Minutes of Finance Committee

Finance Committee 5 18 October 2018

6.1 ASSET MANAGEMENT REPORT

SUBJECT INDEX:
STRATEGIC OBJECTIVE:	Assets are well maintained and responsibly managed.
BUSINESS UNIT:	Engineering and Facilities Services
ACTIVITY UNIT:	Asset Management
REPORTING OFFICER:	Asset Coordinator - Daniel Hall
AUTHORISING OFFICER:	Director, Engineering and Works Services - Oliver Darby
VOTING REQUIREMENT:	Simple Majority
ATTACHMENTS:	Attachment a Reserve Funding Overview Attachment b Example increase in Annual Building Replacement Value Attachment c Annual Percentage of Attachment C Replacement Value Allocated to Reserves by Hierarchy Attachment d Allocation of Annual Renewal Funding Attachment e Overall Ten Year Building Allocation funds to Specific Reserves Attachment f Overall Ten Year Building Allocation funds to Specific Reserves

9.45am At this time the Chief Executive Officer entered the meeting.

PRÉCIS

The purpose of this report is to provide the Finance Committee with asset management information relevant to the financial management of the City of Busselton. It outlines various activities and how they may or may not impact the financial management of the City. It is not intended as an exhaustive list of all of the asset management undertakings for the period, but is rather a targeted report detailing issues relevant to the Finance Committee.

Asset Management Report

Building Funding Plan - Overview

The recent and planned growth of the buildings portfolio has created the need for a more flexible approach to allocation of annual renewal funding for buildings. This funding has historically been allocated through the Capital budget as a standard amount each year with incremental increases for inflation. This annual amount must be spent within the allocated year and underspent funds are not able to be added to the following year’s budget. This provides certainty for the annual amount available, however has limitations in situations where the value of the critical projects may be less than the budget allocation for that year, creating the need to ‘fill the budget’ with projects that may not be absolutely necessary.

In this current structure, the predetermined annual budget drives the allocation of renewal projects.

The Progression of the City’s Buildings Asset Management Plan has highlighted the need for the annual budget process to be more flexible in terms of the amount to be allocated each financial year. The allocated amount needs to be driven by the current prioritised projects for buildings rather the pre-determined budget allocation driving the amount of projects to be delivered.

In order for the required projects to drive the annual budget, a structure has been put in place to allow for variations within the annual budget allocation from year to year. Reserve accounts have been established in which to allocate funds and draw upon when they are required.

Funds in a Reserve Account are not tied to being spent in any particular financial year which provides the required flexibility to the Building Renewal funding.

The funds can remain in the account until such time as works are scheduled through the various avenues as outlined in section two of the methodology.

This represents a major change in how the City approaches building renewal funding and for this reason, detailed modelling has been undertaken to determine how funds will be apportioned and how the change will be managed in the long term.

An overview of the funding plan outcomes is provided in Attachment A. It shows the funds to be allocated to Reserves for the purpose of funding renewal of buildings. How this has been determined is detailed within the methodology section.

Building Funding Plan – Methodology for How the Funds Are Allocated

The methodology for determining the annual amount to be allocated to the reserves is based on the following criteria;

1. Building replacement cost,

2. Annual Inflation of building replacement cost,

3. Apportion of funds based on building SLH; and

4. Building Asset Management Reserves

Building Replacement Costs

The replacement costs are based on the Rawlinson’s Australian Construction Handbook, 2016. The handbook provides the average cost range for a wide selection of typical buildings. CPI has also been added to the values to ensure they are relevant for 2018. Table 1 provides an example of the current replacement value for Alan Street Ablutions in preparation for annual inflation.

Table 1 Example Building Replacement Cost

Description	Current Replacement Value
Alan St Ablutions	74,880

Annual Inflation of Building Replacement Cost

The inflation applied to the annual replacement cost of buildings is determined by the Non-Residential Building Construction Index, provided by the Australian Bureau of Statistics [ABS]. Advice received from the Western Australian Local Government Association [WALGA] suggests that the index will increase by two percent in both 2018-19 and 2019-20. This has then been applied across the ten years for the purpose of this exercise. It will however, be subject to ongoing review and update. Attachment B provides an example of how the current replacement cost is increased per annum in accordance with the index.

Once the building values have been established, the next step in the process is to apply the amount to be allocated for renewal per annum. This is done by applying an annual percentage to the building value for that year i.e. the building values shown in attachment B. The annual percentages to be applied are based on the criticality and importance of the building (Service Level Hierarchy) and are shown in Attachment C.

The intention of the funding plan is to maintain these buildings at the required standard until such time as they require replacement, refurbishment or significant upgrade. It is anticipated that the reserve will have a balance of funds at this point to contribute towards these works, however is not intended to fund the major upgrade, expansion or new works.

As outlined in Table X below, buildings receiving four percent in 2028/29 are SLH 1, indicating that they are high use buildings that are critical the ongoing operations and service provision of the City. They would therefore be required to be maintained at higher standard and be required to be replaced sooner to cater for the evolving requirements of the community.

Buildings receiving two and a half percent in 2028/29 are less critical, lower use or leased buildings with reduced City management obligation and would generally not require replacement, refurbishment or significant upgrade until after a forty year period.

Buildings with no annual allocation are buildings with little or no use or are leased and the City has no obligation to maintain them. At the end of their useful lives, these buildings will generally be decommissioned, demolished, subject to third party renewal responsibility or grant funding application. An annual allocation has been apportioned ($100,000 plus CPI) within the funding plan to allow for City contributions to grant funding as required.

Once the annual replacement value and apportioning percentage have been determined, the next step in the process is to allocate an annual renewal funding amount. This is achieved by multiplying the annual replacement value and the annual apportioning percentage to determine the amount to be allocated. In the example shown in Attachment D, the replacement value for each given year is multiplied by the percentage for that year. In 2018-19 the replacement value of $74,880 is multiplied by the corresponding percentage of 1.5 to provide an annual allocation of $1,123.

