BYRON SHIRE COUNCIL

13.4 - Attachment 1

FINANCIAL SUSTAINABILITY PLAN (FSP) 2015/16

1. Overview

This is the third Financial Sustainability Plan (“FSP”) prepared by Council and includes the projects and strategies to be progressively implemented and actioned during the 2015/16 Financial Period. The projects and strategies identified have a focus of improving the financial sustainability of Council as an organisation over the short, medium and longer term.

Council adopted its first FSP on 9 May 2013 (Resolution 13-238). This FSP was for the 2013/14 Financial Period and during this period the progress achieved in the implementation of the FSP Action Plan was reported quarterly to the Finance Advisory Committee in accordance with Resolution 13-148.

Council adopted its second FSP on 7 August 2014 (Resolution 14-326) for the 2014/15 Financial Period, with the progress achieved in the implementation of the FSP Action Plan again reported quarterly to the Finance Advisory Committee.

Although the FSP is for a specific financial period the projects and strategies identified in the Plan may need to be developed, implemented and reported on over a number of periods.

The FSP is not a requirement of the integrated planning and reporting provisions detailed in the Local Government Act 1993, but it is an adopted Council Plan, prepared by Council to detail projects and strategies that it has identified and developed to improve and maintain its financial sustainability.

The FSP is also used by Council to inform the preparation of Byron Shire Council’s 10 Year Long Term Financial Plan (“LTFP”) and the annual review of this Plan. The LTFP is a component of the Council’s Resourcing Strategy and is a requirement of the integrated planning and reporting framework.

The projects and strategies identified in the FSP 2015/16 have been used to inform the scenarios in the LTFP 2015-2025, which was adopted by Council on 17 September 2015 (Resolution 15-427).

The development, implementation and review of the annual FSP and the FSP Action Plan is a key element of this Council’s strong focus on addressing its long term financial sustainability. This strong focus has been developed as part of the Council’s commitment and response to the NSW local government reform process.

In 2012 the Minister for Local Government announced that as part of the NSW local government reform process he had:

(a) commissioned the NSW Treasury Corporation (“TCORP”) to undertake a financial assessment of all NSW councils; and

(b) commissioned the Office of Local Government to undertake an assessment of each council’s infrastructure renewal backlog,

Byron Shire Council following that announcement worked with both authorities and its external auditors to gain a clear picture of its long term financial sustainability. In March of 2013 TCORP released the Byron Council’s “Financial Assessment, Sustainability and Benchmarking Report”.

This Report stated that Council’s financial outlook was described as “weak and deteriorating” with this assessment being based upon successive operating deficits, high debt, and a deteriorating capacity to fund infrastructure maintenance and renewal.

The Report prepared by TCORP provided an assessment of the following key areas:

· The financial capacity of the Council to undertake additional borrowings

· The long term sustainability of the Council

· The financial performance of the Council in comparison to a range of similar Councils and measured against prudent benchmarks

TCORP at that time prepared a Financial Sustainability Rating (“FSR”) and an Outlook for Council in which it assessed Council as being:

· Financial Sustainability Rating Weak

· Outlook Negative

The NSW State Government in 2014, as part of the NSW local government reform process and following the release of the TCORP Reports and the Report of NSW Independent Local Government Review Panel, announced the Fit for the Future (“FFF”) program.

Under the FFF program all local government authorities were required to submit a Council Improvement Proposal (“CIP”) by 30 June 2015. The Independent Pricing and Regulatory Tribunal (IPART) was appointed to the role of the “expert panel” and was tasked with assessing the Proposals (CIPs) and reporting to the Office of Local Government with a final assessment report by 16 October 2015.

Council had previously been assessed, as part of the FFF work undertaken by the NSW Independent Local Government Review Panel, as having the “scale” to remain as a stand alone Council, with the “capacity” of a Council to be financially sustainable in the medium to longer term. Council as such was assessed as having the “scale and capacity” to be financially sustainable and this assessment informed the IPART review of the CIP submitted by Council.

The 2013/14 and 2014/15 FSP informed and provided the foundation for the strategies and actions detailed in the CIP submitted by Council. The CIP has in turn informed the strategies and actions detailed in the 2015/16 FSP.

Council in the Report titled “Assessment of Council Fit for the Future Proposals, Local Government – Final Report October 2015”, prepared for the Office of Local Government by IPART was determined as being Fit For the Future. Council on the basis of the CIP submitted to the OLG was assessed by IPART as having satisfied the financial criteria overall and also each of the three elements of this criteria being sustainability, infrastructure and service management and efficiency.

Based on the IPART assessment of the Council’s CIP and its determination that Council is Fit For the Future, the objective set by Council in both the adopted 2013/14 and 2014/15 Financial Sustainability Project Plans that Council “in line with its stated objectives and the strategies detailed in the Financial Sustainability Project Plan the performance of Council in achieving its stated objectives will be firstly to address the outlook rating and secondly to improve the Financial Sustainability rating” has been achieved.

The focus of Council will now be on the implementation of the strategies set out in the CIP to ensure the financial sustainability of Council in the medium to long term and to further maintain its Fit For the Future rating.

The CIP set out the five (5) key strategies to be implemented by Council over a five (5) year period to enable it to be able to satisfy the seven (7) Benchmarks established by the OLG for a Council to be assessed as being fit for the future or financially sustainable. The 2015/16 FSP includes the actions from the key CIP Strategies being implemented by Council in the 2015/16 Financial Period. In addition the FSP also sets out a number of other strategies actions that have been identified to enhance and support the overall financial sustainability of the Council.

The key strategies included in the FSP 2015/16 are as follows.

· The completion of the re-structure of Council’s operations to enable capacity building

· rationalising Council’s property portfolio and associated investment strategies

· an accelerated plan for debt reduction

· investing in Council’s business activities such as caravan parks

· examining new opportunities for raising additional revenue from Byron’s growing tourist and visitor market

· increasing revenues from own source revenue activities such as paid parking schemes

· reducing operational expenditure

· increased focus on asset management programs and activities

· reinvestment of additional own source revenues in asset renewal and maintenance programs and works

· realisation of efficiency savings through strategic procurement initiatives

2. The Plan

Objectives

The objectives of the Financial Sustainability Plan are as follows:

· improve the financial sustainability of Council

· address the asset renewal funding gap

· improve Council’s asset management and maintenance systems and programs

· retire outstanding debt and progressively increase the capacity of Council to borrow for infrastructure renewal projects

· identify and realise viable and sustainable commercial opportunities

· identify opportunities for and achieve cost and waste reductions in operating and/or cost activities of Council

· identify opportunities for sustainable increases to existing recurrent revenues, and to research, investigate and evaluate opportunities for deriving new, recurrent and sustainable sources of revenue identify and pursue new and recurrent revenue sources including opportunities arising from the strong tourism/visitor market

· increase resource sharing through collaboration with government agencies and community stakeholders

· improve the overall financial performance of Council

The Financial Sustainability Plan includes a number of chapters addressing these objectives.

