Last Saturday, 2 November, the GM of the Coffs Harbour City Council (CHCC), Steve McGrath, had a column published in The Coffs Coast Advocate titled ‘Council’s strong financial record’.
Our resident ‘financial wizard’, Rob Steurmann, analyses the GM’s column.
Most people balk at the prospect of checking columns of figures and this is why graphs, pie charts and the like are in common use. It is a handy tool but one easy to manipulate in order to present a specific outcome.
The General Manager used this technique as he tried to boost council’s flagging reputation. The net result from the graph is that council operated at a surplus of $5.98M in the 2018-2019 year.
In six years the improvement in results is $30 M. This can come about in several ways;
- An increase in revenue
- A reduction in costs or
- A combination of the above.
The General Manager referenced the “your council” website an initiative of the Office of Local Government (http://www.your-council.nsw. gov.au) and encouraged residents to take a look at the results.
I have done this previously here and the data shows our council is twice the Group 5 average for administration fees alone.
But let us examine how council appears to be in a better position after six years. Is it really as a result of astute management by council?
Or is it simply because residents were required to pay more?
The graph used by the GM in Saturday’s Advocate covers six years but it is easier to use five years to bring the figures into line with council figures supplied to the Independent Pricing and Rate Tribunal (IPART). So we are looking for a way for how an improvement of $20 M can occur. (Deficit $14 M to surplus $6 M).
Rates in 2014-15 total $55.6 M and charges $13.8 M. This is the sum contributed by ratepayers and users ($69.4 M).
Council forecast this would be $85.7 M by 2018-19.
|figures in 000s||forecast 14/15||forecast 18/19||actual 18/19 as at April 2019|
At the time of the new 2019 forecast, as presented for the period ended 30 April 2019 was made, the projected surplus for 2018/19 was going to be $36,358 M.
Now this means, given the figures supplied by council, the rise in receipts from ratepayers and users rose by a massive $65. 554m. ? At least one councillor, Councillor Townley, was concerned by “anomalies” in some recurrent expenditure items and asked for an explanation at the council meeting. Would council care to explain this anomaly in receipts?
And, it is noted, it is $49 .992m above the estimates at the time the submission to IPART was made.
Can anyone have faith in council’s figures? The particular report presented to Council shows the position to be $432, 000 short of the projected income for the year and there is still two months to run in the year. This is important because the fourth rate installment fell due in May. It gave rise to report of a $27m mistake.
The regular report is the base from which Councillors make decisions. Or as the recommendation to Councillors always say’s “Councillors note the report”.
To take figures provided by Council at face value is fraught with danger.
Why? Because Council seems to have enormous difficulty making a distinction between capital and current expenses. This is the reference by the General Manager to “a more accurate measure” in his column.
Never-the-less the graph shows an improvement of $20 M over five years and it patently clear the above April figures were discarded for this graph.
Therefore it is very easy to explain why there is an improvement of $20 M.
There was a special variation to the rates approved by IPART. That’s why.
The increase was to be 4% (including the automatic rate increase granted annually the Mayor forgot about). IPART said it was permanent.
The following Table shows the projected increase in revenue from Council submission.
|Year||Start rate||4%||End rate||Cumulative |
|2017/18 *||62.62||1.25 M||63.87||10.22|
|2018/19 *||63.87||1.28 M||65. 15||11.50|
*CPI and land valuation adjustments only
The total amount of new revenue flowing in from rates over five years was $38.49m.
The council never adjusted the base figure back at the end of each year.
It also just might also explain why the 4% was not really needed after the third year? But it carries on nevertheless?
But, we should not ‘jump the gun’. The variation in rates granted by IPART in 2014 was to address arrears of $70m at that time . The amount of improvement, given the arrears no longer exist, is therefore actually $90M.
The matter of the arrears will be dealt with as a separate article later.
For the moment the focus is on showing the rate variation gave us the reported year to date result.
As proof, the projected rate figure is $9744 m at the end of 2019. The two figures above give a total of $95.14m. (Start of $55.65m and add the $38.49m increase).
After allowing for the adjustment in the unimproved value of land (the figure used to calculate the rates) in 2017 there was an extra $3.8m in rates.
Residents in the Sawtell area could have told the General Manager how the surplus came about after he commented on the improvement in finances.
It had nothing to do with the Transformation to Sustainability as he claimed and much to do with changed rates partially based on increased land valuations.
But if this is not enough evidence then look at the user charges, aka ‘rates’ among other sundry lesser items. From an actual figure of $13.78m in 2014/15 they went to to an actual figure of $38.1m as at 30/4/2019. This is an increase of over $25 M.
Council would appear to be swimming in money.
Any increase in revenue has little to do with the personal ‘exertion’ of council.
It is not from the Coastal Works or Transformation to Sustainability but rather it is out of the pocket of the ratepayers and the users due to the IPART special rate variation and because of rate increases based on Government valuations based on increased land values.
In other words you, the ratepayer, have funded ‘the spike’.
However, Council also had another objective in play and this will be explained in the next installment.