Draft Amended Resourcing Strategy 2016 v2...Council resolved at its meeting held Monday 21 March 2016 to place the Draft Amended Resourcing Strategy 2013-2023 on public exhibition

Public Exhibition of

Draft Amended Resourcing Strategy 2013-2023

Council resolved at its meeting held Monday 21 March 2016 to place the

Draft Amended Resourcing Strategy 2013-2023

on public exhibition from

Tuesday 19 April to Monday 16 May 2016.

The proposed changes are indicated in italics (additions) and strikethrough (deletions) in the document.

Written submissions are invited and should be sent to the General Manager, North Sydney Council, PO

Box 12, North Sydney NSW 2059 or emailed to [email protected] or faxed to 9936 8177.

Submissions will be received up until 5pm Monday 16 May 2016.

For further information on the Draft Amended Resourcing Strategy on contact Council’s Manager

Integrated Planning and Special Projects on 9936 8463.

Details of individual submissions may be made public in accordance with Part 3, Division 1, Clause 18(g)

of the Government Information (Public Access) Act 2009. Personal information will only be made

available by application in accordance with Part 2, Division 2 - Public interest considerations - of the

Government Information (Public Access) Act 2009.

Adrian Pannucio

Acting GENERAL MANAGER

mailto:[email protected]�

DRAFT AMENDED

RESOURCING STRATEGY 2013-2023

Supporting the North Sydney Community Strategic Plan

April 2016

Progressive - Diverse - Vibrant

Council’s Resourcing Strategy has been prepared in-house in accordance with Integrated Planning and Reporting Framework requirements. Council would like to acknowledge the assistance of Alan Mapstone from Jeff Roorda and Associates (JRA) in the preparation of the Asset Management Strategy component. This plan reflects our intentions at the time of publication. As with any plan or budget, the actual results may vary from that forecast. For further information contact Council’s Manager Integrated Planning and Special Projects on 9936 8100. North Sydney Council 200 Miller Street North Sydney NSW 2060 Telephone (02) 9936 8100 Facsimile (02) 9936 8177 Email [email protected] Website www.northsydney.nsw.gov.au/2020vision May 2015 April 2016

North Sydney Council Draft Amended Resourcing Strategy 2013-2023 - May 2015 April 2016

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Contents

General Manager’s Foreword .................................................................................................................. 4

Executive Summary ............................................................................................................................... 5

Introduction .......................................................................................................................................... 13

North Sydney Profile .............................................................................................................................. 14

Elected Representatives ....................................................................................................................... 19

Organisational Structure ....................................................................................................................... 20

Desired Levels of Service ...................................................................................................................... 22

Long Term Financial Plan 2013/14-2022/23 ....................................................................................... 25

Overview ............................................................................................................................................... 26

Current Financial Position ...................................................................................................................... 27

Planning Assumptions ........................................................................................................................... 31

Financial Scenarios (Modelling) ............................................................................................................ 39

Monitoring and Evaluation ..................................................................................................................... 47

Asset Management Strategy 2013/14-2022/23................................................................................... 47

Overview ............................................................................................................................................... 48

Current Asset Analysis ........................................................................................................................... 51


Gaps and Future Needs (Improvement Plan) ........................................................................................ 60

Resourcing ............................................................................................................................................ 62


Workforce Management Strategy 2013/14-2016/17 .......................................................................... 65

Overview ............................................................................................................................................... 66

Current Workforce Analysis ................................................................................................................... 68


Gaps and Future Needs (Improvement Plan) ........................................................................................ 79

Resourcing ............................................................................................................................................ 85


Appendix ............................................................................................................................................... 87

Appendix 1: Glossary ............................................................................................................................. 87

Appendix 2: Asset Management Policy ................................................................................................. 91

Appendix 3: 10 Year Financial Model - Scenario 1 (Base Case) ........................................................... 94

Appendix 4: 10 Year Financial Model - Scenario 2 ................................................................................ 98

Appendix 5: 10 Year Financial Model - Scenario 3 ................................................................................ 99


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General Manager’s Foreword This Resourcing Strategy 2013-2023 is one of the most significant documents Council prepares. It is our statement of the assets, finance and people we need to achieve the goals in the Community Strategic Plan and Delivery Program. The Resourcing Strategy has three elements:

The Long Term Financial Plan details three financial scenarios for the next ten years. All maintain current service levels and a balanced budget and all three require us to manage finances carefully.

The Asset Management Strategy and Policy outlines the framework we use to manage our infrastructure while the supporting Asset Management Plan details comprehensive plans for each type of asset.

The Workforce Management Strategy analyses our workforce, forecasts future gaps and identifies the skills we need now and in the future.

The essence of our Resourcing Strategy is thoughtful and strategic management of Council’s resources. To support this Strategy we are proposing to realign the internal structures of Council to ensure that we have cohesive, integrated strategies and reliable and responsive delivery of projects. The Resourcing Strategy is intended to be a living document. Council operates in a dynamic environment and our activities are influenced, and sometimes constrained, by changes in the wider economic, political and cultural landscapes. While our plans provide direction and structure for our activities, they need to be flexible enough to respond to changes in the wider environment as they arise. We will therefore continue to review the Strategy and its associated plans to ensure they all remain relevant the changing local government sector.

Warwick Winn GENERAL MANAGER


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Executive Summary Authority for council functions in NSW comes from the Local Government Act 1993 (The Act). The Act classifies council functions as services, regulatory, ancillary, revenue, administrative and enforcement. Councils have a broad discretion in the services they provide and the way they provide them. The Act makes councils directly accountable to their residents and ratepayers. Local councils are required to undertake their planning and reporting activities in accordance with the Act and the Local Government (General) Regulation 2005 (the Regulation). Councils are required to plan effectively for future sustainability through longer-term planning - by developing an integrated suite of medium to long term plans, publishing these and reviewing progress annually. The community and the State then have the best information available to judge progress against the plan, and local governments can make necessary adjustments. The North Sydney Community Strategic Plan 2013-2023 sits at the top of North Sydney Council’s planning, reporting and decision making framework. It outlines the North Sydney community’s shared vision for its future, by providing a vehicle for expressing the long-term community aspirations. However, these will not be achieved without sufficient resources - time, money, assets and people - to actually carry them out. Council’s Delivery Program and Resourcing Strategy is the point where Council assists the community by sorting out who is responsible for what, in terms of the issues identified in the Community Strategic Plan. Some strategies are clearly the responsibility of Council, while some are the responsibility of other levels of government and some will rely on input from community groups or individuals. The Resourcing Strategy focuses in detail on matters that are the responsibility of North Sydney Council and looks generally at matters that are the responsibility of others. The Resourcing Strategy provides an opportunity to quantify Council’s contribution to the achievement of the community’s shared vision. The Resourcing Strategy consists of interrelated and interdependent medium to long term strategies, in three key areas:

financial planning; asset management planning; and workforce management planning.

The three components have been prepared concurrently. Cross referencing and adjustment of each component has been required as the development of each plan progressed, this will continue into the implementation phase of the plans. Levels of Service Identification of the community’s desired levels of service is one of the most important aspects in the development of the Community Strategy Plan and Resourcing Strategic Plan. Council used its periodic Customer Satisfaction Survey to assist with this discussion in addition to specific consultations with target groups and distribution of a Discussion Paper highlighting key local issues. The survey indicates both resident and business opinions and priorities. Pages 22 to 24 detail the findings of the 2013 survey, detailing resident and business relative importance of services as well as satisfaction with services. Implementation Council’s internal IPR Working Group will oversee the implementation of this strategy. The Group will periodically report against progress and an Asset Management Sub Committee (or steering group) will oversee the implementation of the Asset Management Improvement Plan.


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Each component of the Resourcing Strategy is detailed below: Long Term Financial Plan 2013/14-2022/23 Council’s Long Term Financial Plan is a fixed term 10 year plan, which is reviewed and updated annually. It enables Council to better understand and plan its long term financial requirements. The plan includes consideration of sustainability, service provision levels and the creation, upgrading and renewal of infrastructure. A council by council financial sustainability assessment is being was conducted by NSW Treasury Corporation (TCorp) that will which developed financial benchmarks and apply applied these to each council. A council by council audit of infrastructure is also being was also conducted by the NSW Office of Local Government (OLG) to determine the significance of the infrastructure backlog at each council. These reviews will provided councils with baseline data and performance targets. Similarly, under Destination 2036, OLG will develop consistent performance measures for councils by 2013. These will encourage councils to provide standardised information about non-financial performance to allow OLG to monitor how well they deliver services. This is similar to what some other jurisdictions are currently implementing. This component of the Resourcing Strategy is updated annually in conjunction with the preparation of the Operational Plan for the following year, starting 1 July. Financial Sustainability As with all levels of government, there has been a growing increase in community expectations and demand for transparency. Council has been on the front foot for some time now, adopting an ‘open government’ approach back in the 1980s and actively having an open dialogue with the community to manage expectations and optimise service delivery. Council has long operated from a position of financial sustainably and has, over many years, consistently achieved an operating surplus. The overall objective of this plan is to ensure that Council remains a financially viable and sustainable organisation. Council’s adopted integrated approach to its planning, reporting and decision making enables a better understanding of its long term financial position. A council-by-council financial sustainability assessment was conducted by NSW Treasury Corporation (TCorp) for the OLG and the Independent Local Government Review Panel that will develop financial benchmarks and apply these to each council. A council-by-council audit of infrastructure is also being conducted by the OLG to determine the significance of the infrastructure backlog at each council. These reviews will provide councils with baseline data and performance targets. TCorp’s Financial Assessment, Sustainability and Benchmarking Report for North Sydney Council was based on a review of the historical performance, current financial position and long term financial forecasts, which is information currently available to the public. This report was released on 12 March 2013, it supports the findings/scenarios within in this plan, as T-Corp found Council’s financial sustainability rating (FSR) to be “moderately sustainable”1, meaning that Council has an adequate capacity to meet its financial commitments in the short to medium term and an acceptable capacity in the long term. Its capacity to manage core business risk is also moderate. Approved Special Rate Variation The Community Strategic Plan outlines the community’s aspirations for North Sydney. Council consulted widely in developing the plan with residents, businesses, ratepayers, community groups and other stakeholders. At every stage of the consultation, the community made it clear that it had high expectations of Council services and infrastructure. The community indicated that they did not

1 The North Sydney Council Financial Assessment, Sustainability and Benchmarking Report, March 2013, prepared by NSW

Treasury Corporation is available at http://www.dlg.nsw.gov.au/dlg/dlghome/dlg_GeneralIndex.asp?areaindex=TCORP&mi=46&ml=1


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want a reduction in current service delivery levels. Funds raised through the Infrastructure, Environment, Crows Nest Mainstreet and Neutral Bay Mainstreet levies, which have been in place for a number of years and were previously time limited, are vital to enable the continuation of numerous critical environmental programs, infrastructure renewal works and commercial precinct improvement programs. The previous Long Term Financial Plan identified that Council requires a consistent level of income to fund these essential services and infrastructure in future. Under Scenario 2 of the former plan, Council successfully applied for a special rate variation (SRV). Scenario 2 assumed the continued receipt of funds raised from the four levies. Without these funds, Council would not be able to undertake the identified environmental and infrastructure works. All other possible revenue and expenditure options were explored and pursued prior to the decision to apply for the SRV. There have been reductions in expenditure on service delivery and capital works over time, to ensure a balanced budget. Council has also pursued an ongoing process of productivity improvements. However, the community of North Sydney has clearly expressed its views as to what it expects from Council in terms of levels of service delivery, asset renewal and maintenance. On 4 June 2012, IPART announced approval of Council’s application in full. Council applied for increases of 12.34% in 2012/13, 14.57% in 2013/14, and 5.50% in each year from 2014/15 to 2017/18. These increases also include the previously approved SRV of 5.50% for each year, and the continuation of the four expiring levies. This represents an increase of 9.07% in 2013/2014 (16.53% cumulative) above what was approved in 2011/12. However, because ratepayers were already paying the levies the average residential rates will increase by a relatively modest amount. Council consulted ratepayers extensively before making its application, writing to all ratepayers to advising of the proposal. 73.6% of respondents were supportive of the continuation of the four levy programs. Scenario Planning The Long Term Financial Plan includes three scenarios, all of which maintain current services levels but propose differing levels of capital expenditure on the renewal of Council’s ageing infrastructure assets. In summary:

Scenario 1 (Base Case) - assumes a continuation of normal business, incorporating some targeted service improvements, and includes the previously approved 5.5% special rate variation, which expires in 2017/18.

Scenario 2 (Base Case plus additional $83 million for capital expenditure from 2013/14 to 2016/17) - assumes a continuation of normal business, incorporating some targeted service improvements, and includes the previously approved 5.5% special rate variation but allows for capital expenditure of approximately $83 million funded from Council’s reserve; and

Scenario 3 (Preferred Infrastructure Funding) - assumes a continuation of normal business,

incorporating some targeted service improvements, and includes the previously approved 5.5% special rate variation but allows for the injection of an additional $60.5 million in today’s dollars (above that allowed for in the Base Case) over the next ten years for the renewal and maintenance of Council’s infrastructure assets and property holdings and the acquisition/construction of new assets.

