Council deficit prompts warning of cuts to come
Wednesday, 8th May, 2013
By Erica Visser
City Council has budgeted for a $7.6 million deficit for next financial year.
Council will adopt its budget at a meeting this afternoon, after months of preparation.
Early last year, the Division of Local Government (DLG) raised concerns with Council over a decadelong deficit which Mayor Wincen Cuy said that Council was "on the right path to rectifying."
Mayor Cuy said yesterday that the 2013/2014 operational plan was particularly hard to put together given it is not known whether Council will be forced to pay back $6.9 million to Perilya this year.
While Council is undertaking a review of all of its services in a bit to trim costs, no cost savings have been made in the new budget.
Both Mayor Cuy and the General Manager, Greg Wright, said in the report that it was likely services would be cut in the near future.
"As this budget has been framed around the business as usual approach, it has not been possible to incorporate any cost savings expected as a result of a comprehensive program of service reviews which is currently underway," Mr Wright said.
"However, it is expected that there will be significant changes to the nature of Council's operations in 2013/2014 and beyond."
In order to pay for ongoing operations, Council will turn to its cash reserves, which are already limited.
It is expected that over $1.7 million in reserves would be used in order to maintain services.
Council will impose the pegged rate rise 3.4 per cent, however its revenue would go down by 3.56 per cent this year.
It would also pay 2.4 per cent in increased employee costs.
The budget includes over $9.4 million worth of projects, but most of these would be paid by grants received from the State and Federal governments.
The major projects on the agenda include the heavy vehicle bypass road, which was deferred for 12 months in January, road resealing and footpath programs and a HACC centre expansion.
Meanwhile, Council expects to have just $5 million in cash and investments by June 2014 - the lowest amount in several years.
Council does not plan to take out any loans for capital investments in the coming year after the Treasury Corporation advised it did not have the capacity to take out loans given its ongoing deficits.
However, Council plans to take out a $7 million loan to repay Perilya if an appeal against a court decision that awarded the payment to the company fails next month.