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CVC’s budget, with director Ashley Lindsay

The Clarence Valley Independent had a chat with Clarence Valley Council’s corporate director, Ashley Lindsay, about the council’s budget, which is on exhibition until 4pm, June 10. Clarence Valley Independent: What are some of the positive features of the budget for ratepayers, and forward into the long term plans? Ashley Lindsay: The council has been able to continue funding its services, with a … 2016/17 projected general fund deficit of $84,865. That is without any SRV funding. The difference between the [6.5 per cent] SRV and the rate page [1.8 per cent] will be spent directly on roads-related maintenance and renewals. The SRV [application] really doesn’t impact on council’s continued operations. In the capital works list, we’ve allocated a further $210,000 for the playground renewals. There’s also funding for upgrades to Jacaranda Park … there’s a focus on renewals of council’s buildings and park areas [and] on trying to address our asset maintenance obligations, to peg back the asset maintenance funding gap … and backlog of works. There is continued funding for renewal of the South Grafton pool … there’s funding allocated to renew the amenities at the Maclean pool and painting and tiling. There is funding for the [proposed] south Grafton depot … pending the outcome of the tender and formal resolution to proceed with the project. CVI: In the extraordinary meeting’s business paper, in the background section, the rate levy advice regarding minimum base rates across the rating categories for the 2016/17 financial year outlines identical scenarios, apart from a higher rate of $529 (with 6.5% SRV) and $506 (at 1.8% rate peg) for ‘Residential Outside Town Areas and Residential A – Coastal Villages’. Can you explain how the increases can be much the same across the categories? AL: The other categories are in a different rates structure – the base amounts in those categories are all increasing by $30; except for Grafton, where the base amount at the moment is $390. Even if the SRV doesn’t succeed, we will continue with the strategy of trying to get consistent base amounts across all of the categories. CVI: So the actual projected increases aren’t all included in the base rate, but included in the total yield – when you break that down to costs for each ratepayer, what’s the real outcome? AL: It depends; the lower value properties increase by more than the 1.8 per cent [rate peg limit]. A property in Maclean, with a land value of $63,700 … the base amount goes from $320 to $350, so for the proposed rates without the SRV it is a 3.2 per cent increase in the base amount. The higher base amount [for the Maclean example above, and other like areas] provides some relief to the higher valued properties. A property in River Street Maclean valued at $250,000, they’ll receive a small rate reduction. With the 6.5 per cent SRV, the lower value property … will get a 7 per cent increase, and the higher valued property gets a 5.7 per cent increase. This is a part of CVC’s strategy to get a consistent base amount for properties across the valley. By 2018/19 all properties on a base amount, both residential and business, will all be on a base amount of $420, apart from Residential Outside Town Areas and Residential A – Coastal Villages; they remain on the minimum structure, largely because of the high value of properties in those areas. Farmland is not adjusted. CVI: CVC’s projected debt on loan borrowings is $129.75m, which is $44,230 a week in interest (or a total of $2.3million over the year – the principal component is another $5.8m for the year); how does CVC propose to get to the $110m max limit indicated by the Ernst and Young review? AL: We looked at the loans [some time ago] that we could refinance, about $42m. For the rest of the debt [at that time] the [early payout] costs were significant; so we’re locked into paying that debt within existing [fixed interest rate] terms – the costs to break the loan far outweigh the benefits of trying to reduce the debt. CVI: How did that debt blow out from around $51m on June 30, 2007 to a peak of $135.8m in 2015? AL: Primarily, CVC’s debt has increased because of the significant investment council has made in securing our sewer and water infrastructure. There were significant borrowings for the construction of the Shannon Creek dam. In 2007, the debt for the water fund was $6.6m, and the sewer fund was $23.1m. The general fund debt was $21.3 in 2007. The general fund debt now, including domestic waste, is $27.2m, an increase of $5.9m; the rest [of CVC’s debt] is for water and sewerage. [Accounting consultants] Ernst and Young said our borrowings were greater than the organisation’s capacity to service, but we are servicing them through the water and sewerage funds [through the collection of W & S charges], because that’s where the majority of the debt lies. Our strategy is to pay down those debts. We borrowed $8m to build the recycling plant [as required by the NSW Government and also as part of the three-bin collection system]. The domestic waste charge is servicing that debt. From a general fund perspective, it’s not out of control. CVI: Cr Baker argued (at the extraordinary meeting to approve the draft budget and operational papers) that CVC should not spend $20m of its cash reserves to pay “cash up front for cars and machinery and new buildings … and a great big new depot”: can you explain how the council is using those cash reserves and how it is a better outcome to make CVC fiscally sustainable? AL: He has an alternate view; he is saying, effectively, that we shouldn’t own our renewable assets; we should lease them. Part of the Uniqco fleet review [consultancy]; they said to us that there is no real advantage in leasing the light vehicle fleet. What they did say was that when we go to replace the graders and the trucks, the high regular usage vehicles, we should look at leasing … that’s what we are proposing to do. CVI: The budget papers say that a strategic review of all services and service levels was conducted from January to March 2016, from the perspective of reducing or eliminating services wherever possible and devising programs and strategies to contain rising costs and improve efficiencies, resulting in a decrease in various operating costs. This, I believe, was tabled in a confidential session at the March council meeting and identified $850,000 in savings. This is lot different to last year’s decision to review and or “at least eliminate” 24 services; when is the council likely to go further with that decision? AL: The changes we are making are incremental in that the general manager has to find $7.4m [over five years] in savings. Irrespective of whether the SRV is approved, or not, we are looking at ways we can achieve that – it has to happen – we still have to meet the Fit for the Future criteria to reduce our costs. To meet those benchmarks we have to spend more – that’s the problem – we have to spend more maintaining the road network … and we can’t reduce the backlog without spending more money. CVI: On the proposed super depot, Cr Baker said at the extraordinary meeting: “We have a report already with a long list of exclusions – there are no dollar figures beside them – just items. So I have to use estimates here. The exclusions ‘extras’ will add a likely $5.3 million to $8.3 million to this depot project.” Is what Cr Baker said correct? AL: I cannot enter into that, you would have to ask the general manager or [works and civil director] Troy Anderson … I don’t know what the exclusions are. CVI: At the extraordinary meeting, Cr Simmons said that CVC hadn’t achieved the supposed savings that amalgamation would bring, that CVC hadn’t done much about it over those 12 years and that CVC “had probably worsened its long term sustainability position by continuing with general fund borrowings”; what is your position on that statement? AL: The actual general fund debt is $22.3m, excluding waste; if you look back to 2007, the balance of the general fund has only increased by $1m – domestic waste is $7.6m. The argument that the general fund is out of control is not right. Since Scott’s [Greensill] appointment, his focus has been on not borrowing for the general fund. We’ve funded our capital works by borrowing but, as we paid it off, we have borrowed more and it’s stayed at [about] the same level. Note: this is an edited version of the interview