1.0 Financial PlanningContext
1.0.1 Working Capital
Working Capital broadly represents monies that Council is required by law, to hold separately (to Council’s general fund) as they canonly bespent for specified purposes.
Funds that are legislatively required to be kept separateinclude:
DeveloperContributionsraisedunder the Environmental Planning and Assessment Act 1979 which must be spent to fund community infrastructure in accordance with the development contribution planunderwhichtheywerecollected. PublicDomainContributionswhicharemadebydevelopers are similarly held by Council.
DomesticWasteManagementfundsareraisedunder the Local Government Act 1993 andcanonly beusedtosupportwastecollection,recyclingandrelatedactivities. Theseincludefundssetaside toreplacethe garbage, recycling or greenwaste binfleet or truck fleet.
A Stormwater Management Service Charge is raised annually by Council under the Local Government Act 1993. Fundsthatarenotusedinanyoneyearmustbeheldforuseonauthorised stormwater management and relatedactivities.
Grantfundingprovidedfor aspecificpurposebytheCommonwealthor StateGovernmentmustbe held by Councilfor that purpose.
Funds that are set asidefor specific purposes by Councilinclude:
Employee Leave Entitlements: Council sets aside cash to pay out liabilities for accrued employee annualand long serviceleave. Council’s Workforce Management Strategy has identified theneed to cash back 49% of total leave liability to mitigate any financial risks surrounding employee leave entitlements.
Plant, Technology and Vehiclereplacement: Council has longterm models in place toforecastthe timing ofheavyplant, motor vehicleand informationtechnologyhardwarereplacement. Funds are allocatedto ensure budget is available for replacement.
Funds held in trust by Council either on behalf of other parties or under a Trust arrangement must be held separately to Council funds and only spent in accordance with the terms of the trust arrangement.
Loan funds: Council raises loan funds annually to fund its capital program (only if required). Unspent funds are held specifically to ensure those works are completed. Council currently funds theseworks fromunrestricted workingcapital. Seesection 1.0.2.
Other unrestricted working capital is held and has been allocated throughout Council’s LTFP to fund a number of operationaland capital projects.
1.0.2 Loan Borrowings
Council borrowed $40.0 million to redevelop Ashfield Aquatic Centre. This loan is with NSW Treasury TCorporganisation thatprovides funding opportunities for local government and other Stateagencies. Theseborrowings will be repaid from rate incomeraised over a 20 year period.
Council has principal outstanding on its loanborrowings of $34.3 million as at 30June 2024. Council’s Debt Service Cover ratio, which measures the availability of operating cash to service debt including interestandprincipalrepayments,isforecastat22.31to1attheendof2025/26.Thisiswellabovethe Office of Local Government’s benchmark of 2to 1.
WhenCouncil borrows funds,loans have beenused tofund major capital projects and are never used tofund operating projects.
1.1 Structure
1.1.1 Overview ofStructure
This LTFP is structured around two financial models or scenarios, in accordance with the Integrated Planning andReportingframework.They are:
Scenario1 basescenariowhich captures Council’s “Business as Usual” approach maintaining existing servicelevels.
Scenario2 models the Elimination of the Asset Renewal Backlog.
The LTFP details the assumptions used when compiling each scenario, as well as the financial outcomes over a ten-year period. It also lists the major opportunities and risks associated with each scenario,to provide an analysis of thesensitivity of the modelling toa variety of changes.
The last section of the document contains some high-level measures by which Council’s long term financial performance willbemeasured.
2. GLOBAL VARIABLES AND ASSUMPTIONS
Below is a list of variables and assumptions that are the drivers in predicting Council’s revenue and expenditure forecasts over the 10 years for this iteration of the LTFP. These variables apply to each scenario of this LTFP unless explicitly stated in the particular scenario. Any references made to ConsumerPriceIndex(CPI)willhaveanassumedrateof0%per annumfor expenditureand3.8%per annumfor income, unless stated otherwise.
2.1Operating Revenue Drivers
The following tables summarise the revenue drivers onwhichtheLTFP has been modelled.
OperatingRevenueArea
General Rates
Assumption
Based onthe followingrate cap infutureyears:
2025/26
2026/27 andonwards
Voluntary Pensioner Rebates Counciloffers voluntary pensioner rebates to eligible aged pensioners.
This rebate covers thedomestic waste and stormwater charges for resident owners of ten years or greater. For pensioners whodonotmeet theabovecriteria, grandfathering provisions exists for pensioners inthe former Ashfield, Leichhardt and Marrickville LGA’s.
Pensioner Rate Subsidy
The Pensioner Rate Subsidy is set by theState Governmentat amaximum of $250 per property per annum.This is a flat subsidy and does not increase annually.