Chapters

The main areas or chapters of the Plan are:

· Expenditure Review

· Revenue Review

· Land Review and Property Development

· Strategic and Procurement

· Policy and Decision Making

· Potential Commercial Opportunities

· Volunteerism

· Collaborations and Partnerships

· Asset Management

· Long Term Financial Planning

The actions proposed by Council being as detailed in each of these areas

Performance Criteria

The TCORP in its Report titled “Financial Sustainability of New South Wales Local Government Sector released in April 2013” has assessed Council as

· Financial Sustainability Rating Weak

· Outlook Negative

“Weak” Financial Sustainability Rating is defined as follows:

· A local government with an acceptable capacity to meet its financial commitments in

the short to medium term and a limited capacity in the long term.

· It has a record of reporting moderate to significant operating deficits with a recent

operating deficit being significant. It is unlikely to be able to address its operating

deficits, manage unforseen financial shocks and any adverse changes in its business,

without the need for significant revenue and/or expense adjustments.

· The expense adjustments would result in significant changes to the range of and/or

quality of services offered.

· It may experience difficulty in managing core business risks.

and “Negative Outlook” is defined as:

· As a result of a foreseeable event or circumstance occurring, there is the potential for

deterioration in the local government’s capacity to meet its financial commitments (short

and/or long term) and resulting change in its rating. However, it does not necessarily

indicate that a rating change may be forthcoming.

Council through the actions that it has implemented from its adopted 2013/14 and 2014/15 FSP has made significant progress in addressing both the Financial Sustainability Rating of “Weak” and the Outlook rating of “Negative”.

The IPART assessment of Byron Shire Council (refer page 155 of Assessment of Council Fit for the Future Proposals, Local Government – Final Report October 2015”) as Fit For the Future and that in the CIP submitted by Council that its Plan satisfies the financial criteria overall and also each of the three elements of this criteria being sustainability, infrastructure and service management and efficiency, demonstrates the progress achieved by Council.

The CIP includes an assessment of the current performance of Council in the seven (7) Performance Measure/Benchmark indicators developed for the Fit For the Future program and where the Council does not currently a Performance Indicator the strategies to be implement over the next five (5) financial years, to be either meet the mandatory performance indicators or to show or demonstrate significant progress in the non-mandatory performance indicators by the 2019/2020 financial year.

Council in the CIP has provided a Plan that details the strategies and actions that will see it achieve six (6) of the seven (7) Performance Indicators, including all of the mandatory indicators by 2019/2020 and show significant improvement in the seventh indicator, being the Infrastructure Backlog Ratio by 2019/2020.

Further information is provided in Chapter 13 – Performance Measures on these performance indicators which it will be using to monitor its progress in achieving its stated objectives during the 2015/16 Financial Year.

Council in Chapter 14 has included a summary of the financial outcomes that it achieved during the 2014/15 Financial Year.

Council in Chapter 15 – Action Implementation Plan has summarised the actions proposed throughout the Plan and is the template to be used for the quarterly reporting to the Finance Advisory Committee.

3. Expenditure Review

This was one of the key strategies identified in the 2013/14 FSP and the 2014/15 FSP and is again a key strategy area in the 2015/16 FSP. This strategy is central to Council achieving the FSP objective to” identify opportunities for and achieve cost and waste reductions in operating and/or cost activities of Council”.

During the 2013/14 and 2014/15 Financial Years the General Manager established an Expenditure Review Group consisting of nominated members of staff. The role of the Expenditure Review Group was to review and assess the cost activities of Council to identify areas where expenditure maybe reduced and to make recommendations to the General Manager and the Executive Team on actions to be implemented to reduce costs and wastage, without reducing the capacity of Council in the area of service provision.

In the 2015/16 Financial Year the overarching function of the Expenditure Review Committee has been assumed into the Strategic Procurement Steering Committee. The role of the Strategic Procurement Steering Committee is by definition focussed on Strategic Procurement and the actions of this Committee are detailed and discussed further in Chapter 6.

The responsibility of the Expenditure Review Group in identifying opportunities for and to achieve cost and waste reductions in operating and/or cost activities of Council has with the implementation of the new Monthly Management Finance Reporting been delegated to Directors, Managers and responsible staff.

The new Monthly Management Reporting requires staff to be responsible for Program budgets and the expenditures incurred in the Program areas during each financial year. The same staff also play an important role in the development of Budgets for the future years as part of the Operational Plan and Budget preparation process.

The accountability of Staff for Program area budgets has meant that opportunities or recommendations for efficiencies or cost reduction is driven by the Staff involved in or responsible for the delivery of Programs and who have the best understanding of the activities, services or works. An outcome of this is that the savings or efficiency measures when implemented are owned by staff and are more successful and sustainable.

Where savings are identified and realised, the savings will also be reported to the Council through the quarterly budget review process. Any policy changes proposed as a means of facilitating improved financial outcomes will also be periodically reported to the Council for consideration.

Action Implementation Plan

1. Recommendations on expenditure savings or efficiency gains identified by responsible staff reported to the Executive Team.

2. Monthly Management Finance Reports provided to the Executive Team.

3. Monthly Management Finance Reports provided to Councillors.

4. Progress reports to the Finance Committee on the implementation of the adopted FSP actions.

5. Report to Council through the Quarterly Budget Review any identified expenditure savings.

6. Report to Council any recommendations regards policy changes.

4. Revenue Review

This was one of the key strategies identified in the adopted 2013/14 FSP and 2014/15 FSP is again a key strategy area in the in the 2015/16 FSP. This strategy is central to Council achieving the FSP objective to “identify opportunities for sustainable increases to existing recurrent revenues, and to research, investigate and evaluate opportunities for deriving new, recurrent and sustainable sources of revenue”.