The plan details the assumptions used when compiling each scenario, which includes asset management and maintenance and workforce structure projections, as well as the financial outcomes over a 10 year period. Regardless of the scenario adopted, Council will need to carefully manage its income and investments to sustain its operations over the coming years in the event of unforeseen challenges, e.g. unexpected changes in asset conditions resulting from severe weather events or shift in demand for services.


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The Long Term Financial Plan has been prepared using assumptions which are outlined in this document. The assumptions are correct as at the time of publication and will need frequent review. Regardless of its currency, the plan is a useful guidance tool, helping Council to identify financial issues in advance and enabling planned approaches to be put in place to deal with them. The Draft Resourcing Strategy 2013-2023 was presented to Council at its meeting of 29 April 2013 for endorsement to be placed on public exhibition, concurrently with the then draft Community Strategic Plan and Delivery Program 2013/14-2016/17. Council resolved (Min. No.239): 1. THAT Council resolve to adopt Scenario 2 of the Long Term Financial Plan component of the

amended Asset Management Policy. 2. THAT the amended Asset Management Policy (Appendix 2) be endorsed. 3. THAT the draft Resourcing Strategy 2013/14 - 2022/23 be placed on public exhibition for 28

days, commencing from 2 May 2013. 4. THAT a further report be prepared for Council’s consideration at the end of the closing period for

submissions. The Resourcing Strategy 2013-2023 (post exhibition) was adopted by Council at its meeting of 17 June 2013 (Min. No.367). Council will use the indicators outlined in this plan to measure its financial performance. These indicators are used by the OLG in its annual publication on comparative NSW council information. This means the measures are both transparent and comparable. Links to the Community Strategic Plan This strategy, by seeking to maximise efficiency in financial planning and management, addresses some of the key challenges and priorities in the Community Strategic Plan, as outlined in the following table, while other outcomes will be in turn indirectly helped by improved financial planning and management practices. Direction Outcome Strategy 5. Our Civic Leadership 5.2 Council is financially

sustainable

5.2.1 Implement best practice financial planning

5.2.2 Review rating system to

reflect an equitable distribution of costs and benefits

Asset Management Strategy 2013/14 - 2022/23 Council’s Asset Management Strategy has been prepared to assist Council in improving the way it delivers services from infrastructure including:

open space and recreation facilities road facilities and streetscapes road pavement seawalls and marine structures stormwater drainage property

These infrastructure assets have a replacement value of approximately $700 million2. The purpose of this strategy is to enable Council to show:

how its asset portfolio will meet the service delivery needs of its community into the future; that its asset management policies are being achieved; and

2 Note 9a Audited Financial Statements 30 June 2012. Excludes land, non-depreciable and miscellaneous assets


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that existing asset management practices integrate with the North Sydney Community Strategic Plan.

The strategy has been prepared following a review of the Council’s service delivery practices, financial sustainability indicators, asset management maturity and fit with the community’s vision for the future as outlined in the Community Strategic Plan. An asset management improvement plan is outlined, detailing a program of tasks to be completed and resources required to bring council to a minimum ‘core’ level of asset maturity and competence. The Improvement Plan within this strategy will be reviewed in conjunction with Council’s Delivery Program and Asset Management Plans and Policy. Asset Management Plans may be subject to review on an annual basis. While these plans will produce information for a 10 year horizon, modelling of future asset expenditure will, wherever possible, be based on a greater time period such as 15 to 20 years. This is because major asset renewals due to occur just outside the 10 year horizon often need to be budgeted and planned for several years in advance. The identification of how such renewals are to be funded can allow for considered community consultation regarding desired service levels, capacity to pay and risk consequences, this links with the Long Term Financial Plan. Council’s Assets The following table provides an overview of Council’s asset classes and current total replacement value. Detailed information about each asset class is outlined within the accompanying Asset Management Plans which are available from Council’s website.

Asset Category (Service) Total Replacement

Value3 Open Space and Recreation Facilities $31,089,457 Road Facilities and Streetscapes $163,815,856 Road Pavement $231,753,910 Seawalls and Marine Structures $39,872,635 Stormwater Drainage $146,873,122 Property $154,784,827 Total $768,189,807

Asset Management Capability Council used the National Asset Management Strategy program, known as NAMS.PLUS to prepare this strategy. It is based on the International Infrastructure Management Manual (IIMM) framework. Working with Jeff Roorda and Associates (JRA), an asset maturity assessment was undertaken to provide benchmarking against the current status of council’s assessment management practices and identify gaps and areas for improvement. This framework is a planning and improvement process, that ensures as systematic, cross disciplinary and optimised approach to asset management that helps correctly blend responses to short term requirements with sustainable delivery of long term goals. The 2013 asset maturity assessment conducted in February 2013 as part of the development of this plan identified the most significant risks which require consideration and management as summarised in the following table. Risk DescriptionProperty There are a number of significant properties, including the North Sydney

Olympic Pool and North Sydney Oval, which require significant investment. The funding availability and timing of these works are important considerations in ongoing asset strategy.

Underfunding of Resealing Roads Current levels of road resurfacing will result in a long periods between

3 2013 replacement costs as per Technical Assets Register. Not as per 9a Audited Financial Statements 30 June 3012.


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Risk Descriptionresurfacing. This ultimately will result in higher costs to water penetrating and prematurely damaging the underlying road structure. This situation requires continued monitoring as the costs associated with this work and the risks to the network are high.

Stormwater Drainage Recent investigations have identified a significant number of pipeline failures. Substantial investment for renewal of pipelines has been made in the four year financial estimates and Long Term Financial Plan. The extent and improvements made by this investment requires close monitoring particularly over the next few years. 4

This strategy includes specific actions required to improve Council’s asset management capability and projected resource requirements and timeframes. In summary:

Council’s asset management capability is continuing to develop. Council needs to continue to invest in improved condition data and risk inspections and monitoring.

There are a number of significant properties (including the North Sydney Olympic Pool and North Sydney Oval) requiring significant investment. The funding availability and timing of these works should be important considerations in ongoing asset strategy; and

Current levels of road resurfacing will result in a long periods between resurfacing. This ultimately will result in higher costs due to water penetrating and prematurely damaging the underlying road structure. This situation requires continued monitoring as the costs associated with this work and the risks to the network are high;

The financial projections in this strategy are based on Council’s Technical Assets Register, with the anticipated funds available being based on the draft budget (Scenario 2 of the Long Term Financial Plan). Whilst there are variances between the technical and financial registers, they are not materially significant in terms of this strategy. Asset Management Improvement Plan An Asset Management Improvement Plan has been prepared. It will also be periodically reviewed and re-prioritised to match the available resources. Links to the Community Strategic Plan This strategy, by seeking to maximise efficiency in asset management, addresses some of the key challenges and priorities in the Community Strategic Plan, as outlined in the following table, while other outcomes will be in turn indirectly helped by improved asset management practices. Direction Outcome Strategy 2. Our Built Environment 2.1 Infrastructure, assets and

facilities that meet current and future community needs

2.1.1 Develop a program of infrastructure asset acquisition and creation, maintenance, renewal and disposal to minimise whole of life cost

2.1.2 Expand capacity of existing

community infrastructure 2.1.3 Advocate for improved

state infrastructure and adequate funding for maintenance and improvement of community assets

4 In response to this issue, Council introduced, following community consultation, a Stormwater Management Charge effective from 1 July 2014.


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Direction Outcome Strategy

Workforce Management Strategy 2013/14-2016/17 Council’s Workforce Management Strategy will help guide organisational development, while providing a safe, supportive and stimulating work environment for all employees. While there are human resource challenges ahead, including an ageing workforce, the need for work-life balance and retaining quality employees, there are also many opportunities to improve and grow as an organisation. Implementation of the Workforce Management Strategy between 2013/14 and 2016/17 will assist overall job satisfaction, while recognising that people are our greatest asset. A committed and engaged workforce will result in improved organisational outcome, ultimately better service delivery and facilities for the community. This strategy is a living document that will need ongoing review. It reflects the immediate needs of the organisation, in terms of workforce structure and sustainability, organisational development and employee support and productivity. It takes into account the short, medium and long term needs of the organisation by providing a program of activities (through the Improvement Plan). It sets a strategic human resources (HR) framework within other activities such as training, health and safety and diversity and fairness. The key strategic challenges addressed by the strategy include: Community Expectations and Aspirations All government organisations, especially local government, are faced with meeting the challenge of rising community expectations. The North Sydney community expects Council to be an efficient, effective and transparent organisation; one that is ethically committed to its employees and its community. Council is faced with the challenge of doing more with less in terms of financial sustainability, and needs to ensure that the functions performed by Council are aligned with quality of life and sense of community of present and future generations. This in turn means that Council needs to ensure that the organisation and its employees are aligned with the community’s shared vision and Council’s mission and values. Service reviews will be conducted in the short term to ensure the currency of Council’s existing service level agreements’ based on community expectations identify by the Community Strategic Plan review process. Change Management Local government sector changes are an inescapable reality that lies ahead. While its rate and extent are unpredictable; it includes impending recommendations on the structure of local government arising from Destination 2036 and the Local Government Review Panel. Whether it is constructive or negative depends largely on the change management framework and culture within Council. Change can either help development or restrict organisational performance. In order to ensure it is not the latter, Council needs to ensure Council has the right people, in the right roles, performing well. This also means that Council needs to discard systems, processes and practices that add little or no value. In 2012 Council’s commenced a leadership and culture program which will be progressively implemented across the organisation. Staffing Australia as a nation is faced with challenge of an ageing workforce. North Sydney Council is no different; a significant number of employees across the organisation are reaching retirement age. Council must ensure it has strong succession plans in place to make sure it is able to staff the organisation adequately and have in place robust programs to ensure that transfer of corporate knowledge occurs. Council is also faced with the challenge of retaining and recruiting core professions such as engineers and other technical specialists. Council needs to ensure it has in place effective systems and processes to retain and reward these core professions in line with market


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trends as well as attract new generations of workers. Council also needs to ensure it has career development plans in place to allow up-skilling of existing employees into these professions. Council must respond quickly and comprehensively to address these challenges, by ensuring we have strategies in place that account for the diversity of our workforce and are able to ensure the ongoing sustainability of our workforce into the future. While comparatively, Council may have more employees that the OLG Group 2 average, our FTE takes into account the range of discretionary services that we provide in response to community needs compared to other councils e.g. street cleaning, environmental sustainability. Workforce Management Improvement Plan A Workforce Management Improvement Plan has been prepared. These improvement items are prioritised, considering economic factors and current resources as presented on pages 81 to 84. The plan will be periodically reviewed and re-prioritised to match the available resources. Links to the Community Strategic Plan This strategy, by seeking to maximise efficiency in Council’s organisational structure and human resource management, addresses some of the key challenges and priorities in the Community Strategic Plan as outlined in the following table, while other outcomes will be in turn indirectly helped by improved human resource policies and practices. Direction Outcome Strategy 5. Our Civic Leadership 5.5 Council is an employer of

choice

5.5.1 Attract, develop and retain highly skilled staff and provide a safe work environment

5.5.2 Implement best practice human resource policies and strategies


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Introduction In accordance with Integrated Planning and Reporting (IPR) requirements councils are required to draw together their various plans, to understand how they interact and to get the maximum leverage from their efforts by planning holistically for the future. The North Sydney Community Strategic Plan 2013-2023 provides a vehicle for expressing long term community aspirations. However these aspirations can only be achieved if sufficient resources - time, money, assets and people - are allocated. North Sydney Council through its Delivery Program 2013/14-2016/17 outlines how the objectives of the Community Strategic Plan will be implemented through strategies and actions during its term of office. Implementation will be within the resources available under the accompanying long term Resourcing Strategy.

Source: OLG IPR Manual March 2013

The Local Government Amendment (Planning and Reporting) Act 2009 (No. 67) requires councils to have a long term strategy (called its resourcing strategy) for the provision of the resources required to implement the strategies established by the Community Strategic Plan that council is responsible for. The Resourcing Strategy is the critical link between the Community Strategic Plan and the Delivery Program, detailing the provision of resources required to implement strategies established by the Community Strategic Plan for which Council is responsible. The Resourcing Strategy focuses on long term strategies in three key areas - financial planning; asset management planning; and workforce management planning. Council’s internal IPR Working Group will oversee the implementation of this strategy. The Group will periodically report against progress and an Asset Management Sub Committee (or steering group) will oversee the implementation of the Asset Management Improvement Plan.