OperatingRevenueArea
Domestic Waste Management Charge (DWMC)and related User Charges
Assumption
The DWMC is modelledover the life of the Plan tocover the costof the provision of the service. The Local GovernmentAct prohibits councils from either subsidising or receiving a profitfromtheDWMC. The methodology of applyingcorporate overheads to the domestic waste services has beenreviewedandapplied from 2018/19 onwards.The budget has been prepared onthebasis to maintain the Domestic Waste Management for future years to allow capacity tocover increase of costs that are reactive.
Stormwater Management Service Charge
Fees
Intereston Investment
Intereston OverdueRates
Other Revenues
Rental/Lease Income
This is a flat charge used to fund stormwater planning and infrastructure. Thechargeis set by the Local GovernmentAct and associatedRegulations as follows:
$25.00 per residential property per annum.
$12.50 per strata unit per annum.
$25.00 per 350m2 per business property per annum.
Councilgenerally increases its fees for theservices it provides toat leastcover generalmovements in costs eachyear.
Statutory fees have beenincreased inaccordancewith advicegiven by the relevant statutory body whilst discretionary fees have beenincreasedby CPI. TheCPI inthe LTFP for future years is:
3.8% 2025/26
2.5% 2026/27 andonwards
The interestCouncilreceives on its investments has been modelled and reviewed annually. The modelis linked to the projected level of reserves and forecast interestrates. As cashis expected todiminish over timeas Council completes its suiteof major projects,a modest and sustainablelevel of interest incomecurrently supports ongoingoperations.
Councilcharges interest on overdue rates to the maximum allowedby the Minister for LocalGovernment. The Office of Local Government determination of the 2025/26 inters on overdue rates is 10.5% per annum.
This includes ex gratiarates payments, incomefrom street furniture andcredit cardfees. It is assumedthat theserevenue sources will not increase and areindexed according to commercial agreements.
It is assumed that rental/lease income willincreaseat least by CPI, in line with provisions of current leases.
OperatingRevenueArea
Fines
OperatingGrants – General
Financial Assistance Grants (FAG)
Assumption
Thedollar valueof individual fines is determined by the StateGovernment. The volume of fines is aproduct of the level of compliancewith relevant laws andthelevel of enforcement activity. It is assumedthat the total income receivedfromfines are flat.
It is assumed that totalincomefrom grants will beflat over the 10year programand dependant onthe initiatives providedby State and FederalGovernment.
It is assumed that totalincomefrom grants will beflat. The FAG is based on the relativegrowth of the Inner West’s LGA incomparison tothegrowth of Western Sydney. This projection is inline with themethodology used by theNSW Grants Commission who determinethe distribution of theFAG grant every year.
Transport for NSWBlock Grant
Street Lighting Subsidy
Library Subsidy
Disposalof Property
Disposalof Plant
This is a StateGovernment grant with no increase across the 10years.
This is a State Government subsidy. It is assumed that this willbe flat.
This subsidy is provided under the Library Regulation and is administered andset by the State Library of NSW. It is assumed that this will beflat.
The scenarios assumes thatno incomefrom property sales will bereceived during the 10 years of theLTFP. Proceeds fromsales including profits would be transferred toCouncil’s unrestricted working capital.
The scenarios assumes thatplant willbesoldat its written downcost during the 10 years of theLTFP. Proceeds fromsales including profits are transferred to Council’s Plant Replacement restricted working capital.
2.2Operating Revenue SensitivityAnalysis
Operatingrevenue assumptions willbesensitive toa variety of risks and opportunities,including the following:
Future rate increases will be based on the Local Government Price Movements agreed to by the Independent Pricing and Regulatory Tribunal (IPART). Historically, rate increases have not kept pace with increasing costs. From 2024/25, IPART have simplified the modelling by measuring the annual change in NSW councils’ base costs for three groups of councils which are metropolitan, regionaland rural councils. Thenew modelconsiders:
o Employee costs measured by the Local Government Award.
o Asset costs measured by he Reserve Bank of Australia (RBA) forecast change in the Consumer Price Index (CPI), adjusted to reflect the average difference between changes inthe Producer Price Index andchanges in the CPI.
o Allother operating costs measured by the RBA’s forecastchangeintheCPI.
o Included is a separate Emergency Services Levy (ESL) factor which is lagged by one year that reflects the annualchange in eachcouncil’s ESL contribution.
o Population factor to measure the change incouncils residential populations.
Rate increases provide only for a continuation of existing service levels. The changing demographicsoftheInnerWestcommunitysuggestthattheremaybedemandforneworincreased levels ofservices. Thesewillnotbeabletobefunded byordinaryIPART rate increaseswhichare based on movements incosts only.
Council has also considered rate increase due to increase in dwellings as part of the Housing Reform introduced by State Government, with increase in dwellings over the next five financial years.