During the 2013/14 and 2014/15 Financial Years the General Manager established a Revenue Review Group consisting of nominated members of staff. The role of the Revenue Review Group was to progressively make recommendations to the General Manager and the Executive Team on opportunities for sustainable increases to existing recurrent revenues, and to research, investigate and evaluate opportunities for deriving new, recurrent and sustainable sources of revenue.

The main revenue sources reviewed under the adopted 2013/14 FSP and 2014/15 were:

· paid parking

· competitive fees and charges regime

· active management and marketing of Council facilities

· sponsorship

· grow capacity to attract government grants

· identify new own revenue sources

· review of the restricted funds held by Council

The role of the Revenue Review Group will not be continued during the 2014/15 Financial Period as the roles performed by the Group have been either delegated to a dedicated Internal Staff Working Groups such as the Paid Parking Working Group or been delegated to individuals such as Directors, Managers and/or responsible staff. An example of this is the annual review of the fees and charges undertaken and reported to Council as part of the development of Revenue Policy for the next financial year.

The main initiatives identified for investigation and review by the organisation during the 2015/116 Financial Period are:

· implementation of a Paid Parking Scheme for Byron Bay

· to continue the review of adopted fees and charges and to recommend to Council increases or new fees and charges within a competitive fees and charges framework

· active management and marketing of Council facilities including the Cavanbah Centre

· to investigate and recommend new sponsorship opportunities

· examine web site advertising

· establishment of new fees and charges structures for commercial facilities such as the Tyagarah Airfield

· continue to investigate further opportunities for Council to improve its revenue recovery and collection systems to improve its cash flows

· the management of its investment portfolio to maximise interest returns whilst meeting expenditure commitments

· investigate, lobby and prepare submissions for grant funding for significant infrastructure projects

Internal Staff Working Groups will be required to report to the Executive Team on the progress achieved on the implementation of their specific initiative/s and where appropriate to also report initiatives to the Council’s Finance Committee and/or Council. Any proposed policy changes required to facilitate recommended revenue raising opportunities will also be periodically reported to the Council.

Individual staff will report and make recommendations to the Executive Team and/or Finance Committee and Council through a same process.

Action Implementation Plan

1. Internal Staff Working Groups to report to the Executive Team on the progress achieved on the implementation of their specific initiative/s .

2. Internal Staff Working Groups/ staff to report to the Executive Team any proposed opportunities for deriving new/additional revenue.

3. Report to the Finance Committee and/or the Council any proposed opportunities for deriving new/additional revenue.

4. Report to Council any recommendations regarding policy change and/ or increases to existing or new revenue sources.

5. Prepare submissions and lobby for grant funding for significant infrastructure projects.

5. Land Review and Property Development

The 2013/14 FSP activated land and property development as a key option to improve the long term financial sustainability of Council.

This element of the Plan seeks to identify potential strategic objectives and options for the holistic management of land holdings and identify a potential cash flow for Council from land/ asset development and sales that can be deployed to achieve those objectives.

Significant progress has been made in accordance with the 2014/15 plan, including:

· Roundhouse – completion of the land reclassification process to enable sale of the lots.

· South Byron STP – infrastructure demolition contract awarded and works commenced.

· Lot 12 Bayshore – REF completed, tree removal DA approved and site works commenced. Major restoration works will be completed in 2015/16.

· Station St – DA lodged and approved. S96 seeking changes prepared and lodged.

· Lot 22 Mullum – strategic assessment completed.

· Vallances Rd – purchase of Crown Rd to increase options.

The Plan continues to focus on key sites which it is believed provide Council the greatest opportunity. A program of action has been developed over the next two financial years and is presented at section 5.5.

Strategic Objectives

The following strategic objectives have informed the analysis in the Plan and are recommended to guide decision making on Council’s key operational land holdings.

· demonstrate that Council's land holdings are a key opportunity to assist with long term financial sustainability

· maximise the financial return on the investment from Council's operational land holdings

· utilise the equity in Council's land holdings to create revenue for key asset maintenance and renewal programs

· consider Council's land holdings as a portfolio of properties to be managed collectively to promote financial sustainability

· establish a funding source and capacity to develop the potential of Council's operational land holdings.

Land Register

Council’s Land Registers were updated in 2011 and reported to Council in December 2011.

There are a total of 101 individual operational land entries. The majority of land parcels could be described as of a minor nature. The Plan seeks to identify and address key sites.

Yields

Land valuation information has been obtained in relation to some key sites as a result of reporting matters to Council. Where this information is available it has been used in the Plan.

The yield assessments presented in this report are broad estimates only that can be refined as the development of any given property progresses.

Key Land Sites

The 2015/16 Plan continues to focus on the key sites identified in the 2013/14 FSPP and an additional initiative involving the sale of surplus small parcels of land has been added. These sites provide Council with the greatest opportunity for development and sale commensurate with available resources.

The key properties identified in this Plan are owned by the four Fund areas, General, Water, Sewer and Waste.

General Fund

· Roundhouse, Ocean Shores

· Lot 12 Bayshore Drive, Byron Bay

· Station Street, Mullumbimby

· Yaran Road, Tyagarah part Lot 49/881232 (adjacent to Tyagarah Aerodrome – northern side)

· Lot 22, Mullumbimby

· Bayshore Drive Works Depot, Byron Bay (Lot 102, DP1087996)

· Various small surplus land parcels (new)

Water Fund

· Fletcher Street Cottage / Old Library, Byron Bay

Sewer Fund

· Old South Byron STP site

· Old Brunswick Heads STP site

· Brunswick Valley STP, Vallances Road, Mullumbimby (including two houses)

· Bangalow STP, Dudgeons Lane, Bangalow

· Lot 4, Mill Street, Mullumbimby

Waste

· Lots 3 & 29 Manse Road, Myocum (including houses)