Building Asset Management Reserves

There are a total of fifteen current reserves established for the purpose of funding building renewal and another four are planned to be established as new buildings are constructed. Table X provides a breakdown of the current and planned reserves and gives a description of the buildings that are funded by the reserve.

Table 2 Current and Planned Building Renewal Reserves

Reserve Name – Current	Description of Buildings Funded
Aged Housing Residents Funded Reserve	Council owned community housing
Airport Infrastructure Renewal Reserve	All current and future buildings associated with the operation of the Busselton Margaret River Regional Airport. This reserve also funds all other infrastructure, plant furniture and equipment
Barnard Park Building Reserve	Barnard Park Sports Pavilion
Building Asset Renewal Reserve	All other buildings not funded by another reserve. This includes community use elements of fire sheds constructed by the City.

Busselton Jetty Tourist Park Reserve	All current and future buildings associated with the operation of the Busselton Jetty Tourist Park. This reserve also funds all other asset renewal requirements for the park.
Busselton Library Building Reserve	Busselton Library
Civic and Administration Building Reserve	Civic and Administration Building
Community Resource Centre Reserve	Community Resource Centre. Council is responsible for 50% of the renewal requirements for this building and other users are responsible for 50% also.
Geographe Leisure Centre Building Reserve	Geographe Leisure Centre
Jetty Maintenance Reserve	Underwater Observatory and Jetty Interpretive Centre. This reserve also funds renewal and maintenance requirements of all other elements of the Jetty Structure.
Joint Venture Housing Reserve	Community Aged Housing at Winderlup Villas and Harris Road pursuant joint venture agreements with the Department of Housing. This reserve also funds operational and administrative costs.
Naturaliste Community Centre Building Reserve	Naturaliste Community Centre
Railway House Building Reserve	Railway House. The allocations to this reserve are split between the City and other users of the building. The City contributed 50% of the requirements.
Waste and Facilities Plant Reserve	All current and future buildings associated with the operation of waste sites both within the district and regionally. This reserve also funds waste site development and rehabilitation and acquisition of waste plant and equipment and any other waste management activities that may include contaminated sites with the district.
Youth and Community Activity Building Reserve	Youth and Community Activities Building. The Surf Life Saving Club are also required to allocate funds towards future maintenance also.

Reserve Name – Future
Yalyallup Sports Pavilion Renewal Reserve	Future Yalyallup Sport Pavilion - 2024
Dunsborough Lakes Community Pavilion Renewal Reserve	Future Dunsborough Lakes Community Pavilion - 2029
Performing Arts and Convention Centre Renewal Reserve	Future Performing Arts and Convention Centre - 2026
Vasse Sports Pavilion Renewal Reserve	Future Vasse Sports Pavilion -2026

Based on the allocated Reserve for each building, the calculated funds are to be placed in the reserve in preparation for annual renewal works as required. Attachment E provides an overview of the funds to be apportioned to the Reserves over ten years. This table provides the overall amount required, however there is further refinement required to determine the exact annual impact on the City’s municipal funds.

Some of these reserves have income streams other that the City’s main source of funds known as ‘municipal funds’. These other income streams include income from tenants and leases or income from commercial activities undertaken at the site.

The planned future reserves indicate when the City is required to allocate renewal funding, following building construction and building defects liability period of twelve months.

Building Funding Plan – Methodology for How the Funds Are Spent

The allocation of funds into the reserves is based around an anticipated distribution within pre-determined parameters; however, how the funds are actually spent requires further assessment to understand the buildings current condition, cost of components to be renewed and other factors affecting whether renewal works are required at the time. Funds from reserves are allocated through the annual budget as works are required. Renewal works are generated through the following avenues.

1. Asset Management condition assessments,

2. Facilities management identification of major maintenance items requiring a capital allocation,

3. Community and user group requests,

4. Complimentary renewal works undertaken as part of a major upgrade or expansion project;

5. Council requests and budget bids; and

6. Separate Master Planning Activities linking with the Asset Management Plan.

Asset Management Condition Assessments

Asset management condition assessments are undertaken on a regular basis, however each year in the lead up to the annual budget preparation certain buildings will receive a detailed condition inspection. These buildings are those noted as being poorer condition, high use, or reaching the end of their useful lives. These inspections are undertaken in conjunction with the facilities management team also.

In conjunction asset condition assessments, Asset Management officers also undertake assessments of performance of existing buildings. This assessment of performance considers elements such as physical condition, required and expected performance standards, current and expected future utilisation and capacity of the asset to meet requirements.

The asset management condition and performance assessments also generate a guiding plan for required building renewal works over ten and twenty years. This is required as a means of linking the anticipated works with Long Term Financial Planning.

Facilities management identification of major maintenance items requiring a capital allocation

The facilities management team carry-out maintenance works as required to City managed buildings. Through this work they gain a good understanding of renewal requirements for buildings and this information is assessed when determining the budget projects.

Community and user group requests

As regular users of the buildings, community and user groups often provide feedback on the current functionality and condition of buildings. This information is taken into account when deciding upon upcoming budget priorities.

Complimentary renewal works undertaken as part of a major upgrade or expansion project

Renewal works are sometimes undertaken in conjunction with a larger project for the same building. This provides savings in terms of contractor mobilisation and economies of scale for the amount of work being performed. This can trigger renewal works ahead of time, however provides the best benefit to the overall operations of the building or facility and the best value for money.

Council requests and budget bids

As the elected representatives of the community, the Council is able to request and debate potential renewal projects for buildings. This is provided through the annual budget process. This ensures that the community is able to have input into potential projects.

Separate Master Planning Activities linking with the Asset Management Plan.

Buildings associated with larger facilities such as sports grounds, foreshores and Leisure Centres are often included within a master plan outlining the future renewal and upgrade requirements for the whole facility. These master plans are undertaken to ensure that all works undertaken with a view to the short, medium and long term requirements. Again, this can trigger renewal works ahead of schedule; however can be justified as part of the longer term planning for the facility.

