Prudent financial management has created a budget surplus for the benefit of the Boroondara community.
The surplus of $41m is not a profit, it is funds carried forward and is the result of deliberate financial planning and some unexpected increases in revenue. At the beginning of its term four years ago Council recognised the need to reduce its debt to create future capacity for rate reductions and an ability to respond to community needs. Each year of the four year term saw a reduction in rates. Significantly, the surplus has been created to enable Council to reduce debt in 2018 by paying down a $29m loan in 10 years instead of 20 years. This saves the community $9.8m.
Included in the surplus is funding in excess of $8m for capital projects carried forward, $3.8m for repayment of borrowings and $2m allocated to reserves for the acquisition of additional open space, completion of future drainage works and funds to respond to any future call by the superannuation fund. An additional $1m has been carried forward to complete a range of community projects.
Additionally, approximately $21.5m of the $41m surplus is required to fund debt repayments from 2018 – 2026 and to fund future capital renewal requirements. Council has a strong record in investing to maintain its building assets which for many decades had not been adequately maintained. Boroondara’s surplus enables Council to address the backlog in asset renewal. This is reflected in a report by the Auditor General which acknowledged that for the 2015 financial year, Council invested 44% more than simple replacement costs to bring the community’s buildings up to standard as compared to a sector average of 14%. This deliberate strategy has placed Council in a sound position for the future.
Perhaps there has been no greater evidence of this than Council’s ability to respond to the government’s introduction of rate capping based upon CPI. A 2.5% cap on rates when compared to the revenue anticipated through Council’s long term financial strategy has cost $130m over 9 years. The creation of surpluses through prudent financial management has enabled Council to meet this significant reduction in revenue without reducing services to the community or compromising the standard of maintenance on community assets. This is why responsible financial management to create future capacity through a surplus is critical to providing quality services and assets to the community.
With best wishes,
Councillor Jim Parke
Mayor of Boroondara