· Lot 15 (including the 'Bower Cottage') Dingo Lane, Myocum

· Lot 16 Dingo Lane, Myocum

BYRON SHIRE COUNCIL

13.4 - Attachment 1

Development Options and Timeframes for Key Land Sites

Key Land Site	Assumed Option	Approx Yield	2013/2014	2014/2015	2015/2016	2016/2017	2017/2018
General Fund
5.1 Roundhouse	Subdivision and sale (eleven lots)	$2,000,000	Subdivision works completed	Land reclassification process.	Complete sale.
5.2 Lot 12 Bayshore	Sale post cleanup	Unknown due to large clean up costs, however industrial land of this scale has increased in value.	Amalgamation of lots 1&2 completed. Clean up assessment completed.	Voluntary plan of management (VPM), EIS, DA and commence clean up contract.	Complete clean up contract and finalize land contamination status.	Evaluation and possible sale
5.3 Old Telstra Depot Site	Sale following rezoning	$500,000	Council has resolved to sell by process detailed in the Council resolution.	Completed Sale – proceeds restricted and used for preparation and construction of the Station St subdivision.
5.4 Station Street (* Dependent upon on sale of Telstra site)	Subdivision and sale (4 lots)	$800,000 (yield will be influenced by the scope of works necessary in Station St for stormwater, kerb & gutter, tree removal etc)	Planning, investigation and DA development	Subdivision approval and preparation of S96 to vary the consent conditions.	Subject to S96 approval and viability, complete the subdivision.	Complete Sale
5.5 Yaran Road Tyagarah Airfield	Subdivision and sale	To be determined		Investigate flood and environmental options for subdivision (from Aerodrome) and development options	DA completion and approval. Commercial assessment and potential works.	Sale or commercial lease
5.6 Lot 22 Mullum (New) (* Dependent upon on sale of Telstra site and Station Street)	Subdivision and sale	To be determined	Council workshop held regarding options, including a presentation by SASTHA on affordable housing.	Investigation, flood assessment, and options development.	Planning requirements and DA development	DA approval and commence works.	Complete works.
5.7 Bayshore Drive Works Depot, Byron Bay (Lot 102, DP1087996, 1.79 hectares) (New)	Sale	To be determined		Preliminary investigation undertaken and feasibility study prepared on the potential re-location of the Works Depot to an alternate site and sale of the current site.	Progress the assessment and optimization of depot based services.	Reassess the feasibility and options for a potential re-location.	Implement chosen option.

Water Fund
5.8 Fletcher St	Rental and development	Sale of part of a mixed development could yield a valuable long term asset with associated rental income.	Rental agreements established with the Salvation Army and Golden Breed.	Planning, investigation and assessment around options/concept plans for site, redevelopment	Business case and resolve preferred development model. DA preparation and approval.	Development implementation.	Finalize development.

Sewer Fund
5.9 Laboratory	Sale post lease	$600,000	Sold and proceeds used to part repay and refinance sewerage loan no 56.
5.10 South Byron STP	Sale post rezoning and DCP or retention as a tourism facility.	Sale $3,000,000 Annual tourism return yet to be determined.	Detailed site contamination and remediation action plan completed.	Infrastructure demolition. Future option determination. Start remediation. Start rezoning.	Future option determination. Start remediation. Start rezoning.	Complete rezoning. Finalize remediation. Commence implementation of chosen option.	Complete implementation.
5.11 Brunswick Heads STP	Remediation and open space	This site represents land that could be used for community purposes post remediation which will cost $1.5m	Commenced remediation assessment.	Complete remediation assessment.	Start demolition and remediation.	Complete remediation. Create chosen open space option subject to funding.
5.12 Brunswick Valley STP, Vallances Rd.	Sale post rezoning	$1,800,000	Planning commenced. Liaison with Lands Dept.	Complete crown road purchase.	Complete rural settlement strategy review.	Assess development options.	Implement chosen option
5.13 Bangalow STP	Sale post rezoning	$500,000	Pending	Pending	Complete rural settlement strategy.	Assess development options.	Subdivision DA. Commence works
5.14 Lot 4, Mill St	Sale	$200,000	Completed access works	Complete options review, including potential consolidation with the Vallances Rd property.	Complete rural settlement strategy.	Assess development options.	Implement chosen option eg new use, consolidation or immediate sale.
5.15 Various small surplus land parcels	Sale	To be determined			Commence sale program.	Continue program if viable.	Complete rural settlement strategy.

Waste Fund
5.16 Lots 3 & 29 Manse Road	Sale	$1,000,000	Implemented disposal contract. Landfilling ceased.	Complete Quarry Landfill DA.	Complete assessment of Quarry Landfill/ resource recovery options.	Implement chosen option.	Sell Lot 3 & 29 and use funds to pay down loans to reduce debt servicing costs.
5.17 Lot 15 Dingo Lane Myocum	Retained	NA	Quarry Landfill EIS completed.	Quarry DA assessment	Complete assessment of Quarry Landfill/ resource recovery options.	Assess retention and sale options Potential sale.	Potential sale
5.18 Lot 16 Dingo Lane Myocum	Sale	$1,200,000	Quarry Landfill EIS completed.	Quarry DA assessment.	Complete assessment of Quarry Landfill/ resource recovery options.	Assess retention and sale options Potential sale.	Potential sale

BYRON SHIRE COUNCIL

13.4 - Attachment 1

Review of Strategic Options for Land Management

The key properties identified in this Plan are owned by the four Fund areas, General, Water, Sewer and Waste. It is clear there are similarities but also differences between the circumstances of each Fund. As a result the approach and options for property development and asset sales will be different in each area.

The General Fund has limited capacity to borrow, a budget always under pressure to be in surplus, and a significant maintenance backlog for key assets. General Fund land assets in accordance with strategies detailed in the adopted CIP will be utilised to address in part these pressures. It is important to avoid a ‘fire sale’ approach but in cases where strategic land sale does occur, the sale proceeds should be (unless Council directs otherwise – e.g. to retire debt, directed to the Property Development Reserve, etc) directed to a newly created Infrastructure Renewal Reserve. Where funds are directed to the Property Development Reserve these funds will be used to facilitate any necessary expenditure required to make other potential land sites identified for sale to be sold or facilitate funding to develop retained properties so as to generate a recurrent income stream for Council. Other options include (1) for the principal in the infrastructure reserve not to be utilised but interest generated be directed as additional funding towards infrastructure maintenance or renewal; and (2) for funds accumulated in the Infrastructure Renewal Reserve to be utilised as matching funds to release Section 94 funds that are currently underutilised for infrastructure projects due to the non availability of “matching” General Fund sources. The management of this reserve could also be matched with designated investments so that the interest specifically generated by this reserve is allocated to it.