The methodology for how the funds are spent highlights the sometimes complex nature of determining renewals and renewal priorities. It is an iterative process that is not governed by any single element, but rather a combination of information sources that each provide input in the determination of where the money needs to be spent. This process informs both the Annual Budget and Long Term Financial Plan for the City.

10.02am At this time the Manager of Community Services entered the meeting

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

F1810/061 Moved Councillor J McCallum, seconded Councillor R Paine

That the Council note the Asset Management Report for May 2018.

CARRIED 5/0

10.10am At this time the Director of Engineering and Works Services and the Asset Coordinator left the meeting.

Finance Committee 15 18 October 2018

6.2 FINANCIAL ACTIVITY STATEMENTS - PERIOD ENDING 30 SEPTEMBER 2018

SUBJECT INDEX:	Budget Planning and Reporting
STRATEGIC OBJECTIVE:	Governance systems, process and practices are responsible, ethical and transparent.
BUSINESS UNIT:	Finance and Corporate Services
ACTIVITY UNIT:	Financial Services
REPORTING OFFICER:	Manager Financial Services - Kim Dolzadelli
AUTHORISING OFFICER:	Director Finance and Corporate Services - Tony Nottle
VOTING REQUIREMENT:	Simple Majority
ATTACHMENTS:	Attachment a Statement of Financial Activity - Period Ending 30 September 2018 Attachment b Investment Report - Period Ending 30 September 2018

PRÉCIS

Pursuant to Section 6.4 of the Local Government Act (‘the Act’) and Regulation 34(4) of the Local Government (Financial Management) Regulations (‘the Regulations’), a local government is to prepare, on a monthly basis, a statement of financial activity that reports on the City’s financial performance in relation to its adopted/ amended budget.

This report has been compiled to fulfil the statutory reporting requirements of the Act and associated Regulations, whilst also providing the Council with an overview of the City’s financial performance on a year to date basis for the period ending 30 September 2018.

BACKGROUND

The Regulations detail the form and manner in which financial activity statements are to be presented to the Council on a monthly basis; and are to include the following:

§ Annual budget estimates

§ Budget estimates to the end of the month in which the statement relates

§ Actual amounts of revenue and expenditure to the end of the month in which the statement relates

§ Material variances between budget estimates and actual revenue/ expenditure/ (including an explanation of any material variances)

§ The net current assets at the end of the month to which the statement relates (including an explanation of the composition of the net current position)

Additionally, and pursuant to Regulation 34(5) of the Regulations, a local government is required to adopt a material variance reporting threshold in each financial year. At its meeting of 25 July 2018, the Council adopted (C1807/138) the following material variance reporting threshold for the 2018/19 financial year:

“That pursuant to Regulation 34(5) of the Local Government (Financial Management) Regulations, the Council adopts a material variance reporting threshold with respect to financial activity statement reporting for the 2018/19 financial year as follows:

· Variances equal to or greater than 10% of the year to date budget amount as detailed in the Income Statement by Nature and Type/ Statement of Financial Activity report, however variances due to timing differences and/or seasonal adjustments are to be reported on a quarterly basis; and

· Reporting of variances only applies for amounts greater than $25,000.”

STATUTORY ENVIRONMENT

Section 6.4 of the Local Government Act and Regulation 34 of the Local Government (Financial Management) Regulations detail the form and manner in which a local government is to prepare financial activity statements.

RELEVANT PLANS AND POLICIES

Not applicable.

FINANCIAL IMPLICATIONS

Any financial implications are detailed within the context of this report.

Long-term Financial Plan Implications

Any financial implications are detailed within the context of this report.

STRATEGIC COMMUNITY OBJECTIVES

This matter principally aligns with Key Goal Area 6 – ‘Leadership’ and more specifically Community Objective 6.1 - ‘Governance systems, process and practices are responsible, ethical and transparent’.

RISK ASSESSMENT

Risk assessments have been previously completed in relation to a number of ‘higher level’ financial matters, including timely and accurate financial reporting to enable the Council to make fully informed financial decisions. The completion of the monthly Financial Activity Statement report is a control that assists in addressing this risk.

CONSULTATION

Not applicable

OFFICER COMMENT

In order to fulfil statutory reporting requirements, and to provide the Council with a synopsis of the City’s overall financial performance on a full year basis, the following financial reports are attached here to:

§ Statement of Financial Activity

This report provides details of the City’s operating revenues and expenditures on a year to date basis, by nature and type (i.e. description). The report has been further extrapolated to include details of non-cash adjustments and capital revenues and expenditures, to identify the City’s net current position; which reconciles with that reflected in the associated Net Current Position report.

§ Net Current Position

This report provides details of the composition of the net current asset position on a full year basis, and reconciles with the net current position as per the Statement of Financial Activity.

§ Capital Acquisition Report

This report provides full year budget performance (by line item) in respect of the following capital expenditure activities:

· Land and Buildings

· Plant and Equipment

· Furniture and Equipment

· Infrastructure

§ Reserve Movements Report

This report provides summary details of transfers to and from reserve funds, and also associated interest earnings on reserve funds, on a full year basis.

Additional reports and/or charts are also provided as required to further supplement the information comprised within the statutory financial reports.

COMMENTS ON FINANCIAL ACTIVITY TO 30 SEPTEMBER 2019

The Statement of Financial Activity for the period ending 30 September 2018 shows a better than expected Net Current Position “Surplus” of $40.67M being $6.09M higher than year to date budget (YTD budget).