ThePensionerRateSubsidyissetatamaximumof$250perpropertyandhasnotincreasedsince 1993. This creates a greater burdenonpensioners.
Thelevel of individual fines for traffic / parking offences is determined by the StateGovernment.
TheStormwater Management Charge is fixed and has not risen sinceits introduction in 2006/07.
Interest rates have been highly volatile over the past 12 months and are starting to decrease and willcontinueinfuturefinancialyears.Itisforecastthatinterestrateswillreduceflatfortheremaining 2024/25 financialyear and decline as inflation reduces over the nextfinancial year.
Hoarding fees and other Development Assessment income is dependent on the level of developmentactivityintheInnerWestLGA. Althoughstabilisedinthepast12months,expectation isthiswillgrowshouldgreaterbuildingdensitybemadeavailableintheLGAthroughtheproposed StateGovernment housing reforms.
2.3 Capital Revenue Drivers
The following tables summarise the capitalrevenue assumptions on whichthe BaseScenario has been modelled.
BaseScenarioCapitalRevenue Area Assumption
Roads to Recovery Grant
Developer Contributions
This is a FederalGovernment grant which is used by Councilto fund its roads improvement program. It is assumed that this will beflat.
The funding which Council receives from developer contributions is reviewedannually. The funding is linked totheprojectedlevel of development. Allfunds are held ina restricted working capitalfund for releaseto finance projects included in Council’s plan as aresponseto increased population growthin the LGA.
2.4 Capital Revenue SensitivityAnalysis
Capital revenueassumptions willbesensitive toa variety of risks and opportunities, including the following:
TheRoadstoRecoverygrantswasintroducedfrom2013/14andin2019/20itwasannouncedthat the program will be extended for Councils to 2025/26. A further announcement on 22 May 2024 that the grants would be extended to 30 June 2029 with an increase of funding for the next five years.The assumption is that thegrant willcontinuethroughout the 10 years of this LTFP.
Council does receive capital grants other than for Roads to Recovery. However, these grants are tied to specific projects and are non-recurrent. As the receipt of other capital grants is difficult to predict, they are not included inthemodel.
2.5Operating Expenditure Drivers
The following tablesummarises the operatingexpenditureassumptions on whichthe scenarios have been modelled.
OperationalExpenditureArea
Salaries and Wages
Assumptions
Increaseof salaries andwages in accordance with the StateAwardcommenced 1 July 2023. The salary and wages increase is as follows:
3.0% + Lump Sum0.5% or $1,000(whichever is higher) for 2025/26
2.5% for 2026/27and onwards
Superannuation
Workers Compensation
This LTFP includes the increaseof Superannuation to 12.0% in 2025/26inline withthe Superannuation GuaranteeContributions.
It is assumed that superannuation costs for members of the Defined Benefits Schemes willbe paid in accordance with the current advice from the Trustees of the Scheme. Councilhas developed a modelto predict its ongoing contributions towardtheDefinedBenefits Schemes.
Council’s Workers Compensation premiumwas set at $5.9 millionfor 2024/25 and it is assumed itwill increaseto $6.8 million in 2024/25. The futureyears increase is as follows:
10% 2026/27
5% 2027/28
2.5% 2028/29 andonwards
Training It is assumed that expenditureon training willbe flat.
Maternity Leave
Long Service Leave
Materials and Services
It is assumed that expenditureon parentalleave willbe $426,000in2025/26 and willincreaseby Award increases.
ExpenditureonLong ServiceLeave has been modelled and will increase by Award increases. Themodel is reviewed annually.
Components of materials and contracts expenditure are reviewed individually. The budget includes costestimates for the actualexpected expenditure.
OperationalExpenditureArea
DisposalCosts
Oiland Fuel
Street Lighting
Electricity
Gas
Water
Telephone and Mobile Phone
Depreciation
Other Expenses
StateGovernment Levies
Assumptions
The cost of waste disposal has been modelled and is reviewed annually.
Itis assumed that oiland fuelcosts will increaseby CPI per annumover 10 years.
It is assumed that electricity costs will increase 4.0% per annumfor future years.
It is assumed that electricity costs will increase by 4.0% per annumfor future years.
It is assumed that gas costs willincreaseby 4.0% per annumfor future years.
It is assumed that water costs will increaseby 4.0% per annumfor future years.
It is assumed that fixed and mobile phoneanddata costs willincreaseby CPI per annum over 10 years.
Depreciation has been modelled in accordance with Council’s Asset Management Plans –refer page6 of the Asset Management Policy and Strategy.
This includes contributions to organisations anddoubtful debts.It is assumed that these expenses will increase by CPI.