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North Sydney Profile This brief snapshot alludes to some of the strategic factors that will influence North Sydney over the next 10 years. Overview The North Sydney local government area is located in Sydney’s inner northern suburbs, about 3km from the Sydney GPO and covers 10 square kilometres. It is both urban and green in character, comprising two Central Business Districts (CBDs), smaller suburban centres, residential areas and parks and open spaces. The local government area includes the suburbs of Cammeray, Cremorne, Cremorne Point, Crows Nest, Kirribilli, Kurraba Point, Lavender Bay, McMahons Point, Milsons Point, Neutral Bay, North Sydney, St Leonards (part), Waverton and Wollstonecraft. It is bounded by Willoughby local government area in the north, the Mosman local government area in the east, Port Jackson in the south and the Lane Cove local government area in the west. Major features include the commercial and retail areas, St Leonards Park and North Sydney Oval, HMAS Waterhen and HMAS Platypus, Mary MacKillop Place, Admiralty and Kirribilli Houses, and a high proportion of academic facilities including TAFE Colleges, a campus of the Australian Catholic University and a number of secondary and primary schools. North Sydney is served by the Bradfield Highway, the Pacific Highway, the Warringah Freeway and the North Shore railway line with stations at Milsons Point, North Sydney, Waverton and Wollstonecraft. Council acknowledges the Guringai Tribe and Cammeraygal Clan as the traditional custodians of this area. It is important to recongnise the Aboriginal spiritual, social and cultural connections to North Sydney’s land and waters.

Key Statistics Population 67,033

(estimated residential population 2011)

Land area 1,049 hectares (10km2)

Population density

55.98 persons per hectare


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Demographic Profile Understanding North Sydney’s demography is useful to planning for the future of North Sydney. The main features of the demographic profile on North Sydney are: The estimated resident population in 2011 was 67,033 people. The forecast population for 2012

was 67,150 people.

The North Sydney population is expected to increase to 76,861 people by 2031 - an additional 9,711 people (14.46%) or an average of 0.71% per annum change during this period.

Almost half of North Sydney’s residents are aged between 25 and 49 years. The largest age group is 30 to 34 year olds (13.5%).North Sydney has a larger percentage of 25

to 34 year olds (26.6%) compared to the Greater Sydney average (15.4%).

North Sydney has a lower proportion (11.1%) of people in the younger age groups (under 15) and a similar proportion (12.5%) of people in the older age groups (65+) compared with 19.2% and 12.8% respectively for Greater Sydney.


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North Sydney is a relatively affluent community with above average incomes. Overall 50.9% of households earn $2,500 or more per week, whilst 11% are low income households, earning less than $600 per week.

Overall, 61.8% of the population hold tertiary qualifications compared with 40.5% for the Sydney

average.

Overall, 36.4% of the population was born overseas, compared with 34.2% for Greater Sydney; 20.8% are from a non-English speaking background, compared with 34.2% and 26.3% respectively for the Sydney average.

The largest non-English speaking country of birth in North Sydney was China, where 2.2% of the

population, or 1,382 people, were born.

The dominant language spoken at home, other than English, in North Sydney was Cantonese, with 2.7% of the population or 1,662 people speaking this language at home.

1,269 who speak another language report difficulty with speaking English. In 2011 the North Sydney population was living in 34,954 dwellings with an average household

size of 2.0 people. Dwelling density is higher in North Sydney than in other parts of Sydney with 25.7% residing in medium density dwellings (semi-detached, row, terrace, townhouses and villa units) compared with 19.7% for the Sydney average; while 60.8% live in high density dwellings (flats and apartments) compared with 20.7% for the Sydney average.

North Sydney has a low proportion of households with children (15.4%), compared to the Greater Sydney average (34.8%) with 87.2% of the population being over 18 years.

Family households accounted for 49.7% of total households in North Sydney while lone person

households comprised 34.1% of total households compared with 69.6% and 21.5% respectively for Greater Sydney.


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The population is highly mobile. 46.5% of all residents rent compared with 30.4% in Greater Sydney. The establishment of the North Sydney area as a major commercial, employment and entertainment centre has attracted a youthful, transient population. The area has a high proportion of rental dwellings, with the proportion of households renting privately double that of Greater Sydney.

By 2031 North Sydney is required by the State Government to provide an additional 5,500 dwellings as outlined in the 2007 Draft Inner North Subregional Strategy.5

Over 50,000 people travel daily to North Sydney for work and study. The State Government’s

employment capacity target for North Sydney is 15,000 by 2031 as outlined in the 2007 Draft Inner North Subregional Strategy. Of our 15,000 students attending schools and tertiary institutions in North Sydney, only one in five live in the local government area.

It is forecast in 2021: The most populous forecast age group will be 25-29 year olds, with 8,712 persons.

The age group with the largest proportional increase (relative to its population size) will be 70-74

year olds, who are forecast to increase by 92.2% to 2,912 persons. The number of people aged under 15 is forecast to increase by 1,894 (33.0%), representing a rise

in the proportion of the population to 10.4%. The number of people aged over 65 is expected to increase by 3,649 (50.6%), and represent 14.8% of the population by 2021.

5 The State Government’s Draft Metropolitan Strategy was on exhibition at the time this plan was prepared. New Sub-regional Strategies will be prepared following finalisation of the Metropolitan Strategy, at which time these targets maybe revised.


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The largest increase in household type between 2006 and 2021 is forecast to be in group households, which will increase by 601 households, comprising 7.8% of all households, compared to 7.2% in 2006.

In contrast lone person households are forecast to increase by 1,448 households, to comprise

38.2% of all households in 2021, compared to 39.7% in 2006. Source: Australian Bureau of Statistics, Census of Population and Housing, 2001 and 2011; and .id, the population experts 2012. For more information about North Sydney’s demographic characteristics, please refer to the demographic profile, visit www.northsydney.nsw.gov.au.


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Elected Representatives


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Organisational Structure North Sydney Council is constituted under the Local Government Act 1993. Council consists of five divisions - City Strategy, Community and Library Services, Corporate Services, Engineering and Property Services, and Open Space and Environmental Services, as well as the General Manager’s Office - which are responsible for the implementing the Delivery Program and annual Operational Plan.

Warwick Winn General Manager The General Manager leads the organisation and is responsible for the day to day management of Council, exercising functions including policies and decisions delegated to them by Council and the appointment, direction and dismissal of staff. The role of the General Manager is also to oversee Mayoral and Councillor support and legal services.

Joseph Hill Director City Strategy One of the key roles of the City Strategy Division is working with Council to achieve long term sustainability and the delivery of the Vision. The Division coordinates the process to establish a shared vision and strategic directions through consultation with the community. The Division is also responsible for assessing and determining development applications and the regulation of strategic land use planning, through planning instruments such as heritage controls. The Division also supports local government area-wide economic development and ensures public health and safety.

Martin Ellis Director Community and Library Services The Community and Library Services Division plans and delivers a range of services and programs for seniors and people with special needs, families and children services, youth services and arts and cultural events. The Division is also responsible for management of Stanton Library and the North Sydney Heritage Centre.

Ross McCreanor Director Corporate Services The Corporate Services Division is responsible for delivering customer services to the community and business support and financial services to Council.


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Duncan Mitchell Director Engineering and Property Services The Engineering and Property Services Division is responsible for the delivery of municipal infrastructure. Activities include the maintenance of built assets including community facilities, roads, footpaths and drainage. The Division is also responsible for parking meters, parking stations and management of Council’s commercial property portfolio. Engineering and Property Services also delivers capital works projects, manages traffic planning and facilities, provides road safety education programs and manages Council’s fleet and plant.

Robert Emerson Director Open Space and Environmental Services The Open Space and Environmental Services Division’s responsibilities include waste management, environmental services and sustainability, natural resource management and parks and reserves management. North Sydney Olympic Pool and the North Sydney Oval and Function Centre, public events, recreational planning, Aboriginal heritage, street cleaning, and landscaping planning and design is also managed by this Division.


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Desired Levels of Service Council periodically conducts a Customer Satisfaction Survey to determine community attitudes towards the services and facilities it provides. This provides Council with feedback about the quality and appropriateness of each of its services, and this information is used in the development of the Delivery Program to ensure areas that are not meeting community expectation are reviewed and form the basis of the suite of indicators used to measure Council’s performance. Surveys were conducted in 2002, 2004, 2006, 20096, 2010 and 2013. The survey is conducted on Council’s behalf by an independent research company. The randomly selected survey sample consists of 400 residential customers (both owners and renters) and 200 business customers. Relative Importance of Services The following table details the top four key service areas of relative importance for residents and businesses in 2013 as identified through the Customer Satisfaction Survey. Three of the top four (75%) key areas of relative importance were the same for both residents and businesses; this was the same in 2010: Ranking Residents %

2013 % change

compared to previous

Business % 2013

% change compared to

previous 1 maintaining roads and

footpaths

100 no change 2010

maintaining roads and footpaths

100 no change 2010

2 maintaining parks, ovals and bushland areas

93 no change 2010; 2% decrease 2009

keeping local roads and footpaths clean

78 1% increase 2010

3 keeping local roads and footpaths clean

86 no change 2010; 1% increase 2009

maintaining parks, ovals and bushland areas

73 1% increase 2010

4 improving services offered at community centres

67 no change 2010; 8% decrease 2009

improving the overall management of parking

58 2% decrease 2010

For residents, the only service area to slightly increase in relative importance was maintaining malls and plazas in commercial areas (1% increase compared to 2010). The only area service area to slightly decrease in relative importance was improving Stanton Library (1% decrease compared to 2010). The three service areas to slightly increase in relative importance compared to 2010 were managing development in the area (2% increase), improving the appearance of commercial streetscapes (1% increase) and improving customer service/information provided by Council staff (1% increase). Satisfaction with Services For residents, satisfaction was highest with the following four service areas:

feeling safe in North Sydney 86% (3% decrease from 2010) waste and recycling collection services 84% (1% decrease from 2010)

6 Surveys are usually conducted biennially, however due to the timing of the last two local government elections they were conducted in the February following the election. This enabled the findings to be incorporated within the engagement strategy for the 2009 and 2012 Community Strategic Plan review. All survey results are available at: http://www.northsydney.nsw.gov.au/Council_Meetings/Community_Engagement/Customer_Satisfaction_Survey


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maintenance of parks, ovals and bushland areas 84% (2% decrease from 2010) cleanliness of local roads and footpaths 78% (3% decrease from 2010)

For residents, dissatisfaction was highest with the following four service areas:

Service Area % dissatisfied

2010change

Top reasons for dissatisfaction

pedestrian and cycle paths

30% 2% increase Of the 128 (32%) unsatisfied respondents the top 3 reasons given were:

a) not enough cycle paths (40%); b) cyclists disobey road rules/ behave

badly/think they always have priority (14%); and

c) footpaths are cracked/ uneven/ pose a trip hazard (11%).

maintenance of roads and footpaths

30% 5% decrease Of the 123 (31%) unsatisfied respondents the top 3 reasons given were:

a) footpaths/surfaces are cracked/ broken/uneven/trip hazard (37%);

b) many potholes (28%); and c) not maintained properly/more needed

(19%).

overall management of parking, restrictions, residents parking

26% 6% decrease Of the 104 (26%) unsatisfied respondents the top 3 reasons given were:

a) isn't enough parking/can’t find a park (36%); b) insufficient parking for residents/ and their

visitors (30%); and c) too many restrictions/too many meters

(18%).

policing of parking 24% 6% decrease Of the 99 (25%) unsatisfied respondents the top 3 reasons given were:

a) parking is over policed (26%); b) parking is not policed/ still a lot of illegal

parking (23%); and c) insufficient parking (17%).

For businesses, satisfaction was highest with the following four service areas:

appearance of commercial streetscapes 82% (no change from 2010) maintenance of parks, ovals and bushland areas 82% (no change from 2010) appearance of public spaces in the North Sydney CBD 80% (4% decrease from 2010) maintenance of commercial areas 78% (1% decrease from 2010)

For businesses dissatisfaction was highest with the following four service areas:


2010change


overall management of parking (restrictions, pricing etc.)

46% 2% increase Of the 128 (32%) unsatisfied respondents the top 3 reasons given were:

a) not enough cycle paths (40%); b) cyclists disobey road rules/behave badly/think

they always have priority (14%); and c) footpaths area cracked/uneven/pose a trip

hazard (11%).

maintenance of roads and footpaths

30% 10% increase

Of the 59 (29.5%) unsatisfied respondents the top 3 reasons given were:

a) footpaths/ surfaces are cracked/ broken/ uneven/ trip hazard (27%);

b) not maintained properly/ more needed (25%);


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2010change


and c) too many potholes/roads very bumpy (15%).

policing of parking 30% 4% increase Of the 58 (29%) unsatisfied respondents the top 3

reasons given were: a) parking is over policed/ no flexibility (55%); b) isn't enough parking/ especially longer term/

all 2 hours (19%); and c) driving customers/ business out of the area

(16%).

traffic management with the use of speed humps, chicanes etc.