The following summarises the major variances in accordance with Council’s adopted material variance reporting threshold that collectively make up the above difference:

Description	2018/2019 Actual	2018/2019 Amended Budget YTD	2018/2019 Amended Budget	2018/19 YTD Bud Variance	2018/19 YTD Bud Variance
	$	$	$	%	$
Expenses from Ordinary Activities	(17,719,783)	(19,457,637)	(75,222,770)	8.93%	1,737,854

Borrowings Cost Expense - Interest Expenses	(232,039)	(287,008)	(1,374,387)	19.15%	54,969
Non-Operating Grants, Subsidies and Contributions	(552,228)	4,380,103	30,347,185	-112.61%	(4,932,331)

Adjustments for Non-cash Revenue & Expenditure
Depreciation	5,555,662	4,853,652	19,070,922		702,010
Deposit & Bonds Movements (cash backed NC)	74,433	0	0

Capital Revenue & (Expenditure)
Land & Buildings	(216,636)	(3,899,049)	(17,618,620)	94.44%	3,682,413
Plant & Equipment	(661,422)	(1,620,500)	(5,363,500)	59.18%	959,078
Furniture & Equipment	(91,360)	(217,873)	(883,640)	58.07%	126,513
Infrastructure	(3,780,762)	(8,772,781)	(36,804,070)	56.90%	4,992,019
Proceeds from Sale of Assets	87,490	401,850	1,045,950	-78.23%	(314,360)
Transfer to Restricted Assets	(402,581)	(136,998)	(551,000)	-193.86%	(265,583)
Transfer from Restricted Assets	3,399,616	2,392,590	14,423,922	42.09%	1,007,026
Transfer to Reserves	(6,024,886)	(3,987,556)	(19,269,123)	-51.09%	(2,037,330)

Operating Expenditure:

Expenditure from ordinary activities, excluding depreciation, is $2.44M less than expected when compared to YTD budget with the following items meeting the material variance reporting threshold set by Council for the 2018/2019 Financial Year.

Description	2018/2019 Actual	2018/2019 Amended Budget YTD	2018/2019 Amended Budget	2018/19 YTD Bud Variance	2018/19 YTD Bud Variance
	$	$	$	%	$
Materials & Contracts	(3,030,050)	(4,636,098)	(18,621,467)	34.64%	1,606,048
Utilities (Gas, Electricity, Water etc.)	(512,617)	(642,148)	(2,569,240)	20.17%	129,531
Depreciation on non-current assets	(5,555,662)	(4,853,652)	(19,070,922)	-14.46%	(702,010)
Insurance Expenses	(423,061)	(312,088)	(698,808)	-35.56%	(110,973)
Other Expenditure	(579,570)	(1,128,996)	(4,770,041)	48.67%	549,426
Allocations	267,645	419,311	1,723,162	36.17%	(151,666)

Materials and Contracts:

The main items affected are listed below:

Cost Code	Cost Code Description / GL Activity	Variance YTD
Finance and Corporate Services
10250	Information & Communication Technology Services	184,242
10251	Business Systems	49,612
10500	Legal and Compliance Services	25,637

Community and Commercial Services
10591	Geographe Leisure Centre	38,739
10600	Busselton Jetty Tourist Park	50,162
10980	Other Law, Order & Public Safety	36,243
11151	Airport Operations	30,004

Planning and Development Services
10830	Environmental Management Administration	26,725
10925	Preventative Services - CLAG	32,754
11170	Meelup Regional Park	38,389

Engineering and Works Services
11101	Engineering Services Administration	64,405
11160	Busselton Jetty	195,907
11300	Sanitation Waste Services Administration	25,099
11301	Regional Waste Management Administration	30,000
12620	Rural-Tree Pruning	(62,775)
B1000	Administration Building- 2-16 Southern Drive	26,401
G0010	Domestic Recycling Collections	46,348
G0034	External Waste Disposal	53,459
G0042	BTS External Restoration Works	(65,964)
R0004	Bsn Foreshore Precinct (not including Skate Park)	55,843
5280	Transport - Fleet Management	111,374

Utilities:

There is an overall variance in utility charges of $129,531 this variance is spread over 364 individual line items with an average variance of only $364 per item.

Depreciation:

There is an overall variance in depreciation of $702K, it should be noted that this is a non-cash item and does not impact on the City’s surplus position. The variance can be attributed to the fact that Fair Valuation of infrastructure assets was completed post budget adoption and the increase in valuation was unable to be included in the 2018/2018 budget.

Insurance:

There is a YTD variance in insurance costs of $111K, this is of a timing issue only.

Other Expenditure:

There is a YTD variance in other costs of $549K, this is considered a timing issue only, and the main items affected are listed below:

Cost Code	Cost Code Description / GL Activity	Variance YTD
Finance and Corporate Services
10000	Members of Council	56,768
10700	Public Relations	29,148

Community and Commercial Services
10530	Community Services Administration	35,785
10567	Cinefest Oz	(71,249)
11156	Airport Development Operations - Marketing and Incentives	375,000

Planning and Development Services
10942	Bushfire Risk Management Planning - DFES	(39,283)

Engineering and Works Services
B1223	Micro Brewery - Public Ablution	30,000
G0042	BTS External Restoration Works	(38,169)

Allocations:

Allocations are running $151k under YTD budget; these items are an internal allocation of administrative costs from the Finance and Corporate Services division.

Borrowing Costs – Interest Expenses:

Interest expenses are $55k less than YTD budget, no new loans have been taken at this point in time.

Non-Operating Grants, Subsidies and Contributions:

Non-Operating Grants, Subsidies and Contributions are less than YTD budget by $4.93M with the main item impacting on the above result being the timing of the receipt of “Airport Development - Project Grant” with a current negative result of -$4.7M.

Capital Expenditure

As at 30 June 2018, there is a variance of -67.26% or -$9.76M in total capital expenditure with YTD actual at -$4.75M against a YTD budget of -$14.51M. The airport development makes up for $4.43M, Plant and Equipment Purchases, $959K, Busselton Tennis Club – Infrastructure $922K, Eastern Link - Busselton Traffic Study $698K, Council Roads Initiative projects $649K, Main Roads projects $498K , Sanitation Infrastructure $461K, Parks Gardens and Reserves $347K. These items of under expenditure also assists in explaining the above current YTD shortfall in Non-Operating Grants.

