KEMPSEY Shire Council is projecting a $1.9 million operating profit in its 2015-16 budget.
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Council general manager David Rawlings told The Macleay Argus the $1.9 million surplus was due to two reasons.
“The first factor is that we expect the revaluation of the roads assets will dramatically reduce depreciation expenses, and the second factor is that we will have a couple of large capital grants coming in which lift revenue, but the funds are spent on assets,” Mr Rawlings said.
“The following year we will fall back into a loss, but much smaller than in the past of around $2.4 million."
Mr Rawlings said the biggest issue for the council was actually not what is in the budget, but what is not in the budget.
“Based on current information, what we will be spending to maintain our assets is $7 million less than ideal,” he said.
“Not spending funds on maintenance means that the assets we have don’t last as long, falling into poor states quicker than they should, meaning they cost more to provide.
“We need to do more work on seeing what maintenance is carried out in other ways, such as by community groups, and make sure we get a good handle on the actual shortfall.
"This will be something to do as we develop service standards and review how we provide those services.
“At the end of the day there is likely to have to be either a reduction in the amount of assets we provide or increased revenue, as efficiency improvements cannot offset a gap in the amount of funds required to do the job.”
Despite the $1.9 million surplus, state government bean counters are still putting the council books in the red by insisting the council not include capital grants income.
Due to this, if council was to meet the state government's Fit for the Future criteria, rate increases of $1.7 million would be required within five years, even though the council expects to gain capital grant income which would cover those costs.
“Council has to calculate whether it is sustainable for the NSW government,” Mr Rawlings said.
“In that calculation we have to remove all capital grants and contributions. This means we will still be showing as not financially sustainable.
“Regular and ongoing capital income shows the general activities coming close to break even over the longer term, with water and sewerage operations still continuing to make losses for some years.”
Mr Rawlings said low interest rate returns and federal government cuts to Financial Assistance Grants had also hammered the revenue available to council in the 2015-16 budget.
“The council has had increased costs which we have had to cover and have done,” he said.
“Through another round of budget adjustments we reduced our overall costs by another $700,000 per annum. This brings the total we are up to in efficiency changes to $3.2 million per annum.”
Mr Rawlings added the 2015-16 budget allows council to include some upgrades to playgrounds and parks, in addition to the ongoing road works.
“We have found ways to start to fund some extra things, such as the toilet block at Crescent Head, and the community will enjoy using those renewed items,” he said