25% 9% increase Of the 49 (24.5%) unsatisfied respondents the top 3 reasons given were:

a) inhibit traffic flow / make things slower/ more congested (20%);

b) chicanes/speed bumps are badly designed/in the wrong places (16%); and

c) too many speed humps/ chicanes (12%).

The following table indexes residents’ relevant importance for funding against satisfaction: Lower Importance - Higher Satisfaction - Lower priority issues

Stanton Library* Waste collection services

Higher Importance - Higher Satisfaction - Issues requiring no additional attention

Parks, ovals and bushland areas

Lower Importance - Lower Satisfaction - Issues needing some attention

North Sydney Olympic Pool* Customer service/information by Council staff Malls and plazas in commercial areas Managing traffic on roads Policing of parking

Higher Importance - Lower Satisfaction - Critical issues for attention

Community services at Community Centres* Cleanliness local roads and footpaths Children’s services* Maintaining roads and footpaths Improving overall management of parking

* satisfaction amongst users The following table indexes business’ relevant importance for funding against satisfaction: Lower Importance - Higher Satisfaction - Lower priority issues

Appearance of commercial streetscapes Managing commercial areas Managing traffic on roads Customer Service/Information by Council staff

Higher Importance - Higher Satisfaction - Issues requiring no additional attention

Parks, ovals and bushland areas Cleanliness local roads and footpaths Maintenance local roads and footpaths Managing development in the area

Lower Importance - Lower Satisfaction - Issues needing some attention

Policing of parking

Higher Importance - Lower Satisfaction - Critical issues for attention

Overall management of parking


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Long Term Financial Plan 2013/14-2022/23


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Overview Council’s Long Term Financial Plan 2013/14-2022/23 is a decision making tool. It is governed by a series of financial strategies and accompanying performance indicators that Council considers and adopts. It is not intended to be a document that specifically indicates what services/proposals funds should be allocated; rather it addresses the impact of the Council’s ability to fund its services and capital works, whilst living within its means ie ensuring financial sustainability. It establishes the financial framework upon which sound financial decisions are made. Council’s Long Term Financial Plan is underpinned by its Financial Management Policy7. The policy outlines Council’s guiding principles when preparing the plan and its ongoing financial sustainability. In order to live sustainably, the Council has to look into the future and provide future generations with a sustainable infrastructure and environment without the burden of excessive debt. The plan seeks to answer four key questions:

Can we survive the pressures of the future? What are the opportunities for future income and economic growth? Can we afford what the community wants? How can we go about achieving these outcomes?

The plan includes:

Planning assumptions used to develop the plan; Projected Income Statement, Balance Sheet, Equity Statement and Cash Flow Statement; Sensitivity analysis (factors/assumptions most likely to affect the plan); Modelling for different scenarios (planned/optimistic/conservative); and Methods of monitoring financial performance.

The plan intends to achieve the following objectives of the ten year time frame:

Maintain existing service levels; Maintain a strong cash position; Maintain a balanced budget position after allowing for transfers to/from reserves; Maintain a sufficient Employee Leave Entitlement Cash Reserve based on the age and

entitlements of all employees in accordance with Council’s Workforce Management Strategy; and

Maintain a capital expenditure program which facilitates the renewal of assets at similar rates to which they are depreciating.

The longer the planning horizon, the more general the plan will be in the later years, ie it is not expected that the tenth year of the plan will include specific detail. As decisions are made more detail can be added to the plan. As Council finalises its Delivery Program every four years, the first four years of the Long Term Financial Plan will become firmer. The following diagram illustrates the relationships and integration within the Framework:

Long Term Financial Plan - 10 years 1 2 3 4 5 6 7 8 9 10

Detailed budget from the Operational Plan

Forward estimates from the Delivery Program

Financial projections and assumptions

7 Council Policy Manual is available from http://www.northsydney.nsw.gov.au/Council_Meetings/Policies_Plans/Policy_Manual


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Current Financial Position As at 30 June 2014, Council’s financial position was sound with no debt and total net assets of $756 million, including cash and investments of $95.6 million. Of this $95.6 million, $23.4 million was externally restricted and $66 million was internally restricted. The remaining $6.2 million was unrestricted. Externally restricted monies can only be utilised for the specific purposes for which they were received or levied, examples include developer contributions, specific purpose grants and special rates. Available working capital was $4.6 million, a level sufficient to comfortably manage Council’s day to day operations and provide a ‘buffer’ against unforseen and unbudgeted expenditures after taking into consideration the nature and level of internally restricted reserves. In terms of the key performance measures, performance has been better than the industry benchmark and is forecast to continue to remain so for the life of this plan, with the exception of the Building and Infrastructure Renewals Ratio. This performance measure assesses the rate at which Council’s buildings and infrastructure assets are being renewed relative to the rate at which they are depreciating. It should be around 100%. After being below this benchmark for three years, it increased to 106.6% in 2013/14 and is forecast to remain at this level for the life of the current Delivery Program. Council’s fees and charges are reviewed annually and in 2014/15 will increase generally in terms by 2.5% or by market comparison, with the exception of the Domestic Waste Management (DWM) Charge. It is proposed that the standard annual DWM Charge will increase from $280 to $288 in 2015/16. Until 2017/18, Council’s strategy will be to draw down approximately $500,000 per annum from the DWM Reserve in order to reduce the impact of future cost increases. Income from Council’s property portfolio has stabilised and no more significant drops in revenue are expected to occur. In overall terms, Council is still of the opinion that the bottom of our revenue decline has been reached and will not improve significantly for some time into the future. Therefore Council will continue to face the funding challenges posed when operating costs are increasing at a greater rate than operating revenue and an ever increasing unfunded capital renewal program. General Assumptions Population North Sydney’s estimated resident population (ERP) at 30 June 2011 was 67,033 people8, an increase of 1.49% since June 2010. Since 2001, there has been average annual increase in the population of 1.33% and is forecast to increase by an average of 0.71% per annum over the life of this plan. North Sydney’s population growth is moderate and the cost of Council’s services is not particularly sensitive to population growth of this magnitude. Therefore, it has been assumed that increases in North Sydney’s population will not have an impact on the income and expenditure projections in the plan. Growth Capacity North Sydney has the highest residential density in the NSW metropolitan area after City of Sydney and Waverly Councils. The NSW Government recently released its Draft Metropolitan Strategy in early 2013. The draft strategy is based on the latest information and evidence, including the 2011 Census. It is also based

8id, the population experts 2012


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on the feedback received from hundreds of residents and organisations during the consultation on the discussion paper 'Sydney over the next 20 years' in May and June 2012. The Metropolitan Strategy will set how land use factors interact with transport networks and the delivery of infrastructure. It will set new targets for 2031, not 2036 as per the existing Metropolitan Plan. The draft strategy has been developed in conjunction with other key documents including the new Long Term Transport Master Plan and the State Infrastructure Strategy. The eventual outcomes of these three strategies will set a framework facilitating growth in Sydney for the next 30 years. Subregional planning is the next step in helping to deliver the new strategy and new annual growth in new dwellings targets and workforce growth targets will be established. In 2014, new Subregional plans will be drawn up in partnership with the community and local councils. These will plan for local areas across Sydney in more detail. They will help to ensure communities have the right types of housing, jobs, public spaces, community facilities, transport options, schools and hospitals to meet their needs. The results of steady growth have been captured within the Long Term Financial Model, but there are two key financial outcomes from investigating some of the historical data. Firstly, growth in rates revenue is negligible and secondly, extraordinary increases in developer contributions, increases both the financial capital liability for Council and the additional maintenance costs resulting from increased capital works. Inflation Changes in inflation will impact both revenue and expenditure. The Australian Government’s Mid-Year Economic and Fiscal Outlook for 2012/13 forecasts Australia’s Consumer Price Index (CPI) to increase by 2.25% in 2013/14, 2.5% in 2014/15, 2015/16 and 2016/17. This data has been incorporated into the scenario planning. For the remaining life of the plan, it has been assumed that the annual inflation rate will be 3%, ie at the top of the Reserve Bank’s target range of 2% to 3%.

2013/14 2014/15 2015/16 2016/17 2017/18 2022/23

Consumer Price Index 2.25% 2.50% 2.50% 2.50% 3.00% Sustainability A council-by-council financial sustainability assessment is being conducted by NSW Treasury Corporation (TCorp) for the OLG and the Independent Local Government Review Panel that will develop financial benchmarks and apply these to each council. A council-by-council audit of infrastructure is also being conducted by the OLG to determine the significance of the infrastructure backlog at each council. These reviews will provide councils with baseline data and performance targets. TCorp’s Financial Assessment, Sustainability and Benchmarking Report for North Sydney Council based on a review of the historical performance, current financial position and long term financial forecasts, which is information currently available to the public. This report was released on 12 March 2013, it supports the findings/scenarios within in this plan, as TCorp found Council’s financial sustainability rating (FSR) to be “moderately sustainable”9, meaning that Council has an adequate capacity to meet its financial commitments in the short to medium term and an acceptable capacity in the long term. Its capacity to manage core business risk is also moderate. Council’s ‘outlook’ is neutral, meaning that there are no foreseeable events that would have a direct impact on the financial sustainability of Council. The report identified the following in regards to Council’s performance and medium to long term sustainability:

9 NSW Treasury Corporation, North Sydney Council Financial Assessment, Sustainability and Benchmarking Report, March 2013, p5.


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Operating results (excluding capital grants and contributions) have been at or near breakeven over the review period;

Council’s own source operating revenues have remained above the benchmark each year

demonstrating financial flexibility; and

Council has had very strong levels of liquidity throughout the period as indicated by its Unrestricted Current Ratio being well above the benchmark.

Apart from declining performance in asset maintenance and renewals (which will be further detailed in the Asset Management Strategy), Council has been well managed in most areas over the review period. In the 2011/12 Financial Statements, Council reported a $19.1 million Infrastructure Backlog as at 30 June 2012 which represents 5.2% of its infrastructure asset value of $368.4 million. Other observations included:

Council’s Infrastructure Backlog is on an upward trend and it is likely to increase given the declining levels of asset renewals

A significant portion of the backlog (39.1%) is related to roads and 44.7% is related to buildings

Council is forecast to consistently record Operating Ratios above the benchmark until the

expiration of the SRV in 2017/18

The forecast capital expenditure is below the benchmark to meet the cost of asset renewals. In TCorp’s view, Council has the capacity to undertake additional borrowings of up to $32.8 million. This is based on the following analysis:

Based on a benchmark of Debt Service Cover Ratio (DSCR) of greater than 2.0x, up to $32.8 million could be borrowed in 2013 in addition to the existing forecast borrowings of $14.6 million.

This scenario has been calculated by basing borrowing capacity on a 10 year amortising loan at

7.5%. TCorp’s review supports a finding that Council is moderately sustainable. In respect of the long term sustainability of the Council their key observations were:

Despite the introduction of a seven year SRV, there are still insufficient funds forecast to be invested on asset renewals to reach benchmark levels.

Council’s Operating Ratio remains above the benchmark for the lifetime of the SRV. Once the

SRV expires, Council’s Operating Ratio and liquidity position will decline, which will require Council to review its options to find additional revenue or new efficiencies.

Council currently operates debt free and has the capacity to utilise borrowings in the future.

Council’s cash and reserves are increasing over the lifetime of the forecast and could fund

increased expenditure on asset renewal. In respect of the Benchmarking analysis TCorp compared Council’s key ratios with other councils in OLG Group 2. Their key observations were:

Council’s financial flexibility as indicated by the Operating Ratio is above the group average and above benchmark;

Council’s Own Source Operating Revenue Ratio is below average but above the benchmark;


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Council has no borrowings but is planning to borrow in the medium term. The forecast DSCR and Interest Cover Ratio are above the benchmarks and around or above the group averages;

Council was in an acceptable liquidity position which is expected to improve in the medium

term;

Council’s performance in terms of its Infrastructure Backlog Ratio was better than the group average, but weaker than the benchmark;

The Capital Expenditure Ratio, Building and Infrastructure Asset Renewal Ratio and Asset

Maintenance Ratio all declined over the review period to be below the benchmarks and group averages.

Responses to these issues are detailed in Financial Scenarios (Modelling) Section, beginning on page 39.


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Planning Assumptions Income Assumptions Rates and Annual Charges As per the 2011/12 comparative information available from OLG, the average residential rates in the North Sydney local government area were $483.73 per assessment, while the Group 2 average is $957.76. The North Sydney local government area has a high proportion of ratepayers on the minimum rate as many residents live in high density developments. Average business rates in the North Sydney local government area were $2,703.86 per assessment, while the Group 2 average is $3,698.40. In summary, North Sydney:

has the lowest average residential rates amongst Group 2 councils; has comparatively low business rates; has the highest ‘gross weekly household income’ over $1,000 per week amongst category 2

councils (as per the 2011 Census); and has less than 1% of rates outstanding.