The attachments to this report include detailed listings of the following capital expenditure (project) items, to assist in reviewing specific variances.

Investment Report

Pursuant to the Council’s Investment Policy, a report is to be provided to the Council on a monthly basis, detailing the investment portfolio in terms of performance and counterparty percentage exposure of total portfolio. The report is also to provide details of investment income earned against budget, whilst confirming compliance of the portfolio with legislative and policy limits.

As at 30^th September 2018 the value of the City’s invested funds totalled $80.8M, up from $67.4M as at 31st August. The increase is due to the inflow of funding associated with the annual rates first instalment period.

During the month of September four term deposits held with two different institutions totalling $12.0M matured. All were renewed for a further 166 days at 2.67 per cent (on average).

The inflow of rate funding culminated in the annual opening of new term deposits. A call for rates was put out to eight banks and as a result six new deposits were opened totalling $16m. The term of these deposits are between seven and nine months, and rates are between 2.70 per cent and 2.76 per cent.

The balance of the 11am account (an intermediary account which offers immediate access to the funds compared to the term deposits and a higher rate of return compared to the cheque account) decreased by $2.5M with the funds being converted to fixed term deposits returning a higher interest rate.

The balance of the Airport Development ANZ cash account remained steady this month.

The RBA left official rates on hold during September and October. Future movements remain uncertain at this point, although the next movement is likely to be up but not in the immediate future.

Chief Executive Officer – Corporate Credit Card

Details of monthly (August to September) transactions made on the Chief Executive Officer’s corporate credit card are provided below to ensure there is appropriate oversight and awareness of credit card transactions made.

Date	Amount	Payee	Description
25-Aug-18	$29.00	Equinox Café	Coffee With Minister Templeman
30-Aug-18	$230.51	Westin Perth FDS Perth	Accommodation - Mike Archer (Cancelled)
03-Sep-18	$74.95	Map World Australia	Laminated World Map For Citizenship Ceremonies
03-Sep-18	$531.00	LG Professionals	2018-2019 Membership Subscription
04-Sep-18	$25.86	Hiroshima Peace Culture Foundation	Membership Fees - Two (2) Years 2017 & 2018
04-Sep-18	$25.86	Hiroshima Peace Culture Foundation	Membership Fees - Two (2) Years 2017 & 2018
05-Sep-18	$68.68	City Of Perth - Airport Parking	Airport Security Parking Perth
07-Sep-18	$27.27	City Of Perth - Airport Parking	Airport Security Parking Perth
07-Sep-18	$9.09	City Of Perth - Airport Parking	Airport Security Parking Perth
10-Sep-18	$29.00	Empire Karratha	Meals
13-Sep-18	$1,218.00	ICTC Society Inc. - Tweed Heads	Conference Payment For Cr Ross Payne

*Funds debited against CEO Annual Professional Development Allowance as per employment Contract Agreement

+ Allocated against CEO Hospitality Expenses Allowance

CONCLUSION

As at 30 September 2018, the City’s financial performance is considered satisfactory.

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

F1810/062 Moved Councillor J McCallum, seconded Councillor G Henley

That the Council receives the statutory financial activity statement reports for the period ending 30 September 2018, pursuant to Regulation 34(4) of the Local Government (Financial Management) Regulations.

CARRIED 5/0

Finance Committee 21 18 October 2018

6.4 BUDGET AMENDMENT REQUEST / REVIEW

SUBJECT INDEX:	Budget Planning and Reporting
STRATEGIC OBJECTIVE:	Governance systems, process and practices are responsible, ethical and transparent.
BUSINESS UNIT:	Finance and Corporate Services
ACTIVITY UNIT:	Finance and Corporate Services
REPORTING OFFICER:	Manager Financial Services - Kim Dolzadelli
AUTHORISING OFFICER:	Director Finance and Corporate Services - Tony Nottle
VOTING REQUIREMENT:	Absolute Majority
ATTACHMENTS:

10.33am At this time Cr Carter left the meeting.

PRÉCIS

This report seeks recommendation of the Finance Committee to Council for the approval of budget amendments as detailed in this report. Adoption of the Officers recommendation will result in no change to the City’s current amended budgeted surplus position of $0.

BACKGROUND

Council adopted its 2018/2019 municipal budget on Wednesday, 25 July 2018 with a balanced budget position.

Since this time Council has been advised of certain funding changes that have positively impacted the original budget and Council is now being asked to consider budget amendments for the following key areas/projects:

1. Beach Emergency Numbers (BEN) Sign Program;

2. Legal Costs – Reimbursement;

3. Toddler’s Playground; and

4. Lighting at Bovell Park.

STATUTORY ENVIRONMENT

Section 6.8 of the Local Government Act refers to expenditure from the municipal fund that is not included in the annual budget. In the context of this report, where no budget allocation exists, expenditure is not to be incurred until such time as it is authorised in advance, by an absolute majority decision of the Council.

RELEVANT PLANS AND POLICIES

There are multiple plans and policies that support the proposed budget amendments.

FINANCIAL IMPLICATIONS

Budget amendments being sought will result in no change to Council’s budget surplus position of $0.

LONG TERM FINANCIAL PLAN IMPLICATIONS

There are no Long Term Financial Plan implications in relation to this item.

STRATEGIC COMMUNITY OBJECTIVES

RISK ASSESSMENT

There is a risk to the City, as there is with all projects undertaken, that the final cost could exceed budget. If this looks to be the case Council will be notified so a suitable offset / project scope back can be identified.

CONSULTATION

Consultation has occurred with the appropriate Council officers.

OFFICER COMMENT

The Officer recommends the following requested budget amendments to the Finance Committee for consideration and recommendation to Council.

1. “Beach Emergency Numbers (BEN) Sign Program

The Beach Emergency Numbers (BEN) Sign Program is a coding system designed to improve emergency response times by installing signs with unique numbers at beach access points. These signs provide specific location information which is vital when emergency services are deployed in the event of a shark attack or other beach emergencies.