Council’s annualcontribution to the Emergency Services Levy (ESL) is estimated basedoff the 2024/25costs anda 4.2% increase applied. The contribution amount will be providedto Council in May 2025. Theremaining State Governmentcharges levied to councils contribute toa range of services andit is assumed that the levies will increase by CPI.
Insurance
It is assumed that insurancecosts will increase as follows: 3.0% 2025/26 2.75% 2026/27and 2027/28 2.5% 2028/29 andonwards
2.6Operating Expenditure SensitivityAnalysis
Operatingexpenditureassumptions will be sensitive toa variety of risks and opportunities, including the following:
Thecurrent industrialawardwas negotiated and applies from 1 July 2023. For 2025/26theaward willbe3.0% + Lump Sum 0.5% or $1,000 (whichever is higher).
The Federal government legislated that Superannuation Guarantee Charge (SGC) will rise to 12.0% in 2025/26.
Natural disasters and other unforeseeable events may impact to increase insurance premium levels.
2.7 Capital ExpenditureDrivers
CapitalExpenditureArea
Information and Communication TechnologyHardware / Software Program
Local Roads and Lanes Program
Assumptions
Council currently leases the majority of its Information Technology Hardware over a 4 year lease term. Software costs associated with hardware upgrades are forecast and included in the relevant year withinthe Operating Budget.
The LTFP provides for the full cost of replacement of existing hardware and software. The budget includes the hardware and softwarereplacementprogram.Thisprogramreplacesassetsatthe end of their useful life and also takes into account the consolidation of three existing data centres into one and the consolidation of maintenance agreements and softwarelicences.
Maintenancecostsareconsideredaspartoftheevaluationprocess and included in the operational budget where required for both software and hardware.
Council’s investment in its Local Roads network has been set at $10.0 million in 2025/26 funded by Financial Assistance Grants, SRV,RoadstoRecoveryandgeneralfunds.Fundinglevelsarekept at levels to ensure Council exceeds it RenewalRatio every year for its infrastructureportfolio throughout the LTFP.
RegionalRoads Program
Footpath Program
Bike Facilities Program
CouncilownstheRegionalRoadnetwork. NSWTfNSWsubsidises upkeepthroughgrants.CouncilmatchesfundingundertheRegional Roadsprogramusingunrestrictedworkingcapitalorotheravailable funding sources. A total of $1.7 million is anticipated to be spent on RegionalRoad capital works throughout the 2025/26 financialyear. Funding levels are kept at levels to ensure Council exceeds its Renewal Ratio every year for its infrastructure portfolio throughout the LTFP.
Council’s investment in its Footpath Renewal & Upgrade Program has been set at $3.3m in 2025/26 funded by SRV and unrestricted working capital. Funding levels are kept at levels to ensure Council exceeds its Renewal Ratio every year for its infrastructure portfolio throughouttheLTFP.
Unrestricted working capital and developer contributions are allocated to improve bike facilities to match capital grant funding from the NSW or Federal government or tofund direct works.
CapitalExpenditureArea
Traffic Amenities Program
Assumptions
The traffic amenities program is funded from Developer Contributions,SRV,governmentgrantfundsorotherworkingcapital to improve traffic amenities. The traffic amenities program included in the budget is $6.1 million (this includes $2.3 million of PAMP). Thisprogrammaycontinuetoreduceasthedevelopercontributions reduces nexus on traffic amenities from where themajority of these works arefunded.
Stormwater upgrade and renewal Program
Councilhasaprogramofcatchmentstudiesacrossthevarioussubcatchments within its boundaries. These are funded from the Stormwater Charge.
DrainagecapitalworksarefundedfromSRVfundsandunrestricted working capital. Additional capital works are funded from the Stormwater Charge in accordancewith the Stormwater Plan.
The total budget is $4.1 million.
Parks Improvement Program Park improvements are primarily funded from Developer Contributions, SRV and Federal or State grants. Council’s Parks Improvement Program approximately $18.0million in 2025/26.
The Capital Program also incorporates expenditureon Council’s ‘Major Projects’ as follows:
Project
Leichhardt Park Aquatic Centre Major Project
GreenWay
Henson Park Grandstand Stage 2
Main Street Revitalisation
Leichhardt Oval
Inclusive Playgrounds
Mort Bay Park
Callan Park AllWeather Sporting Field
2.8 Capital ExpenditureSensitivity Analysis
$10.0million
$7.3 million
$6.2 million
$5.8 million
$3.0 million
$2.2 million
$1.6 million
$0.3 million
Capital expenditure assumptions will be sensitive to a variety of risks and opportunities, including the following:
Council has prepared Asset Management Plans for each of the four infrastructure asset groups (seeaccompanyingAssetManagementPlans). Asdataisupdatedontheconditionoftheseassets it is likely that further investment will be required to ensure roads, footpaths, drainage, bike networks, parks facilities, buildings and the like continue to be available for both the current and future generations living inthe Inner West.