The Water Fund has a low debt servicing ratio, significant reserves and a funded capital works program going forward. Service pricing charges are at median levels. The Fletcher St property was opportunistically purchased using the Water Fund as an available source of funds rather than for any particular strategic outcomes associated with the Water Fund. The property has significant value and the opportunities for development and the need to realise financial benefits is far more aligned with the General Fund. As such, the potential transfer/ purchase of the property from the Water Fund to the General Fund remains an important consideration.

The Sewer Fund has a high debt servicing ratio (now trending downward) as a result of loans used for the completion of the major program of sewerage system augmentations. As a result service pricing charges are comparatively high and reserves have been depleted. The sale of properties could assist with the objective of bringing service pricing charges progressively back to a median value.

The Waste Reserves have been under pressure due to a range of reasons. Sale of the available land holdings at a prudent time will assist with paying down debt and alleviating the cost pressure of debt servicing charges.

Conclusion

The long term financial sustainability of Byron Shire Council is fundamental to the continuance of the local government area and the organisation. There is an imperative in focussing with renewed energy on the opportunity afforded to Council through its operational land holdings. The available land holdings, particularly in the General Fund, are not extensive and as such the stewardship of these assets is critical in creating a sustained revenue stream for key asset maintenance and renewal programs.

Progression of future options for the key strategic land holdings identified in this Plan will require prioritisation and variously need an investment of financial and staff resources.

6. Strategic Procurement

Procurement has a powerful impact on the bottom line of organisations engaged in the process of purchasing and the challenge is to extract maximum benefit to those activities. Strategic procurement is the development of, and continuous review and improvement to, a plan and framework that ensures maximum procurement benefit and ongoing compatibility with the organisation’s other deliverables and objectives. To demonstrate the importance of Strategic Procurement, Council could achieve between 0.5% and 1% savings through its procurement spend then this could have the ability for Council to save between $180,000 and $390,000 per annum. Improvements already delivered under the Strategic Procurement Roadmap are yielding expenditure savings, and the adopted Council Improvement Plan anticipates achieving the 1% ongoing from 2016/17 financial year.

The benefits of taking a strategic approach to procurement are:

· Direct cost savings through lower prices paid.

· Increased value added benefits (such as other social, economic, and environmental objectives)

· Savings achieved through improved systems and process efficiencies (including new technologies)

To leverage the maximum benefit from procurement activities, Council recently completed a strategic procurement review and implement the first 12-months of improvements:

· Review Council purchases and how much it costs to ensure best possible pricing can be achieved.

· Identify risks for Council associated with procurement activity to ensure they are managed appropriately.

· Identify Council’s strategic objectives to identify priority areas for maximum value-add benefits (economic, social, and environmental).

· Council’s procurement systems, processes, methodologies, and resourcing to identify priority areas for efficiency and productivity gains.

· Established Strategic Procurement Steering committee

· Adopted the centre-led procurement model and established roles and responsibilities

· Recruited the new Strategic Procurement Coordinator

· Participating in the NOROC Regional Procurement initiatives

· Implemented the first 6-months of strategic procurement improvement initiatives

The strategic procurement review provided a series of further recommendations, the next 12 months key actions for 2015/16 are set out below:

Action Implementation Plan

1. Develop contracts management guidelines and processes

2. Develop annual procurement plan

3. Develop and implement priority contracts program

4. Detailed spend analysis and reporting

5. Implement on-going procurement and contract management training program

6. Implement targeted program to reduce invoice numbers and transaction costs

7. Develop social and sustainable procurement and economic development plan

8. Review purchase to pay process

9. Implement purchasing cards for low value high volumed transactions

7. Policy and Decision Making

The Policy and Decision making of the Council can have short, medium and long financial implications on the sustainability of Council.

Council during its current term has taken and adopted a number of measures to assist and guide it in its policy and decision making process. In adopting these measures the Council acknowledges and recognises that not all decisions can be made based solely on achieving the objective of improving the financial sustainability of Council.

Council in its policy and decision making processes also gives consideration to other adopted infrastructure, economic, environment, society and cultural objectives.

For the purpose of achieving the objective of improving the financial sustainability of Council, the following measures are used or have been adopted by Council.

Financial Modelling and Reporting

Council under the Integrated Planning and Reporting Framework is required as part of the Resourcing Strategy, developed to support the implementation of the adopted Delivery Program and annual Operational Plan, to prepare a Long Term Financial Plan (“LTFP”) (10 years), Asset Management Plan (“AMP”) (10 years) and Work Force Plan (4 years). Further details on both the LTFP and AMP are provided in later Chapters of the FSPP.

The Long Term Financial Plan (LTFP) is reviewed and adopted by Council each year is prepared based on assumptions and predictions over a longer period of ten years.

The LTFP is used to guide Council in assessing the long and medium term implications of its decision and policy making processes and provides Council with information on the projected long term financial sustainability of Council as an organisation.

Council under the Integrated Planning and Reporting Framework is also required in its annual Statement of Revenue Policy to include its Estimates of Income and Expenditure for the following financial period (refer clause 201(1)(a) LGR 2005). This is the annual budget prepared and adopted by Council.

The Budget prepared by Council each year also includes a projection of the estimates of income and expenditure over a further three year period or the period of the four year Delivery Program. This provides Council with information on the medium term financial sustainability of Council as an organisation.

The adopted annual budget is used to guide Council in assessing the short term implications of its decision and policy making processes.

Council during each Financial Year is required by clause 203 LGR 2005 to review progressive performance against these plans not later than two months after the end of each quarter (except for the June quarter). This process is referred to as the Quarterly Budget Review (QBR), and includes by reference to the estimates of Income and Expenditure in adopted in the Statement of Revenue (budget), details the revised estimate of income and expenditure for the remainder of that financial year.

The QBR provides Council with information on the short term financial sustainability of Council as an organisation during each financial year and informs both Council and the Community of the revenue and expenditure trends against adopted Budget. Each QBR is reported firstly to the Finance Advisory Committee (“FAC”) and then Council. The reports to both the FAC and Council include recommendations from Management on required budget adjustments. The report to Council is also informed by any recommendations from the FAC on required budget adjustments.

Council at its Ordinary meeting held on 19 September 2013 resolved that it receive a monthly Finance Report for a trial period of twelve (12) months. Council at the conclusion of the trial period amended the template of the Finance Report and resolved that Monthly Finance report prepared in accordance with adopted template be distributed to Councillor on a monthly basis.