In December 2017, the State Government launched a grants program to provide financial assistance to local government authorities to introduce BEN signs along beach access points in their district.

Planned Expenditure Items

Supply only of 89 BEN signs including posts, post caps and brackets.

Officers propose that the 2018/2019 adopted budget be amended to reflect the following funding charges, shown in Table 1.

Table 1:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Revenue
BEN Program Grant Funding	Grant funding for the supply only of 89 BEN signs	0	(24,250.50)	(24,250.50)

Expenditure
441-10980-3213-0000	BEN Program Signage	0	24,250.50	24,250.50
Net Total		0	0	0

Proposed Outcome

The proposed amendment will enable signs to provide specific location information which is vital when emergency services are deployed in the event of a shark attack or other beach emergencies.

2. “Legal Costs - Reimbursement”

As Council will be aware, the owners of Busselton Central Shopping Centre (Australia Unity Property Ltd) applied for judicial review by the Supreme Court of the decisions by Council to approve a Kmart discount department store development and an Aldi supermarket development at Lot 17, West Street. On 18 August 2017 the primary judge dismissed that application for judicial review. AUP unsuccessfully appealed that decision in the Supreme Court of Appeal, and on 23 March 2018 the appeal was dismissed. As a result AUP was ordered to pay legal costs incurred by the City’s. Those costs have now been determined and paid by AUP to the City.

Planned Expenditure Items

The amendments shown below in Table 2 will reflect the receipt of payment of money for legal costs as income and a corresponding transfer to the Legal Expenses Reserve.

Table 2:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Income
300-10500-1529-0000	Reimbursement - Legal Fees (GST)	(13,400)	(61,364)	(74,764)
Equity Transfer
Reserve	Transfer to Legal Expenses Reserve	10,464	61,364	71,828
Net Total		(2,936)	-	(2,936)

Proposed Outcome

The proposed budget amendment will ensure recognition of additional income that was unbudgeted at the commencement of the 2018/2019 financial year.

3. “Toddler’s Playground”

Due to reallocation of interest accrued on Royalties for Regions grant funds in accordance with State Government requirements, the budget for the Toddler’s Playground project has decreased. The resulting budget will be overspent if Major Projects constructs the project to the approved design and expected standard of works.

It has been identified that there is $101,801 of funds held in POS 52 that are approved to spend exclusively on the Toddler’s Playground project; only $61,010 of these funds have been allocated to the project in the current budget. Officers are seeking to amend the budget for the project to incorporate all the remaining funds held of $40,791 to the project.

Planned Expenditure Items

Completion of the Toddler’s Playground project to the approved design and expected standard of works.

The amendments shown in Table 3 are sought for approval.

Table 3:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Expenditure
120-C3150-3280-0000	Toddler Playground	133,510	40,791	174,301
Equity Transfer	Public Open Space Reserve # 52	(61,010)	(40,791)	(101,801)
Net Total		72,500	0	72,500

Proposed Outcome

The proposed amendment will bring efficiency to filed work undertaken by the Engineering Works and Services team.

4. “Lighting at Bovell Park”

As a result of the strong winds and bad weather during the night of the 4th June 2018, one of the light poles at Bovell Park servicing the training ground used by the Geographe Bay Football Club and situated between the turf hockey pitch and Vasse Highway came down.

On inspection, it was discovered that the base of the pole was severely affected by rust and the second pole also showed clear signs of major deterioration at the base. The poles are believed to be approximately 40 years old and the contractor was instructed to remove the second pole as a safety precaution.

The cost of purchase and installation of two new lights is estimated at $79,000 for which there is no budget provision. Whilst there is an expected insurance payout for one of the lights, this is not expected to exceed $19,000 – and could be less. The new football season commences in April 2019 and it is suggested that funds be provided by way of a budget adjustment so that the lights can be installed before the 2019 season commences. A budget adjustment of $60,000 is therefore sought.

Planned Expenditure Items

The amendments shown in Table 4 are sought for approval.

Table 4:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Revenue
Equity Transfer	Community Facilities – Busselton Reserve	(20,000)	(60,000)	(80,000)
211-10200-1509-0000	Reimbursements - Insurance	(68,000)	(19,000)	(87,000)

Expenditure
New	Bovell Park Lighting	0	79,000	79,000
Net Total		(88,000)	0	(88,000)

Proposed Outcome

Installation of two new lights at Bovell Park.

CONCLUSION

Council’s approval is sought to amend the budget as per the details contained in this report. Upon approval the proposed works will be planned, organised and completed.

OPTIONS

The Council could decide not to go ahead with any or all of the proposed budget amendment requests.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Should the Officer Recommendation be endorsed, the associated budget amendment will be processed within a month of being approved.

10.39am At this time Cr Carter returned to the meeting.

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

F1810/064 Moved Councillor G Henley, seconded Councillor J McCallum

ABSOLUTE MAJORITY DECISION OF COUNCIL REQUIRED

That Council endorse the requested budget amendments outlined in tables 1 to 4 below, resulting in no change to an amended budgeted surplus position of $0.