Increasing investments to promote accessibility will also be required as the Inner West population ages. Thiswillbe plannedtoensureanaccessibilitycontinuum betweenlocalroads,streetscapes and footpaths and transport infrastructure managed by State Government including trains, buses and light rail.
2.9 Non-Financial Assumptions
TheInner WestCouncil’s adopted Community StrategicPlan providesanoverviewof themajor issues impacting upon the local community. The data and analysis used to arrive at those issues also inform the preparation of this LTFP.
3. SCENARIO 1 – BUSINESS AS USUAL
3.1 Scenario 1Overview
Scenario1 is predicated on:
Continuation ofexisting services at current service levels
Continuation ofexisting levels of investment in infrastructurerenewal
Continuation ofexisting incomesources
This scenarioalsoincorporates thefollowing ‘major projects’:
Leichhardt Oval
Leichhardt Park Aquatic Centre Major Project
Greenway Program
Callan Park AllWeather Sporting Field
Henson Park Grandstand Stage 2
GreenWay
MainStreet Revitalisation
Inclusive Playgrounds
Mort Bay Park
3.2 Scenario
1Context
CouncilwasformedbytheamalgamationofAshfield,LeichhardtandMarrickvilleCouncilsinMay2016 and until service reviews are complete, service levels will remain as they were in the constituent Councils.CounciliscurrentlyoperatingfromapositionoffinancialstabilityandhasusedtheIntegrated Planning and Reporting (IPR) Framework to drive the long term financial sustainability and ensure Council is fit for thefuture as a stand-aloneentity.
It is evident that while Council’s immediate and long term financial position is capable of delivering existingservicesattheircurrentlevelsgivencurrentcosts,anuncertaineconomicenvironmentandthe changing nature of the Inner West community will generate new or expanded needs for services and for associatedfunding.
Council’s major income source, rates, is capped by the State Government and has historically grown at a slower pace than salaries, State Government levies and other costs. As a result, Council has reviewed its expenditure and income generated and prioritised programs to ensure a high level of serviceis providedtothecommunitywhileremaining financiallyresponsible.Councilhascommittedto acontinuous improvement program throughout the life of this LTFP.
Scenario 1 outlines the method of delivering business as usual whilst Scenario 2 outlines the method of dealing with the infrastructure renewal backlog. These scenarios are illustrative only. As and when the need develops to fund major infrastructure, provide new or expanded services or invest more in infrastructure maintenance, Council will engage with the Inner West community and develop these options further.
3.3 Scenario 1Financial Projections
The following tables outline the financial impact of Scenario 1 – Business As Usual over the next 10 years by externalreporting category.
IncomefromContinuingOperations
Scenario1-InnerWestCouncil-10YearIncomeStatementProjection
Scenario1-InnerWestCouncil-StatementofFinancialPosition
2024/252025/262026/272027/282028/292029/302030/312031/322032/332033/342034/35 ($'000)($'000)($'000)($'000)($'000)($'000)($'000)($'000)($'000)($'000)($'000)
ASSETS
Currentassets
Cashandcashequivalents104,35876,51764,99955,62658,75558,44561,45665,26569,96376,28977,644
Investments83,18963,01433,83429,87626,05233,64240,25647,05750,23154,38057,937 Receivables49,24446,53643,97641,55739,27237,11235,07133,14231,31929,59627,969 Inventories207208209210211212213214215217218
Other----------
Non-currentassetsclassifiedas‘heldforsale’----------
Totalcurrentassets
Non-currentassets
236,998186,275143,018127,270124,291129,411136,996145,678151,729160,482163,767
Investments58,95058,95058,95058,95058,95058,95058,95058,95058,95058,95058,950 Receivables----------
Inventories----------
Infrastructure,property,plantandequipment3,030,8673,110,5883,214,3953,248,9243,271,0173,285,8293,298,6563,309,2613,325,0613,337,8443,351,132 Investmentsaccountedforusingtheequitymethod----------
Investmentproperty73,43075,26677,14878,69180,26581,87083,50785,17786,88188,61990,391 Intangibleassets5,5936,1816,3866,3866,3866,4466,4466,4466,4466,5066,506 Rightofuseassets286293301307313319326332339346352