In accordance with 2011 Socio-Economic Indexes for Areas (SEIFA) rankings, which compare the relative social and economic conditions of cities, towns and suburbs across Australia, North Sydney local government area ranks tenth highest nationally and sixth highest in NSW, after Ku-ring-gai, Mosman, Lane Cove, Woollahra and The Hills Shire local government areas. IPART has approved a SRV which commenced in 2012/13 and continues until 2017/18 (30 June 2018) inclusive. This approval is for an annual rate quantum increase of 5.5% cumulative (inclusive of the annual rate peg) and will be part of Council’s rating base going forward. After this time, there has been an assumed rate peg of 3% per annum. Funded by a reserve of unspent Domestic Waste Management (DWM) charge funds, it has been assumed that annual losses of approximately $500,000 per year will be incurred in the operation of Council’s DWM service until the expiration of the current SRV in 2017/18. Nevertheless, the likelihood of increases in waste collection and disposal costs in 2014/15 requires an increase in the annual charge for DWM of 2.86% in that year. Thereafter, it has been assumed that revenue from this source will increase by between 2.75% and 3.30% until 2017/18. With the cessation of the annual $500,000 subsidy from the DWM reserve, an increase of 7.92% has been assumed in 2018/19. Thereafter, for the remaining life of the plan, an increase of 3.3% has been assumed as shown in the following table.

2013/14 2014/15 2015/16 2016/17-2017/18

2018/19 2019/20-2022/23

Ordinary Rates 5.50% 5.50% 5.50% 5.50% 3.00% 3.00% Special Rates 5.50% 5.50% 5.50% 5.50% 3.00% 3.00% Annual Charges 9.37% 2.75% 2.86% 3.30% 7.92% 3.30%

User Fees and Charges Revenue raised from Council’s fees and charges for the provision of services and the use of facilities can be divided into two categories:

a) Statutory and Regulatory Fees and Charges - which are set by regulation or another authority (eg Development Application fees) and which Council has no discretion to increase; and

b) Other Fees and Charges - which are set by Council and which Council has the discretion to increase.

The factors that determine Council’s pricing principles are equity, user-pays and market rates and:


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prices represent either the full recovery of costs or the current market-rate whichever is the greater, except to those individuals or groups that have been identified as disadvantaged and in need of “special consideration”;

Council reserves the right to vary this pricing policy on any reasonable basis having regard for specific circumstances;

documents that are made available on Council’s website will be free of charge except for those variations identified in the annual Fees and Charges Schedule; and

a fee for the use of credit cards by customers will be charged when making payments. The annual review of Council’s fees and charges incorporate matters such as the ability to pay, full or partial cost recovery, subsidy levels and market comparisons. Also, consideration is given to those members of the community, who because of their special circumstances may not be able to access the service. These considerations are also reviewed annually and are detailed in a separate report to Council on community grants and subsidies. The fees and charges that Council has the discretion to increase have been assessed individually and it has been proposed to increase many of these by 2.5% for 2014/15. It has been assumed that revenue from both categories of user charges and fees will increase by the CPI for the remaining life of this plan, as shown in the following table.

2013/14 2014/15 2015/16 2016/17 2017/18-2022/23

Statutory and Regulatory Fees 2.25% 2.50% 2.50% 2.50% 3.00% Other (Discretionary) Fees 3.00% 2.50% 2.50% 2.50% 3.00%

Interest and Investment Revenue Council has a large investment portfolio that is subject to movements in interest rates. Investments are placed and managed in accordance with Council’s adopted Financial Investment Policy10 in compliance with the Local Government Act 1993. As a custodian of the community’s funds, Council ensures that funds are invested with the appropriate care and due diligence. Council’s guiding investment principles are:

Applicable risks; Any constraints and other prudential requirements having regard to applicable legislation and

regulations; Compliance monitoring and reporting; Expected level of future returns; and Appropriate benchmarks for each category of investments.

Council’s investment portfolio consists of Term Deposits, Floating Rate Notes (FRNs) and Grandfathered Income Funds. The performance benchmark for all of these investment categories is the 90-day Bank Bill Swap Rate (BBSW). It is Council’s expectation that the performance of each investment will be greater than or equal to this benchmark by a sufficient margin to justify the investment taking into account its risks, liquidity and other benefits of the investment. Taking this into account, the assumed interest rate on investments for the remaining life of this plan is 4% per annum, as shown in the following table. The pool of funds available in Council’s portfolio will also have a bearing on the amount of revenue generated from this income stream in any given year. Council’s policy regarding the interest rate on outstanding rates is to charge the maximum allowable by the OLG. It has been assumed that this will be 9% per annum for the life of this plan, as shown in the following table.

2013/14 2014/15 2015/16 2016/17-2022/23

Interest on Investments 5.00% 4.00% 4.00% 4.00% Interest on Overdue Rates and Annual Charges 9.00% 9.00% 8.50% 8.50%

10 Policy Manual available from http://www.northsydney.nsw.gov.au/Council_Meetings/Policies_Plans/Policy_Manual


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Other Revenue With the exception of revenue from ex-gratia rates payments, which has been assumed to increase by the same rate as that for ordinary and special rates, it has been assumed that revenue in this category will increase by the CPI for the life of this plan, as shown in the following table.

2013/14 2014/15 2015/16 2016/17 2017/18-2022/23

Parking Meter Fees 2.25% 2.50% 2.50% 2.50% 3.00% Property Rental 2.25% 2.50% 2.50% 2.50% 3.00% Off-Street Car Park Fees 2.25% 2.50% 2.50% 2.50% 3.00% Outdoor Dining Rental 2.25% 2.50% 2.50% 2.50% 3.00% Ex-Gratia Rates 5.50% 5.50% 5.50% 5.50% 3.00% Other Revenues 2.25% 2.50% 2.50% 2.50% 3.00%

Parking Meter Fees Council has been using paid parking to manage and control the demand and utilisation of on-street parking since the mid-1980s. The resulting revenue stream is a significant component of Council’s total income. Currently, there are 460 multi bay parking meters servicing 2,600 paid parking spaces. The bulk of these spaces are in the North Sydney CBD and the four retail shopping villages within the North Sydney local government area. Over the last ten years there has been small growth (1% per annum) in the number of bays; however these have been located adjacent to residential areas. These additional metered spaces have low financial yields compared with the CBD metered spaces. Since 2000 parking meter income has increased by 8.3% per annum. However the increase in income has not been evenly distributed over the 10 year period. The maximum increase (21%) occurred in 2004/05, while the smallest increase (2.1%) occurred in 2009/10. There are a number of factors that impact on meter income. Principal among them is the ‘Compliance Rate’. Compliance is linked to the ‘Booked Rate’. This is the percentage of illegally parked vehicles that are issued with an infringement. Council has upgraded all parking meters to be PCI (credit card) compliant and to improve the overall reliability and serviceability of the meters. This has ensured that compliance rates have improved and that revenue, in particular from the use of credit cards is more reliable. Also Council is investing in new (sensor) technology to also improve compliance and turnover. This technology will be in operation by the end of 2014/15. Property Rental Council manages a property portfolio covering commercial, investment, residential and community facilities. The management of the portfolio is outsourced to professional property managers on a long term contract. The extent of the portfolio has remained constant since 2001. The property portfolio revenue income has been relatively stable over the last three years. It is anticipated that income growth over the life of the plan will be in line with CPI. Council resolved not to sell 2 Anzac Ave, Cammeray (ANZAC Club site). In late 2013 Council resolved to enter into a long term lease with the NSW Department of Education and Committees who will build a school on the site. Off-Street Car Park Fees Council operates five commercial off-street car parks with a combined capacity of over 1,000 spaces. The number of spaces Council allows for permanent lease is up to approximately 370. Of these, generally between 80% and 90% are currently leased. Car park revenue has been increasing between 2.5% and 3% since 2008. Using an average 2.5% to 3% per annum increase over the life of the plan is reasonable.


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Three of the Crows Nest car parks operate as ‘shopper’ parking and offer the first two hours free to customers. The Alexander Street Car Park is currently subject to redevelopment through a public private partnership (PPP). The development application was lodged in March 2013. As part of this application the capacity of the car park has been increased from 134 spaces to 312 spaces. Outdoor Dining Rental Outdoor dining was first introduced to the local government area in the mid-1990s. As Council has redeveloped its retail shopping villages the popularity and demand for space grew quite rapidly. Council currently has a total of 196 outdoor dining licences (permits). Outdoor licence fees and charges are broken up into high, medium and low rates based on location. High is defined on area management per square meter, per annum. Currently high areas include Crows Nest, Kirribilli, North Sydney CBD and Blues Point Road. Medium is defined on area management per square meter, per annum. Currently medium areas include Crows Nest Outdoor Seating, Cremorne, Cammeray, Kirribilli, Neutral Bay and St Leonards. Low is defined on area management per square meter, per annum. Currently low areas include all other areas within the local government area. It is expected that licence fees will rise in line with inflation at about 2.5% to 3% per year, and remain in keeping with rates of the adjoining councils. Grants - Operating and Capital Council’s Financial Management Policy recognises the importance of actively pursuing and maintaining grant funding. Generally any matching funds required from Council for non-recurrent grants are sourced from the existing level of internally restricted assets (ie internal reserves). Future matching of funds is uncertain For the life of this plan, it has been assumed that recurrent specific purpose grant funding will increase by the CPI, with the exception of the Roads to Recovery Grant, funding for which is expected to continue at the current level until 2018/19 and cease thereafter. In the 2014/15 Federal Budget handed down on 13 May 2014, the Federal Government announced that it would be pausing the indexation of the Local Government Financial Assistance Grants Program for three years commencing 1 July 2014. This decision is forecast to result in no increases in Council’s grant from 2014/15 to 2016/17. It has been assumed that revenue from this grant will increase by 3% thereafter for the life of the plan.

2013/14 2014/15 2015/16 2016/17 2017/18- 2022/23

Financial Assistance Grant -1.25% 0.00% 0.00% 0.00% 3.00% Pensioners' Rates Subsidy 0.00% 0.00% 0.00% 0.00% 0.00% Roads to Recovery Grant 0.00% 0.00% 0.00% 0.00% 0.00% Specific Purpose Grants 2.25% 2.50% 2.50% 3.00% 3.00%

Net Gain from Disposal of Assets All funds generated from the sale of assets will be directed to assets that offer improved community benefits or are income-producing. Revenue from asset sales will not be directly used to offset recurrent operating expenditure. In effect, gains from asset sales are not available for the continued provision of existing services. It has been assumed that only plant and equipment will be sold and that revenue derived from their gain on disposal, will remain at the current level for the life of this plan. Expenditure Assumptions Employee Costs One of the largest expenditure assumptions is employee costs; however changes in employee costs impact both on income and expenditure. Total employee costs are a combination of direct wages and salaries plus overheads that include workers compensation, superannuation, training and advertising.


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Terminations will impact on the employee entitlements’ reserve, employee entitlements’ liability as well as recruitment and training costs. Whilst maintaining the current staffing levels and any new positions identified through the Delivery Program, total employment costs have been forecasted to increase by a maximum of 4.1% per annum (taking into account such factors as Award increases, salary step increases as a result of performance appraisals and employer superannuation liabilities). The following table shows that employee costs as a percentage of revenue from rates and employee costs as a percentage of total expenditure (excluding capital expenditure) have remained stable since 2006/07. Expenditure ($’000) 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14Employee Costs 25,979 28,063 29,807 30,877 32,848 33,611 34,811 35,559 Rates and Annual Charges

29,745 32,194 33,886 35,196 37,157 38,968 40,789 43,550

Employee Costs (as a % of Rates & Annual Charges)

87.3% 87.2% 87.9% 87.7% 88.40% 86.25% 85.34% 81.65%

Total Expenses from Continuing Operations

66,300 69,177 74,954 71,401 78,491 81,926 86,324 93,414

Employee Costs as % of Total Expenses

39.2% 40.6% 39.8% 43.2% 41.85% 41.03% 40.36% 38.07%

Source: Financial Statements11 An organisational restructure occurred in April 2012. Prior to the restructure the organisation had six Divisions. When the opportunity arose, due to the retirement of two long serving Directors, the decision was made to restructure to five Divisions.12 In 2012/13, there were increases in employee costs due to an increase in the staff establishment. This is due in part to restructuring of some Departments following the organisational restructure, receipt of grant monies to fund the engagement of an Environmental Upgrades Agreement Officer, the introduction of new legislation which has necessitated the temporary appointment of an additional Compliance Officer, Council resolutions and the recognition of an increasing demand for certain services. New positions introduced by Council resolution were Compliance Officer (Pool Inspection Program) and Senior Strategic Planner (Urban Design). From 1 July 2014, the Superannuation Guarantee charge increased to 9.50% and will remain at this rate until 30 June 2021. From 1 July 2021, it will increase by 0.5% each year until it reaches 12%. The following analysis details what drives Council’s employee costs: a) Employee entitlements - as at 30 June 2014, 50% of Council’s leave entitlements were

funded within the Employee Leave Entitlements Reserve and it has been assumed that this level of funding is more than adequate to cover projected total employee leave liabilities and will not require abnormal cash injections in the short to medium term.

b) Award Increases - an increase of 2.7% is effective from 1 July 2015 and an increase of 2.8%

is effective from 1 July 2016 in accordance with Local Government (State) Award 2014. It has been assumed that Award increases will be consistent at 3% per annum for the remaining life of the plan.

c) Salary System - the Award requires that each council establishes a salary system and

provides for a system of progression through a salary range. Councils may also make available access to bonus payments or other opportunities for additional reward for those

11

Income Statements are available from Council’s website: http://www.northsydney.nsw.gov.au/www/html/3738-annual-financial-statements.asp 12 Following the commencement of a new General Manager in April 2014 a further organisational structure occurred which included the introduction of new departments within the General Manager’s Office, including an additional senior management position i.e. the changes resulted in increases to employee costs.