The Monthly Finance Report is used to guide Council in assessing the short term implications of its decision and policy making processes.

Council Reports

Each Report to Council includes a section on the financial implications of the actions, activities, services or programs dealt with in the Report or the Notice of Motion being considered.

The information detailed in the financial implication section of a Council Report provides Council with information on the impact of the actions, activities, services or programs dealt with in the Report, with a budget area.

Policy Framework

Council through its regular policy and decision making processes can potentially impact on the long term financial sustainability of the organisation so it is critical that the financial implications of each decision is considered carefully on the basis of its potential short, medium and long term impacts. The Council’s Long Term Financial Planning tools can now be used for effective financial modelling of potential council decisions and Council is encouraged to avail itself of this resource prior to making key decisions that have financial implications.

Council is a politically based community organisation and as such councillors are regularly pressured by constituents to support various community initiatives which often have unforseen, (unbudgeted) and recurrent financial implications. While the desire to satisfy changing community expectations is natural and understandable, the Community Strategic Plan represents a compact between the Council and its constituency and represents a discipline in decision-making by the Council. It is important that Council recognises that it can no longer be “all things to all people” and maintains the discipline inherent within this community compact.

Council at its Ordinary meeting held on 18 April 2013 adopted a policy framework to assist it and the FAC to address the short term financial sustainability of the Council during the 2012/13 Financial Year.

This framework was also applied to the 2013/14 and 2014/15 Financial Years and will, with the adoption of the 2015/16 FSP, also be applied to the 2015/16 Financial Year.

The Framework used by Council in its Decision and Policy Making processes to assess and consider the financial implications of these processes is as follows:

· That Council not pass any resolutions authorising new or additional expenditures of money unless an available funding source is identified and quarantined for that purpose.

In addition Council has determined that:

· That any general revenue funded allocated expenditure, not expended in a financial year, will NOT be automatically carried over to the next financial year before it is reviewed and priorities established.

· That in March each year that staff with budget programs in the General Fund will consider the current financial position of each of their budget programs in terms of the remainder of the financial year and that any existing expenditure items funded from general revenue (that is items not funded by reserves, water, sewer or waste revenues or specific purpose grants and contributions) not spent, be reviewed and where budgets have not been committed and do not need to be expedited, that these budgets be identified as expenditure savings.

In relation to the first dot point above, staff will be required, after the end of each Financial Year to submit a bid for any budgets to be carried over, and these bids will be reported to the FAC and then Council for consideration.

Policy Review

Council has developed over time numerous policies to establish direction and assist in implementation of operational decisions through delegation. Some Council policies could be considered to include wording that is restrictive and may not provide for timely decision making on the use of public land or for the day to day operations. It is proposed that those policies not already reviewed, be reviewed during the 2015/16 Financial Year to provide more enabling wording and guidelines to then allow more timely operational decision making through delegation.

Action Implementation Plan

1. Council continue to consider the short, medium and long term financial impacts and the context of Council’s long term financial sustainability in its on-going policy and decision making processes.

2. That any unspent budget votes from the 2014/15 budget recommended to be carried over to the 2015/16 Budget be reported to Council following the end of the 2014/15 Financial Year.

3. That the monthly Finance Report be distributed to Councillors on a monthly basis.

4. That polices that contain wording or provisions that are considered to be restrictive be reviewed to incorporate enabling wording and guidelines for Council’s consideration and approval.

8. Potential Commercial Opportunities

Council from time to time will be presented with the ability to consider a project that has a potential commercial opportunity that it could investigate and develop. Council is in the position to consider, investigate and development potential commercial opportunities both in its role as a Council and also as the Reserve Trust Manager for Crown Reserves that it controls and manages on behalf of the Crown.

These opportunities may include the development of current commercial activities such as the operation of the Council owned and managed Holiday Parks or a new commercial activity. New commercial activities may be associated with the functions that Council currently carries out such as car parking or it might be associated with a new functional area.

The Local Government Act 1993 imposes a framework on Councils regarding its involvement in potential commercial activities. The Office of Local Government has also issued Guidelines under Section 23A to provide Council’s with guidance on areas such Public Private Partnerships, Tendering and Capital Expenditure.

Council under the Local Government Act and the issued Guidelines is required, as part of its governance framework, to consider any proposal with regard to the cost, benefits and business risk to the Council and the wider community. The first consideration of Council in regard to any potential commercial activity is to whether it is within the power of the Council to participate.

Council to date since being elected in September 2012 has identified a number of potential commercial opportunities and ventures that it could consider in the future. These include:

· Development of Byron Bay Swimming Pool/Café

· Development of its Holiday Parks (First Sun and Suffolk Park)

· Development of a Multi-level car park (Byron)

· Foreshore public amenities combined with commercial kiosk/café

· Redevelopment of the Railway park Precinct including the Old Stationmasters Cottage (Byron Bay Visitor Information Centre)

· Redevelopment of the Old Fletcher Street Library Building

· Redevelopment of the Byron Bay Surf Club

· Future management and development of the Tyagarah Aerodrome

The commercial opportunities and ventures identified are located on both Council owned and managed Crown Land.

Council at an Ordinary meeting held on 21 November 2013 resolved (13-613) to fund and proceed with the development of a Masterplan for the Byron Bay Town Centre. A number of the commercial opportunities and ventures identified fall within the Masterplan area and the preliminary investigation or consideration of these projects will form part of the masterplanning process.

Following the Masterplan process, which has involved and included extensive community consultation, further detailed project investigation maybe required for these projects or of other opportunities and ventures identified during the process.

Other projects fall within separate studies or reports being prepared for Council by external Consultants. These projects include the future management and development of the Tyagarah Airfield.

Council at its Ordinary meeting held on 27 February 2014 resolved to commence the process to reclassify part of Lot 100 DP 1023737, being the land on which the Suffolk Park Beachfront Holiday Park. The reclassification process is a pre-requisite to the preparation of a Plan Management of the Holiday Park and development of Holiday Park in accordance with the adopted Plan of Management.

Management will progressively prepare and submit to Council reports on potential commercial opportunities and ventures. The reports will enable Council to consider any commercial opportunity in terms of its responsibility to the community for the prudent management of community assets and finances. Reports will need to identify the scope of any project and/or venture along with the estimated project costs including feasibility studies, probity planning, design costs and scoping costs.

