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Saturday
Jul212018

Answers To My LTP Submission

Here are the three main objections to the content of the Draft Ten Year Plan that was presented back in February with the answers as provided yesterday by Policy & Planning Manager Scott Summerfield  appended followed by my further comment:

1. The first relates to the long overdue decision to stop using depreciation reserves for building new assets rather than preserving the reserve for the purpose of replacing assets for which the depreciation has been set aside. The net result of this foolish, and possibly illegal policy is that the depreciation reserve cupboard is now bare with a mere $6.8m remaining, and with our Council facing $168m of 'renewals.' 

This reversal, and the stated intent to rebuild these reserves to $124m by 2028, while acquiring new assets of $126m appears contradictory, particularly in the light of the intent to eliminate external debt. It seems to me that this can only be accomplished through internal debt to its mandated limit, and a substantial increase in rates far beyond that already signalled in the financial projections accompanying the LTP.  There is something 'screwy' about these figures that need better explanation, particularly as we appear to have been misled over the term of the last Plan, based on the use of depreciation reserves as outlined above.

"The balances of the depreciation reserves have be  updated in the final plan to $104m by the end of 2027/28. The replacement of assets is estimaed to be $169m.

Counil is addressing the issue of funding for future renewals by only using depreciation for renewals, not new assets...."

[Then followed a whole lot of palaver about "intergenerational equity," and changing the "balance" between internal and external borrowing, but basically I count the response a major win through 'shaming' them into this radical change. Scott goes on to claim that the extraordinary discrepancy between the build -up of depreciation reserves and new asset expenditure - several hundred million dollars, does not signal a substantial increase in rates. 

2. And secondly, the question of asset re-valuations of from $24m to $58m annually, totalling $347m over ten years was raised in consultation at the outset of the previous 2015/2025 LTP, and never satisfactorily explained. Para 87 of the Regulatory Impact Statement accompanying the Local Government Financial Prudence Regualtions (2014)  states clearly that "These transactions provide local authorities with no financial resources to meet their outgoings,. Therefore they should be excluded from a balanced budget measure."

The proffered Financial Strategy on this occasion makes no mention of asset re-valuations, so that we are left in the dark as to their effect of the ciurrent projections, and claimed 'balanced budget,' if any. I believe that Council has an obligation to disclose this information for the purpose of consultation, and seek an immediate explanation. I should add that the previous CFO was unable to give an unequivocal assurance at the time that it complied with the Regulatory Impact Statement.

"There is no requirement to disclose asset revaluation information in the financial strategy. Current asset revaluation projections are included in the financial statements in the final LTP."

[My point was to simply high-light what we have all been aware of - that Council has long adopted the habit of assuming regular and substantial re-valuations of assets as a convenient means by which to 'balance the books.' It is not new, or illegal, just illusional accounting that hides the true state of our Council's finances as suggested in 1. above.

3. The other issue that remains the 'elephant in the room' that must be faced relates to the incredible proposal to reduce coastal and hazard management from $6.68m to $3.88m in this period just when all indications point to the need to increase the provision substantially.

 "You will note the the decisions document includes additional funding of almost $2.6m has been provided"

[I wiould suggest that that is another major win for which Denis Tegg can legitimately claim the substantial credit.]

I don't consider that there is anything else of note to comment on in this regard, except to say that I consider that Scott has done his job in an exemplary manner - not a common compliment proffered in these posts. It remains to be seem just how well  the decisions are implemented.

 

 


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