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employees who have progressed through the salary system to the maximum point/step for their position. It should be noted that skills and performance progression increases are paid on top of Award increases. Council’s salary system has established a series of grades for each position, based on a job evaluation system and market comparisons. Employees are able to progress through their salary grade range in accordance with Award requirements.

In 2009, in consultation with employees and Unions, Council reviewed its salary system as amounts previously granted within the scheme were not sustainable; the review resulted in a saving of $344,000 between the 2009/10 and 2010/11 performance cycles. Council maintained access to a bonus system for employees who are at the top of their identified salary range13. With many employees having over five years’ service, this assists with maintaining motivation for long term employees.

d) Market Competitiveness - Council aims to provide a fair reward system for employees which

allows for internal equity and external competitiveness. Council aims to position itself at the 75th percentile of salaries at comparable councils. Council participates in an annual salary survey conducted by Mastertek. The April 2012 survey compared 143 positions and involved 21 councils from within the Sydney Metropolitan Area (15) and regional NSW (6). The results of each survey are utilised to compare Council’s position against other councils to ensure that salaries remain competitive. Each year salaries are adjusted in order to remain in the 75th percentile.

e) Transport Allowance - as detailed in the Workforce Management Strategy, the average daily

two-way employee travel distance is 45.78km (round trip), with 65% of Council’s employees travelling more than 20km each day to and from work. In line with one of the key objectives of the Community Strategic Plan, Council promotes use of public transport as well as encourages alternative modes of transport. In contrast to the majority of other councils, Council does not provide employee parking. In order to attract and retain employees and to encourage use of public transport, Council offers a subsidy to employees using public transport.

f) Workers Compensation Premiums - Council continues to managing its workers compensation

and work health and safety expenditure closely. In the Local Government NSW Benchmarking Survey, one metric relates to Workers Comparison Premium Rate (ie workers compensation premium divided by total salaries and wages x 100). The results were compared across 70 councils and ranged up to 10%. Council has been managing its costs within the low range of 2.5%.

Borrowing Costs Council has been debt free for many years, however there will be significant demands on Council to redevelop some of its existing assets and possibly to acquire additional public open space. Depending on the timing and size of these redevelopments, it will become necessary to start a controlled borrowing program. Debt will only be approved where there is an agreed economic, social, or environmental benefit from a project and other sources of funding are not available. As required, borrowing will be undertaken in accordance with Council’s Financial Management Policy, in that:

capital cost of infrastructure will be recognised over the period during which the benefits will be enjoyed;

funds are a resource to fund the replacement and upgrading of existing infrastructure and fund the creation of new infrastructure;

loan funds will be limited: - to the acquisition or enhancement of income producing assets; - to the construction and/or upgrading of buildings; - to infrastructure assets that have a life expectancy of greater than 10 years; and

13 33% of employees are now at the top of the salary range for their positions.


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loan borrowings will not exceed a Debt Service Ratio of 5%. Council plans to borrow for Replacement Parking Meter Solution in 2014/15 and the redevelopment of the Alexander Street Car Park in Crows Nest in 2015/1614. The debt servicing of these loans is expected to be sourced from the users of these services. While the terms and conditions for each loan have yet to be determined, it has been assumed that funds will be borrowed over 20 years at 5.5% per annum for the redevelopment of the Alexander Street Car Park and over 10 years at 5.5% per annum for the Replacement Parking Meter Solution. Materials and Contracts With the exception of waste and recycling collection and waste disposal costs, which are expected to rise significantly in 2013/14 due to anticipated increases in disposal and fall back in line with the CPI thereafter, it has been assumed that the costs of materials and contractors will increase by the CPI for the life of the plan, as shown in the following table.

2013/14 2014/15 2015/16 2016/17 2017/18-2022/23

Waste and Recycling Collection 11.70% 2.50% 2.50% 2.50% 3.00% Waste Disposal 16.50% 2.50% 2.50% 2.50% 3.00% Other Materials and Contractors 2.25% 2.50% 2.50% 2.50% 3.00%

Depreciation Accounting Standard AASB 11615 which deals with property, plant and equipment states: "After recognition as an asset, an item of property, plant and equipment whose ‘fair value’ can be measured reliably shall be carried at a re-valued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the reporting date." As comparable market transactions for the majority of Council's assets do not exist, ‘fair value’ is determined by depreciated replacement cost, i.e. the current cost of replacement less deprecation based on the amount of the assets useful life already consumed. Subsequent depreciation expense is then based on the current replacement cost and the useful life of the asset. It is reasonable to assume that the current replacement costs of Council's assets will continue to increase over time but that their useful lives will remain static. Therefore, as assets are periodically re-valued to comply with AASB116, Council's depreciation expense will increase. Essentially the amount of economic benefits of an asset consumed during a period will be priced at their current value rather than their historic cost. Depreciation of Council’s infrastructure assets is determined from information contained within their various Asset Management Plans and this is reflected in the three scenarios as well as the Asset Management Strategy. Other Expenses With the exception electricity, street lighting and insurance premiums, it has been assumed that “other” expenses will increase by the CPI for the life of the plan, as shown in the following table.

2013/14 2014/15 2015/16 2016/17-2022/23

Electricity 8.00% 8.00% 8.00% 8.00% Street Lighting 8.00% 8.00% -20.00% 5.00% Insurance 3.80% 3.80% 3.00% 3.00%

14 $9.5 million was borrowed by Council in 2015/16 for both the Alexander Street Car Park ($5 million) and the Parking Meter Solution project ($4.5 million). 15 Paragraph 13 of AASB 116.


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2013/14 2014/15 2015/16 2016/17-2022/23

Other Expenses 2.25% 2.50% 2.50% 3.00% Capital Expenditure Capital expenditure to be outlaid for the renewal of existing infrastructure assets and the acquisition of new infrastructure assets is linked to the amounts required in Council’s Asset Management Strategy. As these values are recorded in today’s dollars in the Asset Management Strategy, they have been escalated by the forecast increase in the CPI over the life of the plan. Funding for capital expenditure has been increased by $13.9 million in 2015/16 and by $25.1 million in 2016/17. Total capital expenditure is forecast to be $35.6 million in 2015/16 and $48.7 million in 2016/17.


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Financial Scenarios (Modelling) This plan expresses in financial terms the activities that Council proposes to undertake over the short, medium and long term and guides the future strategies and actions of Council to ensure that it continues to operate in a sustainable manner. The purpose of the plan is to provide a benchmark of the financial position based on current strategies projected out 10 years. It fits in with Council’s IPR framework in the long term, in terms of the Community Strategic Plan; the medium term, in terms of the Delivery Program; and the short term, in terms of the annual Operational Plan and budget. Financial strategies or scenarios provide direction and guidance. Including such scenarios will assist Council in developing the best plan for Council to meet community expectations. Three scenarios have been developed to demonstrate the impact of changes in assumptions:

Scenario 1 (Base Case) - assumes a continuation of normal business, incorporating some targeted service improvements, and includes the previously approved 5.5% special rate variation, which expires in 2017/18.

Scenario 2 (Base plus additional $83 115 million for capital expenditure from 2013/14 to 2016/17) - assumes a continuation of normal business, incorporating some targeted service improvements, and includes the previously approved 5.5% special rate variation but allows for an annual injection of approximately $83 115 million of additional funds towards new capital projects and the renewal of Council’s ageing infrastructure for the Delivery Program term (i.e. from 2013/14 to 2016/17 inclusive). These funds are to be sourced from Council’s reserves, the balances of which hasve increased in recent years due to better than expected operating results.

Scenario 3 (Preferred Infrastructure Funding) - assumes a continuation of normal business,

incorporating some targeted service improvements, and includes the previously approved 5.5% special rate variation but allows for the injection of an additional $61 million in today’s dollars (above that allowed for in the Base Case) over the life of this plan towards the renewal and maintenance of Council’s ageing infrastructure assets and investment property holdings and the acquisition/construction of new assets.

The 2013/14 budget and forward estimates for 2014/15, 2015/16 and 2016/17 were prepared on the assumption that Scenario 2 would be adopted. In Scenario 3, apart from borrowings of $16.58 million between 2014/15 and 2017/18 to fund remedial work at the North Sydney Olympic Pool, it has been assumed that there will be no additional funding available other than Council’s existing reserve funds for the life of the plan. Note: As Council resolved to adopt Scenario 2, Scenarios 1 and 3 have not been amended as at March 2015. Scenario 1: Base Case This scenario models the impact on Council’s financial position if:

existing services are maintained at current levels; infrastructure renewal and other capital expenditure remains at current levels; and revenue from rates continues to increase by 5.5% p.a. until 2017/18 and by the forecast

permissible increase determined by the Independent Pricing and Regulatory Tribunal (IPART) thereafter.

This scenario forecasts:

A $2.02 million net surplus including capital grants and contributions (including Section 94 Contributions) in 2013/14 and modest net operating results ranging from a deficit of $222,000


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to a surplus of $700,000 each year until 2018/19 and then deteriorating over the remaining life of the plan, with increasing annual deficits in excess of $1 million thereafter due to the impact of the cessation of the approved SRV.

Figure 1: Net Operating Result - Scenario 1

Operating expenses are to exceed operating income resulting in annual net deficits before

capital grants and contributions of between $1.62 million and $2.48 million until 2018/19. The deficits are forecast to increase from $3.57 million to $5.93 million thereafter due to the impact of the cessation of the approved SRV.

Figure 2: Net Operating Result before Capital Grants and Contributions - Scenario 1


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An Unrestricted Current Ratio above the benchmark of 1.5:1 each year, an indication of

strong levels of liquidity with sufficient cash reserves and available working capital to fund anticipated commitments.

A Building and Infrastructure Renewal Ratio significantly below the target of 100%, ranging from 55% to 77% over the life of the plan. This is the result of insufficient commitment to infrastructure renewal, with assets depreciating at faster rate than they are renewed.

Scenario 2 (Base Case plus additional $83 115 million for capital expenditure from 2013/14 to 2016/17) This scenario models the impact on Council’s financial position if:

existing services are maintained at current levels;

$83 115 million is allocated to capital expenditure from 2013/14 to 2016/17; and

revenue from rates continues to increase by 5.5% per annum until 2017/18 and by the

forecast permissible increase determined by IPART thereafter. The results of this scenario forecast:

A net surplus including capital grants and contributions (including Section 94 Contributions) and fair value adjustments) of $6.6 13.6 million in 2014/15 2015/16 and $6.7 6.2 million in 2015/16 2016/17. The operating result is forecast deteriorate gradually from a surplus of $2.3 6.4 million in 2016/17 2017/18 to a deficit of $1.1 million 712,000 in 2022/23 over the remaining life of the plan due to the impact on interest and investment revenue of a smaller pool of funds available for investment and the cessation of the approved SRV.

-$5,000,000

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Net Operating Result - Base Case + Additional $115M for Capital Expenditure from 2013/14 to 2016/17


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Figure 3: Net Operating Result - Scenario 2 (Amended)

Excluding capital grants and contributions but including fair value adjustments, a net

operating surplus of $838,000 $9 million is forecast in 2014/15 2015/16 and $2.7 2.1 million in 2015/16 2016/17. Net operating deficits surpluses of between $2.3 million and $715,000 are forecast in 2017/18 and 2018/19. $1.2 million and $1.4 1.8 million are forecast from 2016/17 to 2018/19. The impact on interest and investment revenue of a smaller pool of funds available for investment and of the cessation of the approved SRV is forecast to result in deficits before capital grants and contributions of between $2.9 1.8 million and $4.1 4.8 million for the remaining life of the plan.