Non-currentassetsclassifiedas‘heldforsale’---------Other----------
Totalnon-currentassets
3,169,1273,251,2783,357,1793,393,2583,416,9313,433,4153,447,8853,460,1663,477,6773,492,2653,507,331 TOTALASSETS3,406,1253,437,5533,500,1983,520,5283,541,2223,562,8263,584,8803,605,8443,629,4063,652,7473,671,099
LIABILITIES
Currentliabilities
Payables77,99158,49343,87032,90336,19339,81241,80343,89346,08748,39250,811
Incomereceivedinadvance----------
Contractliabilities25,29922,76920,49218,44318,07415,36319,20422,08421,53223,68624,870 LeaseLiabilities119122126128131133136139141144147
Borrowings2,0471,8171,8581,9001,9431,9862,0312,0762,1232,1702,219 Provisions26,89521,51617,21313,77011,0168,8137,0505,6404,5123,6102,888
Liabilitiesassociatedwithassetsclassifiedas‘heldforsale’----------
Totalcurrentliabilities
Non-currentliabilities
132,352104,71983,55967,14467,35666,10770,22373,83274,39678,00280,935
Payables----------
Incomereceivedinadvance----------
Contractliabilities----------
LeaseLiabilities169173177181185188192196200204208
Borrowings28,69326,87525,01723,11721,17519,18817,15815,08212,95910,7898,570
Provisions2,4941,9951,5961,2771,021817654523418335268
Investmentsaccountedforusingtheequitymethod----------
Liabilitiesassociatedwithassetsclassifiedas‘heldforsale’----------
Totalnon-currentliabilities
31,35529,04326,79024,57522,38120,19418,00415,80113,57711,3279,045
TOTALLIABILITIES163,708133,762110,34991,71989,73786,30188,22789,63387,97389,32989,981
Netassets3,242,4173,303,7913,389,8483,428,8093,451,4853,476,5243,496,6533,516,2113,541,4333,563,4183,581,118 EQUITY
Retainedearnings2,467,7102,499,3352,563,1732,585,1092,606,0362,626,4712,646,0672,666,7602,686,5792,707,2872,728,350
Revaluationreserves774,707804,456826,676843,700845,449850,053850,586849,451854,853856,132852,768
Councilequityinterest 3,242,4173,303,7913,389,8483,428,8093,451,4853,476,5243,496,6533,516,2113,541,4333,563,4183,581,118
Totalequity3,242,4173,303,7913,389,8483,428,8093,451,4853,476,5243,496,6533,516,2113,541,4333,563,4183,581,118
Cashflow from Operating Activities Receipts
Cashflow from Investing Activities
Payments
PurchaseofInvestmentProperty
ContributionspaidtoJointVentures&Associates
Netcashprovided(orusedin)InvestingActivities4,723
Cashflow from Financing Activities
Receipts
ProceedsfromBorrowing&Advances Payments
PaymentsofBorrowing&Advances(2,047)
Scenario 1 - Inner West Council - Statement of Cashflows
4. SCENARIO 2:ASSET MANAGEMENT INFRASTRUCTURE RENEWAL BACKLOG
Scenario 2 is predicated on:
Continuation ofexisting services at current service levels.
An expanded capital renewal program to reduced infrastructure backlog within the time horizon of this LTFP.
Scenario 2 aims to demonstrate the effects of funding the infrastructure backlog to meet the needs of the community.
4.1 Scenario 2Assumptions
The annual budget includes provisions for operations, maintenance, renewal and new expenditure on infrastructure. When renewal funding is inadequate, any unfunded renewal demand is deferred, which generates a backlog. Council’s Asset Strategy states that the asset renewal funding ratio is to be a minimum of 110% until the renewalbacklog has been addressed.
Council identified an infrastructure renewal backlog in its 2023/24 financial reports, estimated to be approximately $29.3macrossits assetportfolio. Inorder toaddressthis backlog, additionalfundswould be required.Therenewalfundingplannedinscenario2isinsufficienttoreducethebacklogofdeferredrenewal demand, therefore a loan of $23.0m would be required in 2026/27.
4.2 Scenario 2 Sensitivity Analysis
The assumptions on which Scenario 2 are predicated will be sensitive to a variety of risks and opportunities, including the following:
Community engagement willprovide a critical input to the service levels expected by the community.
The additional renewal works will be based on thecondition ratings of the assets.
4.3 Scenario 2 Financial Projections
ThefollowingtablesoutlinethefinancialimpactoftheScenario2–ReducetheInfrastructureBacklogover the next 10 years by external reporting category.