Table 1:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Revenue
BEN Program Grant Funding	Grant funding for the supply only of 89 BEN signs	0	(24,250.50)	(24,250.50)

Expenditure
441-10980-3213-0000	BEN Program Signage	0	24,250.50	24,250.50
Net Total		0	0	0

Table 2:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Income
300-10500-1529-0000	Reimbursement - Legal Fees (GST)	(13,400)	(61,364)	(74,764)
Equity Transfer
Reserve	Transfer to Legal Expenses Reserve	10,464	61,364	71,828
Net Total		(2,936)	-	(2,936)

Table 3:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Expenditure
120-C3150-3280-0000	Toddler Playground	133,510	40,791	174,301
Equity Transfer	Public Open Space Reserve # 52	(61,010)	(40,791)	(101,801)
Net Total		72,500	0	72,500

Table 4:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Revenue
Equity Transfer	Community Facilities – Busselton Reserve	(20,000)	(60,000)	(80,000)
211-10200-1509-0000	Reimbursements - Insurance	(68,000)	(19,000)	(87,000)

Expenditure
New	Bovell Park Lighting	0	79,000	79,000
Net Total		(88,000)	0	(88,000)

CARRIED 5/0

Finance Committee 29 18 October 2018

6.5 BUSSELTON CROQUET CLUB INC. - SELF-SUPPORTING LOAN REQUEST

SUBJECT INDEX:
STRATEGIC OBJECTIVE:	A City where the community has access to quality cultural, recreation, leisure facilities and services.
BUSINESS UNIT:	Finance and Corporate Services
ACTIVITY UNIT:
REPORTING OFFICER:	Manager Financial Services - Kim Dolzadelli
AUTHORISING OFFICER:	Director Finance and Corporate Services - Tony Nottle
VOTING REQUIREMENT:	Absolute Majority
ATTACHMENTS:	Attachment a BCCI Application

10.47am At this time the Manager of Community Services left the meeting.

PRÉCIS

The Busselton Croquet Club Inc. (BCC) has requested that the City of Busselton provide a Self-Supporting Loan for $30,000, for a term of 10 years, to be used to support the club in its plan to rebuild two greens and add an additional (third) croquet green located at Churchill Park, Portion of Lot 410, corner Brown Street and Kent Street, Busselton.

BACKGROUND

The BCC is currently struggling to meet the playing needs of all members so an additional green will alleviate the pressure on space and provide a much improved playing surface which should also enable the club to generate some additional income by running State tournaments.

The BCC is located on Council property at Churchill Park, Portion of Lot 410, corner Brown Street and Kent Street, Busselton and currently has a lease in place for 11 years and 9 months expiring on 21 August 2029. Further to this Council passed the following resolution at its meeting of the 22 August 2018 which allows for a renegotiation of lease terms and also the extension of lease period expiring on 21 August 2029 with an option to renew for a further 10 years.

“AMENDED ALTERNATIVE MOTION

C1808/171 Moved Councillor J McCallum, seconded Councillor R Paine That the Council:

1. Enter into a deed of surrender of the current lease between the City of Busselton and the Busselton Bowling Club Inc., conditional on the Busselton Croquet Club Inc. obtaining sufficient grant funding to redevelop three croquet greens and a new lease being entered into in accordance with conditions stated in part (2).

2. Subject to part (1), enter into a lease, subject to the consent of the Minister for Lands, with the Busselton Bowling Club Inc. for a portion of Lot 410, Deposited Plan 216960, Volume 1850, Folio 572, 78 Adelaide Street Busselton, as shown outlined green on Attachment B, on the following terms:

a) The term of the lease will commence on the surrender of the existing lease and expire on 21 August 2029 with an option to renew for a further 10 years;

b) The rent to commence at $220.00 inclusive of GST per annum and increased annually by $5.00 inclusive of GST;

c) The permitted use will allow the Tenant to hire the Premises to other sporting and community groups, with hire to be incidental to the primary purpose of the lease.

Additionally the Bowling Club are to ensure that their insurance covers such use; and

d) Other terms to be consistent with the City's standard community group lease.

e) A condition apply during the term of the option that the usage of the leased premises and land for the leased purposes be actively maintained at or above a reasonable minimal level.

3. Subject to part (1) accept the surrender of the current lease between the City of Busselton and the Busselton Croquet Club Inc, subject to a new lease being entered into in accordance with part (4).

4. Subject to part (1), enter into a lease, subject to the consent of the Minister for Lands, with the Busselton Croquet Club Inc. for a portion of Lot 410, Deposited Plan 216960, Volume 1850, Folio 572, 78 Adelaide Street Busselton, as shown outlined red on Attachment B, on the following terms:

a) The term of the lease will commence on the surrender of the existing lease and expire on 21 August 2029 with an option to renew for a further 10 years;

b) The rent to commence at $220.00 inclusive of GST per annum and increased annually by $5.00 inclusive of GST; and

c) Other terms to be consistent with the City's standard community group lease.

d) A condition apply during the term of the option that the usage of the leased premises and land for the leased purposes be actively maintained at or above a reasonable minimal level.

CARRIED 9/0”

Croquet is useful for all ages and backgrounds as it is very inclusive, welcoming and friendly, and supports both mental and physical health as well as social connectedness, but is especially helpful for the more mature members of the community as they are not disadvantaged by low fitness levels and can still feel challenged by the activity and part of a growing community.

The BCC has a growing membership base, currently standing at 65 (up from 57 in November) and with three more waiting to join in the new financial year. The club is now the third largest in the state and the biggest outside of the metropolitan area.

The development of a third croquet green project has a total cost of $132,272 (ex GST). This includes $22,000 for the old clubroom/shed demolition. The City’s contribution towards this project is a third of the total project cost, i.e. $44,091. The City has allocated funds in the 2018/19 budget towards this project. The Club would be required to contribute one third of the cost which would include in-kind labour.

The Club will utilise the self supporting loan funds as part of its contribution of $44,090 to the project.

	Contribution towards Project	Cost ex GST
	Applicant Cash	44,090
	City - Busselton Croquet Club – 3^rd green budget allocation	44,091
	CSRFF grant application	44,091
	Total Project Cost	132,272

Council considered the merits of the project at its meeting held 22 August 2018 where the following resolution was made:

“COUNCIL DECISION AND OFFICER RECOMMENDATION

C1808/168 Moved Councillor C Tarbotton, seconded Councillor R Reekie

That the Council resolves to support the submission of an application for the Busselton Croquet Club

- Development of third croquet green - to the Department of Local Government, Sport and Cultural Industries Community Sport and Recreation Facilities Fund, and rates the application as a priority ‘B’ project, rank number 1.