-$6,000,000

-$4,000,000

-$2,000,000

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Net Operating Result before Capital Grants and Contributions - Base Case + Additional $115M for Capital Expenditure from 2013/14 to 2016/17


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Figure 4: Net Operating Result before Capital Grants and Contributions - Scenario 2 (Amended)

The Long Term Financial Plan does, however, allow for significant non-cash revenue generated from increases in the fair value of Council’s investment property portfolio. This revenue, being unrealised, cannot be drawn upon to fund operating or capital expenditure but does contribute to the annual operating result. If this revenue along with revenue from capital grants and contributions is excluded, the forecast operating deficit surplus for 2014/15 2015/16 is $2.6 2.7 million, with a surplus of $32,000 in 2016/17 and deficits of between $3.3 2.3 million and $6.3 8.1 million over the remaining life of the plan.

An Unrestricted Current Ratio around the benchmark of 1.5:1 each year, an indication of

adequate levels of liquidity with sufficient cash reserves and available working capital to fund anticipated commitments.

A significant improvement in the Building and Infrastructure Renewal Ratio compared to Scenario 1 and Scenario 2 in the original version of the plan from 2013/14 to 2016/17. It is forecast to be well above 100% between 2013/14 and 2016/17 before falling below 100% thereafter over the remaining life of the plan. This is a reflection of the significant increase in infrastructure renewal expenditure from 2014/15 to 2016/17 and insufficient commitment to infrastructure renewal thereafter, with assets depreciating at faster rate than they are renewed.

Scenario 3: Preferred Infrastructure Funding This scenario models the impact on Council’s financial position if:

existing services are maintained at current levels; infrastructure renewal expenditure is increased by $53.5 million over the life of the plan above

that budgeted for in Scenario 1 and by $48.6 million above that budgeted for in Scenario 2; an additional $7 million is provided for the acquisition or construction of new assets over the

life of the plan above that budgeted for in Scenarios 1 and 2; and revenue from rates continues to increase by 5.5% per annum until 2017/18 and by the

forecast permissible increase determined by IPART thereafter.


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The results of this scenario forecast:

A $191,000 net deficit including capital grants and contributions in 2013/14 and net operating deficits of between $2.4 million and $5 million each year until 2018/19, deteriorating over the remaining life of the plan, with rising annual deficits in excess of $6.4 million thereafter due to the impact of the cessation of the approved SRV.

Figure 5: Net Operating Result - Scenario 3

Operating expenses to exceed operating income resulting in annual net deficits before capital

grants and contributions of between $4.59 million and $7.25 million until 2018/19. The deficits are forecast to increase from $8.88 million to $11.96 million thereafter due to the impact of the cessation of the approved SRV.


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Figure 6: Net Operating Result before Capital Grants and Contributions

An Unrestricted Current Ratio falling below the benchmark of 1.5:1 in 2014/15 and

deteriorating each year thereafter, an indication of lower liquidity levels and insufficient cash reserves and available working capital to fund anticipated commitments. Significant falls in cash and investments until 2019/20 and the need to rely on a sizeable bank overdraft to continue operating thereafter.

Significant improvement in the Building and Infrastructure Renewal Ratio compared to Scenarios 1 and 2. With greater commitment to infrastructure renewal, it is forecast to fluctuate between 61% to 167% between 2013/14 and 2020/21 before settling at around 90% in 2021/22 and 2022/23.

Funding this level of capital expenditure would require an annual increase in rates revenue of

at least 7% each year from 2018/19 after the cessation of the existing SRV rather than the 3% increase assumed in the model. Performance reporting will be in accordance with the Note 13 - Statement of Performance Measures of the current According Code and Council’s Financial Management Policy.


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Monitoring and Evaluation Council will review the Long Term Financial Plan each year as part of the development of the annual Operational Plan. The review will include an assessment of the previous year’s performance in terms of the accuracy of the projections made in the plan compared to the actual results. Evaluation will include reviewing and amending estimates and scenarios to improve the accuracy of the plan over the longer term. Council will not only monitor its performance against the plan and the annual budget, but has also developed key performance indicators to assess its long term financial sustainability. Council’s Financial Management Policy includes several indicators:

Loan borrowings will not exceed a Debt Service Ratio of 5% Unrestricted Current Ratio Available Cash Position Asset renewal expenditure Collection performance (outstanding debtors ratio)

The following indicators are included in the Community Strategic Plan:

Operating Balance Ratio Unrestricted Current Ratio Rates and Annual Charges Coverage Ratio Building and Infrastructure Renewal Ratio Debt Service Ratio Broad Liabilities Ratio

The following indicators are included in the Delivery Program 2013/14-2016/17:

Investment rate of return (% greater than 90-day BBSW) Movements in property portfolio revenue Credit rating Budgeted expenses vs actual expenses Overall budget variances (for operational revenue, operational expenditure, capital revenue,

capital expenditure) Capital expenditure to forecast Services expenses to forecast Staff costs to forecast Ratio of current assets to current liabilities Operating result before capital grants and contributions Available cash assets Unrestricted available cash assets Asset renewal ratio Percentage of revenue from innovative functions (special purpose grants, private works, etc) Utilisation of commercial property portfolio

Council will thoroughly evaluate the plan every four years, in line with the review of the Community Strategic Plan. This will occur three to nine months after each local government election. The Resourcing Strategy in its entirety will be reviewed and updated and a draft Community Strategic Plan and resourcing options concurrently presented to the community.


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Asset Management Strategy 2013/14-2022/23


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Overview Infrastructure assets deliver important services to communities. A key, ongoing issue facing local governments throughout Australia is the management of ageing assets in need of renewal and replacement. Asset management refers to many activities that are already undertaken within Council, such as road pavement management, parks landscaping and the provision of high need services such as community centres. Asset management, therefore, is not a new concept, but rather something what has been undertaken implicitly for as long as services have been provided by councils. Improvement in asset management involves formalising the knowledge about asset performance, maintenance levels and community expectations in order to optimise both expenditure and service provision over a longer time scale. Council’s long term planning requires more detail about its assets and their relative services then has previously been available. Infrastructure assets such as roads, stormwater drainage, property, marine structures and recreational facilities present particular challenges. Their condition and longevity can be difficult to determine. Financing needs can be large, requiring planning for large peaks and troughs in expenditure for renewing and replacing such assets. The demand for new and improved services adds to the planning and financing complexity. The creation of new assets also presents challenges in funding the ongoing operating and replacement costs necessary to provide the needed service over the assets’ full life cycle. Council’s Asset Management Strategy enables it to show how its asset portfolio will meet the service delivery needs of its community into the future; that its asset management policies are being achieved; and that existing asset management practices integrate with the Community Strategic Plan.

The goal of asset management is to ensure that services are provided in the most cost effective manner; through the creation, acquisition, maintenance, operation, rehabilitation and disposal of assets; and for present and future consumers. In line with the community’s vision for North Sydney, the objectives of the Asset Management Strategy are to:

guide the planning, construction, maintenance and operation of the infrastructure essential for Council to provide services to the community;

ensure that Council’s infrastructure services are provided in a financially sustainable, economically optimal way, enabling the appropriate level of service to residents, ratepayers, visitors and the environment;

meet legislative requirements for all Council’s operations; ensure resources and operational capabilities are identified and responsibility for asset

management is allocated; and provide high level oversight of financial and asset management responsibilities on

development and implementation of the Asset Management Plans and Long Term Financial Plan.

Asset management planning commences with defining stakeholder and legal requirements and needs, incorporating these needs into the organisation’s strategic plan, developing an asset management policy, strategy, asset management plan and operational plans, linked to a long-term financial plan with a funding plan.16 Council used the National Asset Management Strategy program, known as NAMS.PLUS to prepare this strategy. It is based on the International Infrastructure Management Manual (IIMM) framework. Working with Jeff Roorda and Associates (JRA), an asset maturity assessment was undertaken to provide benchmarking against the current status of Council’s assessment management practices and identify gaps and areas for improvement. This framework is a planning and improvement process that

16 IPWEA, 2009, AIFMG, Quick Guide, Section 4, p 5.


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ensures a systematic, cross disciplinary and optimised approach to asset management, which helps correctly blend responses to short term requirements with sustainable delivery of long term goals. The key steps in preparing an effective Asset Management Strategy include: 1. Development of an Asset Management Policy - that underpins the strategy. The policy provides

guiding principles for asset management and planning. 2. Strategy and Planning - the State Government and industry bodies have provided guidance on

developing an asset management strategy which is designed to support and implement its asset management policy.

3. Governance and Management Arrangements - applying good governance and management

arrangements which link asset management to service delivery and include assigning roles and responsibilities.

4. Defining Levels of Service - establishing mechanisms, including community consultation, to

define the levels of service councils are expected to provide from their asset base. 5. Data and Systems - establishment of a framework for asset management data collection. 6. Skills and Processes - the framework should contain a continuous improvement program. 7. Evaluation - the framework should contain a mechanism to measure its effectiveness. The following diagram illustrates the key steps in asset management planning:

Source: JRA 2013

Asset Management Planning Process


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Asset Management Policy The management of community assets is a key function of Council. The provision of assets maintained to meet community needs and expectations is fundamental to Council’s overall service delivery. The purpose of the Asset Management Policy is to demonstrate North Sydney Council’s commitment to the responsible management of its assets. Council’s Asset Management Policy was first adopted in June 2010 and re-adopted in February 2013. The policy sets the framework for Council’s strategy and plan(s), while the strategy and plan(s) support and implement the policy. The policy:

establishes goals and objectives for asset management; integrates asset management within council’s corporate and strategic planning; maximises value for money through lifecycle costing and performance measurement; assigns accountability and responsibility for service delivery together with asset management;

and promotes sustainability to protect the needs of future generational (i.e. the principles of

intergenerational equity). Refer to Appendix 2 for Council’s Asset Management Policy. Asset Management Plans Supporting the Asset Management Strategy is an Asset Management Plan. This is a long term plan that outline the asset activities for each service. This details the intended asset management program for each asset class, based on controlling the organisation’s understanding of customer requirements (including desired levels of service and satisfaction with current service levels), existing projected networks and asset conditions and performance17.

17 International Infrastructure Management Manual, p2.39


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Current Asset Analysis Asset management planning is a comprehensive process to ensure that assets are managed and maintained in a way that enables affordable services from infrastructure to be provided in an economically optimal way. In turn, affordable service levels can only be determined by assessing Council’s financially sustainability under scenarios with different proposed service levels. Existing Assets Council uses infrastructure assets to provide services to the community. The range of infrastructure assets and the services provided from the assets is shown in the following table: Asset Class Description Services ProvidedOpen Space and Recreation Facilities

Structures and park furniture

Land improvements - depreciable

Parks and recreation services supporting community and recreational needs

Road Facilities and Streetscapes

Kerb and gutter Footpaths Street furniture

Stormwater drainage management, pedestrian access and amenity.

Road Pavement Regional road pavements

Local road pavements

The road network provided by Council is used to support transportation and are important to the community and economic activities of the area.

Seawalls and Marine Structures

Seawalls Wharves

Foreshore and environmental protection, property protection, waterway access.

Stormwater Drainage Pipes Culverts Pits Water quality

improvement devices

Control local flooding and damage to infrastructure and property. Control water quality of discharge of stormwater into the natural environment.

Property Buildings - community

Buildings - corporate Recreational

buildings Swimming pools

The land and buildings provided by North Sydney Council are used to support the administration, operational and social infrastructure for the community.

State of Current Assets The current financial status of Council’s assets, per asset class, is shown in following table. This information has been obtained from Council’s Technical Assets Register, with indexing to update to 2013 values. Asset Class Replacement

Cost Depreciated Replacement Cost

Depreciation Expense

Open Space and Recreation Facilities $31,089,457 $20,513,082 $1,024,983 Road Facilities and Streetscapes $163,815,856 $131,580,468 $3,424,225 Road Pavement $231,753,910 $130,815,975 $4,133,811Seawalls and Marine Structures $39,872,635 $21,618,737 $983,713Stormwater Drainage $146,873,122 $99,138,111 $1,298,299Property $154,784,827 $84,028,065 $2,812,010 Total $768,189,807 $487,694,438 $13,677,041

Source: Technical Assets Register


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The replacement costs detailed in table above are also shown in the graph below. Council’s largest asset classes in terms of replacement costs are Road Pavement, Road Facilities and Streetscapes, Property and Stormwater Drainage. Council maintains 10km of Regional roads such as Ernest Street (East of Miller Street) and McPherson Street, Cremorne and 128km of Local Roads in the North Sydney local government area; as well as 59 properties and 98km of stormwater drainage. The maintenance of these and all other asset classes are outlined in Council’s Asset Management Plans.

Figure 7: Asset Replacement Dollar Values

Figure 7 above shows the current valuation assessments from Council’s Technical Assets Register Figure 8 indicates that all asset groups have greater than 50% of remaining value, however the classes of Property, Seawalls and Marine Structures as well as Road Pavement have less than 60% of value remaining. It should be noted that a higher depreciation does not necessarily mean that significant asset renewal is required in the short to medium term because an asset class may be in fair condition resulting in higher depreciation but may not require renewal within the next 10 years.