IncomefromContinuingOperations
Scenario2-InnerWestCouncil-10YearIncomeStatementProjection
Scenario2-InnerWestCouncil-StatementofFinancialPosition
2024/252025/262026/272027/282028/292029/302030/312031/322032/332033/342034/35 ($'000)($'000)($'000)($'000)($'000)($'000)($'000)($'000)($'000)($'000)($'000)
ASSETS
Currentassets
Cashandcashequivalents104,35867,26246,48927,86130,99030,68033,69137,02541,24847,09947,929 Investments83,18963,01433,83429,87626,05233,64240,25647,05750,23154,38057,937 Receivables49,24446,53643,97641,55739,27237,11235,07133,14231,31929,59627,969 Inventories207208209210211212213214215217218
Other----------
Non-currentassetsclassifiedas‘heldforsale’----------
Totalcurrentassets
Non-currentassets
236,998177,020124,50899,50596,526101,646109,231117,438123,014131,292134,052
Investments58,95058,95058,95058,95058,95058,95058,95058,95058,95058,95058,950 Receivables---------Inventories----------
Infrastructure,property,plantandequipment3,030,8673,119,8433,232,9053,276,6893,298,7823,313,5943,326,4213,337,5013,353,7763,367,0343,380,847 Investmentsaccountedforusingtheequitymethod---------Investmentproperty73,43075,26677,14878,69180,26581,87083,50785,17786,88188,61990,391 Intangibleassets5,5936,1816,3866,3866,3866,4466,4466,4466,4466,5066,506 Rightofuseassets286293301307313319326332339346352 Non-currentassetsclassifiedas‘heldforsale’---------Other----------
Totalnon-currentassets
3,169,1273,260,5333,375,6893,421,0233,444,6963,461,1803,475,6503,488,4063,506,3923,521,4553,537,046 TOTALASSETS3,406,1253,437,5533,500,1983,520,5283,541,2223,562,8263,584,8803,605,8443,629,4063,652,7473,671,099
LIABILITIES
Currentliabilities
Payables77,99158,49343,87032,90336,19339,81241,80343,89346,08748,39250,811 Incomereceivedinadvance---------Contractliabilities25,29922,76920,49218,44318,07415,36319,20422,08421,53223,68624,870 LeaseLiabilities119122126128131133136139141144147
Borrowings2,0471,8171,8581,9001,9431,9862,0312,0762,1232,1702,219 Provisions26,89521,51617,21313,77011,0168,8137,0505,6404,5123,6102,888
Liabilitiesassociatedwithassetsclassifiedas‘heldforsale’----------
Totalcurrentliabilities
Non-currentliabilities
132,352104,71983,55967,14467,35666,10770,22373,83274,39678,00280,935
Payables----------
Incomereceivedinadvance----------
Contractliabilities----------
LeaseLiabilities169173177181185188192196200204208
Borrowings28,69326,87525,01723,11721,17519,18817,15815,08212,95910,7898,570 Provisions2,4941,9951,5961,2771,021817654523418335268
Investmentsaccountedforusingtheequitymethod---------Liabilitiesassociatedwithassetsclassifiedas‘heldforsale’----------
Totalnon-currentliabilities
31,35529,04326,79024,57522,38120,19418,00415,80113,57711,3279,045
TOTALLIABILITIES163,708133,762110,34991,71989,73786,30188,22789,63387,97389,32989,981 Netassets3,242,4173,303,7913,389,8483,428,8093,451,4853,476,5243,496,6533,516,2113,541,4333,563,4183,581,118
EQUITY
Retainedearnings2,467,7102,499,3352,563,1732,585,1092,606,0362,626,4712,646,0672,666,7602,686,5792,707,2872,728,350
Revaluationreserves774,707804,456826,676843,700845,449850,053850,586849,451854,853856,132852,768
Councilequityinterest 3,242,4173,303,7913,389,8483,428,8093,451,4853,476,5243,496,6533,516,2113,541,4333,563,4183,581,118
Totalequity3,242,4173,303,7913,389,8483,428,8093,451,4853,476,5243,496,6533,516,2113,541,4333,563,4183,581,118
Cashflow from Operating Activities Receipts
Cashflow from Investing Activities
Payments
PurchaseofInvestmentProperty
ContributionspaidtoJointVentures&Associates
Netcashprovided(orusedin)InvestingActivities4,723
Cashflow from Financing Activities
Receipts
ProceedsfromBorrowing&Advances
Payments
PaymentsofBorrowing&Advances(2,047)
Scenario 2 - Inner West Council - Statement of Cashflows
5. PERFORMANCE MONITORING
The Inner West Council will use the following indicators to measure its financial performance. These measures are linked to those used in Council’s published financial statements and also to the indicators used by theDLG in its annual publicationof comparativeinformationoncouncilsinNSW. This means that the measures,and the Inner West Council’s progress againstthem, are both transparent and comparable. A table of the projected rates is provided at the end of this section.
5.1 Operating Performance Ratio
ThisratiomeasuresaCouncil’sachievementofcontaining operatingexpenditurewithinoperatingrevenue. It is important to distinguish that this ratio is focusing on operating performance and hence capital grants and contributions, fair value adjustments and reversal or revaluation decrements are excluded.
5.2 Own Source Operating Revenue
This ratio measures financial flexibility. It is the degree of reliance on external funding sources such as operating grants and contributions. A Council’s financial flexibility improves the higher the level of its own sourced revenue.
