DOES the South Gippsland Shire Council have millions of dollars sloshing around in its coffers or not?
The short answer is ‘yes’ and ‘no’.
By June 30, 2017, according to the shire’s finance manager, Tom Lovass, the shire expects to have a total of $15 million in cash.
And a long way into the future, in the 2031-32 financial year, it expects to have $25 million in cash and investments at financial year’s end.
But it’s not all it’s cracked up to be.
To maintain a secure operating position, the council has decided that it needs to have an underlying working capital ratio of 1.25 to 1, which according to Mr Lovass, amounts to $10 million on hand at any one time.
It’s so the shire can be sure of paying its bills on time and meeting any unforeseen circumstances.
That leaves us with $5 million in cash at year’s end but with the shire’s financial health declining, as represented in the draft budget by an “underlying result for 2017-18 projected to be a $1.17m deficit (not including capital funding sources)”, it’s nowhere near as rosy as it sounds.
In fact there’s a strong case for the shire cutting costs further in order to provide reasonable funds for capital works and grant applications, starting with shire wages which are expected to explode by $1/2 million every year, well into the future.
But the shire CEO Tim Tamlin agrees it’s complicated and in the face of growing criticism about high rates and allegedly fat reserves, the shire is going to have to find a simple way to explain how we stand financially.
If not it faces pressure from within the council and from fledgling groups like the South Gippsland Action Group, former mayor David Lewis and others.
Vocal member of the SG Action Group, Gus Blaauw, is one of those beating the drum at the moment with the draft budget out for comment.
Public submissions are being sought on the budget until Wednesday, April 26, 2017 at 5pm, which isn’t long with Easter in the middle.
While David Lewis recently claimed the shire had $9 million floating around after it decided to shelve the $32 million shire office project, Gus Blaauw says the shire will have more than $26 million “squirreled away” by 2016-17 financial year end on June 30, 2017.
The shire rejects that.
He further claims that a projected surplus of another $5.7 million in the 2017-18 budget will have shire coffers bulging with $32 million in unaccounted for funds.
That’s just plain wrong, says the shire’s financial team.
And they can explain why.
Mr Blaauw also claims the shire has over $7.6 million in various reserves, for caravan park expenses, in a general reserve, for loan reduction and others.
But Mr Lovass says the shire’s reserves will total at just over $3.2 million by June 30, 2017, up from $2.2 million the year before.
Most of that amount, $2 million, is being set aside to pay off the shire’s debts, amounting to principal loan and interest of $3.409 million in 2019-20.
For his part, shire CEO Tim Tamlin makes no apology for trying to maintain a healthy financial position, made all the more difficult in the face of capped rates and rising costs.
“The worst thing I can do is run the shire’s finances into the ground. We’re not considering borrowing into the future because you’d need to be sure you can pay it back. Targets for operational efficiency gains might not be represented in the budget but they are very definitely part of the KPIs I have with council and it’s a priority for me.”
So, whatever you hear from those critical of the shire’s financial position, especially those who say we are swimming in money, it might actually be the other way around; that our “financial sustainability” position is slipping below the break-even line and some remedial action in terms of cost-cutting is needed.
Mr Blaauw certainly got one thing right in his correspondence this week.
That the shire’s draft budget is “deficient in many areas including cost details, direction, outcomes and strategies with many ill-defined objectives”.
He has called on the shire to arrange a Community Budget Presentation to explain the details to the public and “display a genuine willingness to provide transparency and adequate time for questions after the public presentation.
How many people you’d get to a session like that is a moot point.
No shire millions ‘squirreled’ away