The business case for and risk associated with any project and/or venture will also need to be identified.

Council in considering any proposal will need to ensure that the proposal is commercially sound and meets the Community’s needs and objectives as detailed in the Community Strategic Plan and also the Council’s objectives as detailed in the Delivery Program and the Operational Plan.

Action Implementation Plan

1. Management will progressively prepare and submit to Council reports on any potential Commercial opportunities and ventures identified in the Masterplan for the Byron Bay Town Centre.

2. Management to prepare and submit to Council reports on any potential Commercial opportunities and ventures when identified for any other specific projects, such as:

a) Future management and development of the Tyagarah Aerodrome

b) Development of Byron Bay Swimming Pool/Café

c) Redevelopment of the Old Fletcher Street Library Building

9. Volunteerism

The Byron Shire Local Government area has a high participant rate for community members in the area of volunteerism. Volunteerism is an effective way for community members to be involved in their community and for the community to assist Council in the delivery of services and activities in financially sustainable way.

Council has for many years managed a number of community facilities and hall through Committees established under section 355 of the Local Government Act 1993. The members of the S355 Committees are appointed by Council from nominations received from interested community persons who volunteer their time to assist Council with the management of the community facility or hall.

The delivery of this function or service to the community, by this means, ensures local ownership and pride in the facility or hall and also in its operation and maintenance.

Council, based on the success of this relationship and the financial and social benefits derived by Council and the community, has identified other areas for the community to assist Council in the delivery of services and activities in financially sustainable way.

To pursue these areas further, Council has developed an enabling ‘Volunteering with Council’ Policy and guidelines for Council staff to manage and encourage volunteer projects.

Since its election in September 2012, Council has identified a number of actions to considered in the future, including:

· Address and overcome the current risk averse approach

· Create volunteer network support and resourcing capacity

· Nurture and promote social enterprises

· Develop small scale “neighbourhood” infrastructure projects suitable for local volunteer groups

In the past few years Council has introduced a number of community volunteer projects including Beautify Byron Day (2013 & 2014), Beautify Bangalow (2015) as well as the establishment of the Byron Greeters and a volunteer register.

Council in the 2014/15 Financial Year, in addition to the traditional relationships that it has fostered over a number of years with S355 Committees, Landcare and Dunecare groups along with other volunteer groups on environmental and sustainability projects, is seeking to further develop the Beautify Byron Day and to also develop a number of “adopt a” projects such as:-

· Adopt a road

· Adopt a garden bed

· Adopt a park

Management will progressively prepare and submit to Council reports on these issues and opportunities.

Action Implementation Plan

1. Council to hold a volunteer recognition event, and two networking/information sessions for Section 355 Management Committees.

2. Council will update, promote and increase the number of participants on the Volunteer Register.

3. Management will progressively prepare and submit to Council reports on the areas of volunteerism.

10. Collaborations and Partnerships

This area is important to the short, medium and long term financial sustainability of Council. The importance of Council pursuing both collaborations and partnerships has been highlighted by the recommendations of the Independent Local Government Review Panel in its consultation discussion paper in April 2013 “Future Directions for NSW Local Government – Twenty Essential Steps” for the North Coast Councils.

In the discussion paper the Independent Local Government Review Panel is recommending that a new regional Joint Organisation (“JO”) be established including all NOROC Councils that will undertake a broad range of strategic functions to support the member Councils.

Council to date since being elected in September 2012 has not resolved to investigate any potential opportunities for a collaboration or partnership but has identified number areas that it could consider in the future. These areas include:

· Establishment of a Joint Organisation

· Shared services

· Joint strategic procurement

· Collaborate with government agencies and community organisations in delivering shared projects and outcomes

· Support local events and grow “user pays” visitor economy

· Explore shared regional strategic planning opportunities

· Activate collaborative arrangements outlined in and supported by Council’s MOU with Southern Cross University

Initiatives flowing from the NSW Local Government Reform process support improved collaboration between councils and regional organisations. In an era where resources are increasingly scarce it makes good sense to work together with government agencies, regional organisations and community stakeholders to deliver shared outcomes which give communities a better “bang for their buck” and eradicate unnecessary duplication and waste.

It is important though for Council to document these actions as part of the Financial Sustainability Project Plan, to not only place these actions on the record, but to also to put itself in a position to pursue any opportunities that may arise as the LG landscape changes.

Council during the 2014/15 Financial Year continued to investigate and implement where feasible a number of Agreements or Memorandums of Understanding with other Councils and Organisations. These Agreements were prepared to assist with the sharing of services, assets or resources.

Management will progressively prepare and submit to Council reports on any opportunities for a collaborative or partnership relationship.

Action Implementation Plan

1. Management will progressively prepare and submit to Council reports on any potential opportunities for a collaboration or partnership.

11. Asset Management

Council has an adopted Asset Management Policy (E2015/27107)

Council has an adopted Asset Management Plan (#DM1252114) and this document will be updated in 2015/16.

Byron Shire Council is the custodian of over $800 million of community assets which enable council to provide services to the community. These include roads, drains, bridges, footpaths, public buildings, recreational facilities, parks, gardens, water, sewerage and waste assets. A large number of Council’s services to the community are delivered through infrastructure assets.

The DLG Planning and Reporting Manual states, “as custodian, Council is responsible for effectively accounting for and managing these assets and having regard for the long term and cumulative effects of its decisions. This is a core function of councils and is reflected in the Charter in 28 of the Act”.

Asset management is defined in the International Infrastructure Management Manual (IIMM) as, “ the systematic and coordinated activities and practices of an organization to optimally and sustainably deliver on its objectives through the cost effective lifecycle management of assets”.

The IIMM sets out how an organization can develop its asset management capacity and capability through increasing maturity levels from a minimum standard to core, then intermediate and finally advanced. Council is continuing to develop its asset management capacity and capability. This will allow Council to increasingly address the growing drivers from all levels of government to improve asset management and thereby provide continuity of services to the community on a sustainable basis.

Council has addressed the requirements of the NSW Fit for Future Program for infrastructure management and asset management in the Council Improvement Plan (E2015/38307)

Council is also addressing the requirements of the NSW Local Government Asset Management audit preparedness assessment.

The following actions in 2015/16 support achievement of these outcomes.