5.3 Unrestricted Current Ratio
The Unrestricted Current Ratio is specific to local government and is designed to represent a Council’s ability to meet short term obligations as they fall due. Restrictions placed on various funding sources (e.g. Developer Contributions, TfNSW contributions) complicate the traditional current ratio used to assess liquidity of businesses as cash allocated to specific projects is restricted and cannot be used to meet a Council’s other operating and borrowing costs.
5.4 Debt Services Cover Ratio
This ratio measures the availability of operating cash to service debt including interest, principal and lease payments.
5.5 Rates and Annual ChargesOutstanding
This ratio assesses the impact of uncollected rates and annual charges on liquidity and the adequacy of recovery efforts.
5.6 Cash Expense Cover Ratio
ThisliquidityratioindicatesthenumberofmonthsaCouncilcancontinuepayingforitsimmediateexpenses without additional cash inflow.
5.7 BuildingandInfrastructure Ratio
This ratio is to assess the rate at which these assets are being renewed against the rate at which they are depreciating.
5.8 Infrastructure Backlog Ratio
This ratio shows what proportion the backlog is againstthe total value of a Council’s infrastructure.
5.9 Asset Maintenance Ratio
This ratio compares actual maintenance costs versus the required annual asset maintenance. A ratio of above 1.0 indicates that the Council is investing enough funds within the year to stop the Infrastructure Backlog from growing.
5.10 Capital Expenditure Ratio
Thisindicates theextentto whichaCouncilis forecastingtoexpanditsasset basewithcapital expenditure spent on both new assets, and also the replacement and renewal of existing assets.
InnerWestCouncil-KeyPerformanceIndicators
KeyPerformanceIndicators-Scenario1Benchmark2024/252025/262026/272027/282028/292029/302030/312031/322032/332033/342034/35
OperatingPerformanceRatio>0(0.59)%0.02%0.56%0.54%0.13%0.51%0.26%0.56%0.31%0.55%0.63%
OwnSourceOperatingRevenue>60%84.67%87.29%80.81%91.12%91.22%91.84%91.99%92.19%92.33%92.50%92.66%
UnrestrictedCurrentRatio>1.5x1.671.781.711.661.851.961.731.972.041.862.02
DebtServiceRatio>2x16.2221.8322.6822.5521.7722.3421.8322.2721.7622.0922.15
RatesandAnnualChargesOutstandingRatio<5%4.31%3.06%3.03%3.00%2.97%2.94%2.91%2.89%2.86%2.83%2.80%
CashExpenseCoverRatio>3Months8.626.144.283.633.513.764.064.384.594.884.96
InfrastructureRenewalRatio>100%129%193%271%139%111%100%101%101%100%100%100%
InfrastructureBacklogRatio<2%0.33%0.38%0.40%0.46%0.53%0.60%0.68%0.77%0.85%0.94%1.04%
AssetMaintenanceRatio>11.081.131.111.111.131.141.151.181.191.211.23
KeyPerformanceIndicators-Scenario2Benchmark2024/252025/262026/272027/282028/292029/302030/312031/322032/332033/342034/35
OperatingPerformanceRatio>0(0.59)%0.02%0.56%0.54%0.13%0.51%0.26%0.56%0.31%0.55%0.63%
OwnSourceOperatingRevenue>60%84.67%87.29%80.81%91.12%91.22%91.84%91.99%92.19%92.33%92.50%92.66%
UnrestrictedCurrentRatio>1.5x1.671.691.491.251.431.541.331.591.651.481.66
DebtServiceRatio>2x16.2221.8322.6822.5521.7722.3421.8322.2721.7622.0922.15
RatesandAnnualChargesOutstandingRatio<5%4.31%3.06%3.03%3.00%2.97%2.94%2.91%2.89%2.86%2.83%2.80%
CashExpenseCoverRatio>3Months8.625.733.482.452.362.622.963.283.493.803.87
InfrastructureRenewalRatio>100%129%220%297%164%111%100%101%102%101%101%101%
InfrastructureBacklogRatio<2%0.33%0.03%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%
AssetMaintenanceRatio>11.081.131.101.101.121.131.151.171.181.201.22
5.11 Review ofLong Term Financial Plan
Afinal,qualitativeperformancemeasurewillbetheregularreviewofthisLongTermFinancialPlan.TheInner WestCouncilistakingacontinuousimprovementapproachtotheLTFP. Itis expectedthatthedocumentwill beprogressivelyrefined,asCouncil’sknowledgeregardingthevariousassumptionsincreasesandasCouncil and the community begin toconsider and discuss the various scenarios.
It is anticipated that Council willreview theLTFP, including each of the scenarios, at leastannually.