CARRIED 9/0”

EN BLOC

STATUTORY ENVIRONMENT

RELEVANT PLANS AND POLICIES

The City of Busselton Strategic Community Plan 2017.

FINANCIAL IMPLICATIONS

Council made a provision of $150,000 in the 2018/19 Annual Budget Self Supporting loans, however the amount was a general allocation not specific to BCC. The fact that the proposed borrowing will be established as a self-supporting loan, with regular payments by the BCC there will be no net effect on Council’s position.

In addition the loan will not affect Council’s ability to borrow as self-supporting loans are not included in the debt ratio calculation.

The BCC have provided a copy of their financial statements to allow Council Officers to establish whether the Club has the ability to service the loan repayments. An inspection of the financial statements indicates that the Club is well placed to service the loan repayments over a ten year period.

Given the low amount of the loan being requested Officers are proposing that the loan be internally funded through the City’s Municipal fund which would require a Budget amendment as follows:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Expenditure
Self-Supporting Loan Busselton Croquet Club Inc.	Loan Funding	0	30,000	30,000
100-10001-3680-0000	Budget Contingency Holding Account	73,968	(30,000)	43,968
Net Total		73,968	0	0

The loan would be granted on the basis of the prevailing Western Australian Treasury Corporation lending rate including Government Guarantee Fee at the time of actual Funding of the loan.

All interest and principal repayments would be formally agreed to prior to release of any funding.

Aside from the above it is the intention of Officers to present options to Council in the coming months with respect to the formation of a “Loan Borrowing Capacity Reserve” with the intent of reviewing other City held Reserve funds and more specifically the “Long Service Leave Reserve” to ascertain the appropriate level of cash backing and potential reduction of said Reserve in order to allow for future internal borrowing options. This methodology removes the need to actually borrow the funds from the WA Treasury Corporation and the associated administrative processes.

It also reduces the risk to the Busselton Croquet Club Inc. that in the event the State Government increases the Government Guarantee Fee percentage that is applied by the WA Treasury Corporation which would be passed onto the Club.

It is envisaged that other City Reserves will also be reviewed to establish if internal borrowings whereby funds are repaid inclusive of interest to the specific reserve can be achieved.

LONG-TERM FINANCIAL PLAN IMPLICATIONS

As above.

STRATEGIC COMMUNITY OBJECTIVES

Key Goal Area 2:

Well Planned, Vibrant and Active Places:

Our Community Objectives are:

2.1 A City where the community has access to quality cultural, recreation, leisure facilities and services.

Council strategies to support achievement of community objectives -

> Enhance our foreshores and reserves to provide a place where people can come together and engage in a range of social and recreational activity, and

> Ensure our sporting and recreational facilities meet the needs of our growing community.

RISK ASSESSMENT

The Clubs financial statements indicate that they have capacity to meet the repayments on the proposed loan, furthermore their membership is increasing which will further improve their existing sound financial position.

CONSULTATION

The BCC has consulted with their membership with respect to this proposal.

OFFICER COMMENT

The BCC has a strong and growing membership and is the third largest in the State and the largest outside of the metropolitan area. The Club also, through its financial statements, shows that they have capacity to meet the required level of loan repayments.

CONCLUSION

Due to the fact that the costs associated with the internal funding of the loan are offset by the income to be received from the BCC as per a Loan Repayment Agreement, officers recommend that the request be approved.

OPTIONS

Should Council not approve the request from BCC, they may consider the following options:

1. Reduce the scope of works,

2. Look at other fund or loan options, or

3. Not proceed with the upgrade to facilities.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Should the request be approved, action will be taken immediately to implement the recommendations of the Council.

COMMITTEE DECISION

F1810/065 Moved Councillor R Paine , seconded Councillor J McCallum

That the Committee accept the report as a late item.

CARRIED 5/0

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

F1810/066 Moved Councillor R Paine , seconded Councillor J McCallum

ABSOLUTE MAJORITY DECISION OF COUNCIL REQUIRED

That the Council:

1. Approve a self supporting loan, to be internally funded, to the Busselton Croquet Club Inc., for the amount of $30,000 for a term of up to ten (10) years for the purposes of rebuilding two existing greens and establishing an additional (third) croquet green on Churchill Park, Portion of Lot 410, corner Brown Street and Kent Street, Busselton;

2. Advise the Busselton Croquet Club Inc. that it must obtain all relevant development and building approvals from the City prior to any loan funds being disbursed,

3. Enters into a Loan Repayment Agreement with the Busselton Croquet Club Inc where,

i. The club acknowledges it is responsible for reimbursement to the City of Busselton of full costs associated with the loan, and

ii. The Loan repayment calculations are on the basis of the prevailing Western Australian Treasury Corporation lending rate including Government Guarantee Fee at the time of actual funding of the loan.

4. Amends the 2018/2019 Municipal Budget to recognise the relevant income, expenditure and any associated loan movements; noting that there will be no net impact on Councils projected Surplus position, and

5. Approves the following Budget Amendment to allow internal funding of the loan amount:

*Cost Code*	*Description*	Current Budget	Change	Proposed Amended Budget
Expenditure
Self-Supporting Loan Busselton Croquet Club Inc.	Loan Funding	0	30,000	30,000
100-10001-3680-0000	Budget Contingency Holding Account	73,968	(30,000)	43,968
Net Total		73,968	0	0

CARRIED 5/0

SUBJECT INDEX:	Financial Operations
STRATEGIC OBJECTIVE:	Governance systems, process and practices are responsible, ethical and transparent.
BUSINESS UNIT:	Finance and Corporate Services
ACTIVITY UNIT:	Financial Services
REPORTING OFFICER:	Manager Financial Services - Kim Dolzadelli
AUTHORISING OFFICER:	Director Finance and Corporate Services - Tony Nottle
VOTING REQUIREMENT:	Simple Majority
ATTACHMENTS:	Attachment a List of Payments - Period Ended 30 September 2018