Action Implementation Plan

1.	Prepare an infrastructure report for the Fit for Future program	Special Schedule 7 report, complete
2.	Revalue community land, other assets and land improvements to support Fit for Future reporting	Valuations, completed by 30 June 2016
3.	Implement the newly completed asset service plans to address Fit for Future program priorities	Service plans implementation, progressing
4.	Improve the level of asset information to better assist decision making and focus the deployment of asset management resources	Critical asset data improved, = high level of confidence
5.	Develop capital investment strategies and plans that target sustainability and our Fit for Future program priorities	10 year capital plans aligned with Fit for the Future priorities, compete
6.	Creatively develop new and revised funding strategies for better community outcomes	Development charging plans reflect community priorities, complete
7.	Engage with the community on the challenges of asset management	Community Infrastructure Advisory Committee meetings, quarterly

12. Long Term Financial Planning

The need to develop a Long Term Financial Plan (LTFP) is a requirement of Section 403(2) of the Local Government Act 1993.

Council is required under the Integrated Planning and Reporting framework to review its LTFP annually.

The LTFP provides a framework in which a Council can assess its revenue building capacity to meet the activities and level of services outlined in its Community Strategic Plan, Delivery Program and Operational Plan. It also:

· Establishes greater transparency and accountability of Council to the Community.

· Provides an opportunity for early identification of financial issues and any likely impacts in the longer term.

· Provides a mechanism to solve financial problems as a whole, see how other plans fit together and understand the impact of some decisions on other plans or strategies.

· Provides a means of measuring Council’s success in implementing strategies.

· Confirms that Council can remain financially sustainable in the longer term.

The LTFP must support or provide for the following essential elements:

· Must be used to inform the decision making during the finalisation of the Community Strategic Plan and the development of the Delivery Program.

· Must be for a minimum of 10 years.

· Must be updated at least annually as part of the development of the Operational Plan.

· Must be reviewed in detail as part of the four yearly review of the Community Strategic Plan.

The basic structure of LTFP must include the following:

· Projected income and expenditure, balance sheet and cash flow statement.

· Planning assumptions used.

· Methods of monitoring financial performance.

· Sensitivity analysis and modelling for different scenarios.

Council at its Ordinary meeting held on 17 September 2015 resolved via Resolution 15-427:

‘That Council adopt the updated Draft Long Term Financial Plan 2015-2025 for the General Fund

and that the overall Long Term Financial Plan be further updated upon completion of the Water

and Sewerage Business Plans’.

The 2015-2025 Long Term Financial Plan has also been updated to include the Fit for the Future benchmarks as performance indicators and is reflective of the five scenarios lodged by Council to the Independent Pricing and Regulatory Tribunal (IPART) as part of Council’s endorsed Council Improvement Proposal (CIP).

The 2015/2016 Budget Estimates were adopted by Council form the base year of the 2015-2025 Long Term Financial Plan but it only contains information relevant to the General Fund.

During the course of the 2015/2016 financial year, the Long Term Financial Plan 2015-2025 will be updated and reported to the Finance Committee to include the consolidation of Water and Sewerage business plan information once received.

In addition it is proposed to develop the 2016-2026 Long Term Financial Plan as part of the 2016/2017 Operational Plan process with adoption anticipated at the time Council adopts the 2016/2017 Operational Plan prior to 30 June 2016.

Action Implementation Plan

1. Update the 2015-2025 Long Term Financial Plan with Water and Sewerage business plan information during the 2015/2016 financial year.

2. Develop the 2016-2026 Long Term Financial Plan in conjunction with the 2016/2017 Operational Plan and report to the Finance Advisory Committee/Council prior to 30 June 2016.

13. Performance Indicators

The success of any plan after the initial and ongoing implementation needs to be measured. This is also true for Council’s Financial Sustainability Project Plan (FSSP). To do this, Council needs to be able to identify what improvements have been made to the overall financial sustainability of Council, over time through the implementation of the strategies/actions contained in the FSSP.

Performance indicators are a tool to demonstrate the achievement of the FSPP strategies/actions.

The outcomes from the implementation of the FSPP 2014/15 have been identified in the earlier chapters of this document with the financial outcomes summarised in Chapter 14 - Summary of 2014/15 Financial Outcomes. The financial outcomes for the FSPP 2015/16 will be measured as follows:

· Through quarterly reporting to the Finance Advisory Committee (FAC) and Council on FSPP outcomes.

· The recognition of new or increased revenues and / or with expenditure savings (financial outcomes) will be recognised through the QBR process. Structural changes to both revenue sources and expenditure will be updated in the base budget during the preparation of the 2016/17 Budget. The financial outcomes delivered by the FSP will then flow into the Council’s Long Term Financial Plan.

· Comparison and assessment of the Note 13 and Special Schedule 7 performance ratios disclosed annually in Council’s audited financial statements which should indicate a trend improvement from FSPP outcomes.

· Ongoing monitoring of the seven benchmarks established for the NSW Government ‘Fit for the Future’ regime to ensure Council maintains it’s ‘Fit’ Outcome.

Action Implementation Plan

1. Ongoing quarterly reporting to the Finance Advisory Committee (FAC) and Council on FSPP outcomes.

2. Recognition through the QBR process of financial outcomes delivered by the FSPP.

3. Structural changes to both revenue sources and expenditure will be updated in the base budget during the preparation of the 2016/17 Budget.

4. The financial outcomes delivered by the FSPP updated into the Council’s Long Term Financial Plan and modelled in the Long Term Financial Plan Scenarios.

5. Assessment of the Note 13 and Special Schedule 7 performance ratios disclosed annually in Council’s audited financial statements which should indicate a trend improvement from FSSP outcomes.

6. Assessment of the seven ‘Fit for Future’ benchmarks on an ongoing basis to ensure Council maintains the ‘Fit’ outcome.

1. Overview

2. The Plan

3. Expenditure Review

4. Revenue Review

5. Land Review and Property Development

Strategic Objectives

Land Register

Yields

Key Land Sites

Development Options and Timeframes for Key Land Sites

Review of Strategic Options for Land Management

Conclusion

6. Strategic Procurement

7. Policy and Decision Making

8. Potential Commercial Opportunities

9. Volunteerism

10. Collaborations and Partnerships

11. Asset Management

12. Long Term Financial Planning

13. Performance Indicators

14. Summary of 2014/15 Financial Outcomes

15. Action Implementation Plan