Surplus Ratio.
In my view, these measures translate into three values which should be applied to budgets:
- Maintenance of Council’s financial sustainability. Expenditure must not exceed revenue and I believe that we should always maintain a cash buffer for the unexpected by underspending;
- Maintenance of assets. The main assets are bridges, roads, footpaths and drainage. However there are other essential assets like parks and facilities which also need to be maintained.; and
- Fairness and affordability.
Rates Structure
Council has adopted a Differential General Rate Category structure. Properties have been placed in one of the following categories:
- Residential Principal Place of Residence (category 1);
- Residential Future Principal Place of Residence (category 1FPR);
- Residential Non Principal Place of Residence (category 1NPR);
- Multi-Unit Dwellings (categories 21 – 25);
- Rural (category 9);
- Commercial (categories11 – 19) ; and
- Other (category 10 and 20).
Rates are then calculated based on two criteria:
- A rate in the dollar for each category which is calculated by Council; and
- Land values which are calculated by the Department of Natural Resources and Mines.
So for an example, a land value of $300,000 on a residential block which is category 1 which has a rate in the dollar value of $.007856 will have a general rate of $300,000 x $.007856 = $2356.80.
Rates also contain the following other charges:
- Community Infrastructure Charge which is a flat rate levied on all properties.
- Waste Management Charge for properties which receive a waste collection service;
- Waste Disposal Charge for properties which do not receive a waste collection service;
- Rural Fire Levy which is a flat rate levied on rural properties depending on which area you live in and which is distributed to the Rural Fire Service;
- Emergency Management Levy which is a flat rate levied on all properties by the State Government, collected by Council and passed on to the State Government.
Properties which are connected to reticulated water and sewerage will also be charged a rate levied by Queensland Urban Utilities.
When determining the budget, Council sets rates to generate the same amount of dollars as the previous year plus the general rate increase. The aim of this is to generate some consistency in the amount of revenue to be collected which will allow for forward planning. An increase or decrease in land valuations does not mean extra revenue for Council but individual properties will see some change in the rates levied.
Rating Environment
Council’s rates and charges are set each year with regard to a number of factors including the cost of providing services, capital works and service level expectations by the community. Scenic Rim’s low population density means that it has a low rate base from which to raise revenues to maintain infrastructure and provide services.
Budget
The budget is split into two parts: Operational being the day to day services and Capital being new infrastructure
Operational Revenue 14/15
Operational revenue is provided from a number of sources:
| General Rates | $ ?? |
| Community Infrastructure Charge | |
| Waste Charges | |
| Share of Profit from QUU | |
| Recoverable Works | |
| Interest | |
| Fees and Charges | |
| Federal and State Funding | |
| Other Revenue ie Landfill |
Operational Expenditure 14/15
Operational expenditure is as follows:
| Employee Expenses | $ ?? |
| Operational Expenses | |
| Finance Costs ie interest on loans | |
| Depreciation |
The difference (surplus) between revenue and expenditure of $?.??m is transferred to capital expenditure.
Capital Revenue
Capital revenue is provided from a number of sources:
| Operational surplus | |
| QUU Dividend | |
| Proceeds from Sales of Property | |
| Contribution from Developers | |
| Borrowings | |
| Capital Grants (NDRRA), Subsidies & Contributions | |
| Depreciation from operational expenditure |
Capital Expenditure
| Bridge Programme | |
| Roads Programme | |
| Drainage Programme | |
| Footpath Programme | |
| Facilities, Parks and gardens Programme | |
| Waste Management Programme | |
| Fleet Management Programme | |
| Strategic Projects | |
| Other Projects |
Revenue Strategy
It is difficult to find a revenue strategy which will suit all. The current system of rate in the dollar and land value is satisfactory except when a change in land value results in a high increase in rates. A capping system can even this out but, once a cap is in place, it should remain or else the generated increase is just stalled until another year. Should a cap system be employed?
Expenditure Strategy
Assets have to be maintained and services provided. However, some services are essential and others are desirable, depending on your view of life. Which services should be maintained? For an informed decision to be made, you need to know what that expenditure on services is. This operational expenditure of $?.??m is not divulged to the community or councillors in detail but only in totals and percentage spent. Should more detailed reports be provided?
Summary
The aim of this budget review document is to explain in simple terms how the budget is constructed and operated. There are questions which should be discussed and answered by the community.