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Figure 8: Remaining Value of the Assets %

Consumption ratios are indicative of how much value remains in the asset. Figure 8 shows this as a percentage, whilst Figure 9 shows it as the dollar value and brings the relativity of each asset group into the representation. These graphs should be read in conjunction with the renewal forecasts coming from the Asset Management Plan for the next 10 years to achieve an appreciation of renewal requirements.

Figure 9: Remaining $ Value of the Assets

The following table summarises the ‘confidence level’ of the condition data of Council’s assets, this information has been obtained from Council’s Technical Assets Register. This information highlights the areas of future improvement needed to enhance Council’s asset management planning capabilities, which are further articulated in the Improvement Plan. Improvement in these identified areas will lead to improved long term planning. Council’s ‘confidence level’ in the management of its assets is under continuous improvement through inspection regimes. These will be improved as


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further data is collected e.g. Council has invested significant time and funds to investigate the condition of its drainage network.

Asset Class Confidence LevelOpen Space and Recreation Facilities Medium Road Facilities and Streetscapes Medium Road Pavement High Seawalls and Marine Structures High Stormwater Drainage High Property High

Figure 9 should be read in conjunction with the renewal forecasts coming from the Asset Management Plan for the next 10 years, to gain an appreciation of renewal requirements. The graph shows the proportion of assets according to condition. The condition categories used to determine the state of Council’s assets is consistent with NAMS.PLUS and the International Infrastructure Management Manual. It should be noted that assets are not always replaced based on their condition, for example a section of kerb and gutter could have some cracking and be in poor condition, however it is still performing its function and may not require replacement in the short to medium term. Similarly a storm water pipe in reasonable condition but undersized may require replacement with a larger diameter pipe due to flooding issues. Therefore it is not possible to ensure that all of Council’s assets are in ‘good’ condition. The Asset Management Plan ensure communicates the level of service that can be delivered to the community over a 10 year period. The Asset Management Plan continues to be improved over time as information is obtained. Figure 10 provides a summary of the value of asset group conditions as a dollar value.

Figure 10: Summary of Asset Group Condition by $ Value

Life Cycle Costs There are four key phases of the asset management lifecycle of a council’s assets - acquisition, operation and maintenance, renewal, and disposal. These phases are interrelated. It is important to attribute the costs to each phase of an asset’s lifecycle so that the total lifecycle costs can be


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determined to enable better management decision-making. Life cycle costs (or whole of life costs) are the average costs that are required to sustain the service levels over the longest asset life. Life cycle costs include operating and maintenance expenditure and asset consumption (depreciation expense). Long Term Life Cycle Cost (100 years) The life cycle costs and life cycle expenditure comparison highlights any difference between present outlays and the average cost of providing the service over the long term. If the life cycle expenditure is less than the life cycle cost, it is most likely that outlays will need to be increased or cuts in services will need to be made in the future. If the life cycle expenditure is higher than the life cycle cost, it is most likely that we have ageing assets and are in a period of high renewal requirements. Knowing the extent and timing of any required increase in outlays and the service consequences if funding is not available assists Council in providing services to its community in a financially sustainable manner. The life cycle gap per asset class is summarised in following table, includes additional maintenance and operation costs resulting from additional assets. Whilst the actual funding requirements over the next 10 years are not indicated, this information is an indicator of where the current proposed expenditure compares with the long term (whole of life) requirements. It does not acknowledge the ‘peaks and troughs’ of asset renewal.

Asset Class Life Cycle Cost (Whole of Life Average)

Life Cycle Expenditure (Average over 10 years - provisional)

Open Space and Recreation Facilities $1,875,000

$1,446,000

Road Facilities and Streetscapes $8,856,000 $9,533,050 Road Pavement $5,547,000 $4,552,180 Seawalls and Marine Structures $1,030,000 $694,500 Stormwater Drainage $1,822,000 $1,447,000 Property $10,430,000 $9,312,615 Total $29,560,000 $26,985,345

Medium Term Life Cycle Cost (10 years) The following table represents the asset renewal funding ratio as at 2013 and 2015. It is the comparison of the capital renewal funding being provided over the next 10 years with the capital renewals falling due. The significant aspect of this ratio is that it takes into account the timing (peaks and troughs) of renewal requirements over the 10 year period. The ratios of 100% in the table below indicate that the required renewals for the next 10 years are being funded.

Asset Class Asset Renewal Funding Ratio

2013 2015 Open Space and Recreation Facilities 100% 100% Road Facilities and Streetscapes 88% 100% Road Pavement 76% 100% Seawalls and Marine Structures 56% 100% Stormwater Drainage 100% 100% Property 74% 100%

The following table details Council’s overall funding position as at 2013. The sustainability indicators are significantly influenced by the forecast of capital renewal and the planned expenditure of capital renewal. Renewal expenditure is major work which does not increase the asset’s design capacity but


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restores, rehabilitates replaces or news an existing asset to its original service potential. Work over and above restoring an asset to original service potential is upgrade/expansion or new works expenditure. Projected expenditure is based on the Scenario 2 in the Long Term Financial Plan.

Open Space and Recreation Facilities

Road Facilities and Streetscapes

Road Pavement

Seawall and Marine Structures

Stormwater Drainage

Property

Total

Projected Operations (Scenario 3)

$2,073,000 $28,384,000 $8,570,000 $60,000 $2,010,000 $58,213,000

$99,310,000

Planned Operations (Scenario 2)

$1,970,000 $26,030,000 $8,570,000 $60,000 $2,010,000 $57,620,000

$96,260,000

Projected Maintenance (Scenario 3)

$2,073,000 $25,936,000 $5,560,000 $400,000 $3,230,000 $24,095,000

$61,294,000

Planned Maintenance (Scenario 2)

$1,970,000 $23,770,000 $5,560,000 $400,000 $3,230,000 $23,850,000

$58,780,000

Projected Capital Renewal (Scenario 3)

$21,515,000 $19,613,000 $31,496,600

$7,170,000 $9,230,000 $44,579,150

$133,603,750

Planned Capital Renewal (Scenario 2)

$8,320,000 $19,456,000 $31,391,800

$6,245,000 $9,230,000 $10,361,150

$85,003,950

Projected Capital Upgrade/New (Scenario 3)

$3,070,000 $31,699,500 $0 $340,000 $0 $1,745,000 $36,854,500

Planned Capital Upgrade (Scenario 2)

$2,200,000 $26,074,500 $0 $240,000 $0 $1,295,000 $29,809,500


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Planning Assumptions Achieving and maintaining sustainability in local government requires consideration of services, service levels, associated costs and associated risks. The appropriate management of the infrastructure of Council requires asset management estimates and asset accounting estimates that are realistic and support decision making. Service Demand and Satisfaction Asset management sustainability is reliant on Council engaging with the community on affordable and sustainable service levels to determine satisfactory service levels and the trade-off between what the community is prepared to pay the quality and mix of services Council can afford to provide. Council’s periodic Customer Satisfaction Surveys are used to determine desired/expected levels of services. It is clear from the most recent surveys that the North Sydney community (residents and businesses) expect the current level of service to be retained, and if anything increased. Pages 22 to 24 detail current levels, however as part of Council’s continual improvement of its asset management planning it is recommended that in future years a more informed discussion with the community is required in order to further develop an understanding of the relationship between desired levels of service their associated costs, and their willingness and/or capacity to pay for them. The 2013 Customer Satisfaction Survey found that three of the top four key areas of ‘relative importance’ were the same for both residents and businesses - these were maintaining roads and footpaths, keeping roads and footpaths clean and maintaining parks, ovals and bushland areas. Whilst ‘overall satisfaction’ with Council services is relatively high, at 85% for residents and 72% for businesses, there are areas of dissatisfaction, which in turn are areas for improvement through Council’s IPR Framework. The two highest service areas of dissatisfaction for residents were pedestrian and cycle paths and maintenance of roads and footpaths (both 30% dissatisfaction). For businesses, two of the highest service areas of dissatisfaction were also asset related and were similar to residents - maintenance of roads and footpaths (30% dissatisfaction) and traffic management eg traffic calming devices (25% dissatisfaction). Priority Risk Areas Council’s 2013 asset maturity assessment conducted in February 2013 as part of the development of this plan, identified three priority/critical risk areas with the asset classes which require attention. This information provides a long term view of the new/additional responsibilities that should be taken into account in future planning and decision making, including staffing decisions, in particular within the Engineering and Property Services Division. Risk Description

Property There are a number of significant properties, including the North Sydney Olympic Pool and North Sydney Oval, which require significant investment. The funding availability and timing of these this works are is an important considerations in ongoing asset strategy.

Underfunding of Resealing Roads

Current levels of road resurfacing will result in a long periods between resurfacing. This ultimately will result in higher costs to water penetrating and prematurely damaging the underlying road structure. This situation requires continued monitoring as the costs associated with this work and the risks to the network are high.


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Risk Description

Stormwater Drainage

Recent investigations have identified a significant number of pipeline failures. Substantial investment for renewal of pipelines has been made in the four year financial estimates and Long Term Financial Plan. The extent and improvements made by this investment requires close monitoring particularly over the next few years.


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Gaps and Future Needs A whole of organisation approach is essential for asset management practices to continue to improve. A corporate strategy for improvement in asset management will ensure that cost-benefit analyses are reconciled against Council and community needs, enabling Council to deliver the best possible service from its asset base within the limits of available funding. The following Improvement Plan is a critical component of this strategy. The plan has been developed from existing project plans, cross divisional discussions/planning as well as suggestions from Council’s asset management consultant, Jeff Roorda and Associates. In summary:

Council’s asset management capability is continuing to develop. Following the Improvement Plan in this strategy will enable a ‘core’ level of capacity to be achieved within 12 months;

Council’s financial position is sustainable. It is generating a balanced annual operating position (inclusive of asset depreciation) indicating that there is sufficient income being generated over the long term to support its renewal program;

Current levels of funding being sought in the budget in other infrastructure asset areas are being funded indicating existing service levels can be maintained at current levels of service;

There are a number of significant properties (including the North Sydney Olympic Pool and North Sydney Oval) requiring significant investment. The funding availability and timing of these works should be important considerations in ongoing asset strategy; and

Council needs to continue to invest in improved condition data and risk inspections and monitoring.

Key Focus Areas Council’s Asset Management Strategy proposes actions to enable the objectives of the Community Strategic Plan and Asset Management Policy to be achieved. The following action plan contributes to achievement of the following desired outcomes and strategies within the Community Strategic Plan: Direction Outcome Strategy 2. Our Built Environment 2.1 Infrastructure, assets and

facilities that meet current and future community needs

2.1.1 Develop a program of infrastructure asset acquisition and creation, maintenance, renewal and disposal to minimise whole of life cost

2.1.2 Expand capacity of

existing community infrastructure

2.1.3 Advocate for improved

state infrastructure and adequate funding for maintenance and improvement of community assets

The following Asset Management Improvement Plan summarises the tasks ‘core’ asset and financial management maturity in the areas where there are currently gaps. Implementation of


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these actions will only achieve core status if implemented in conjunction with improvements in the accompanying Asset Management Plans.

Practice Area Action Timeline

Annual Report Continue to develop the corporate asset register so that all Asset Management Planning, Annual Reporting, Financial Reporting and Long Term Financial Plan can easily be aligned.

December 2013

Asset Management Plans

Review current Asset Management Plan in line with the revised Resourcing Strategy, including improved alignment with the revised Long Term Financial Plan.

June 2015

Levels of Service Implement state of the assets service level reporting for all asset categories. Ensure Asset Management Plan contain service levels and risks that reflect available resources in Long Term Financial Plan as well as scenarios to achieve target levels of service (if different to achievable levels of service).

December 2015

Data and Systems

Continue the implementation of the corporate asset register. December 2015

Skills and Processes

Annual review of documented processes and procedures to ensure the skills to maintain the asset register are fully and clearly understood by the organisation. Links to Workforce Management Strategy.

December 2015

Evaluation Update the asset maturity assessment following completion of the 2015 review of all Asset Management Plans.

Ongoing

Council’s Engineering and Property Services Division has the lead responsibility of implementation, monitoring and reporting against this strategy. In particular the Engineering Infrastructure and Property Assets Departments will collaborate with the organisation and business units (departments/functions) to assist in the achievement of these strategies. Council’s internal Asset Management Sub Committee (or steering group) will oversee the implementation of this strategy and will periodically report against progress.


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Resourcing

The sustainable management of assets is a ‘whole of council’ responsibility, recognised at all levels within the organisation. Council has undertaken a strategic level review of its asset management practices and systems to provide the future direction and guidance for improving its asset management performance. Implementing the maintenance and improvement actions will have a strategic and corporate significance to Council. Council’s Asset Management Strategy is directly aligned with the vision and desired outcomes of the Community Strategic Plan and Delivery Program. Central to this is forecasting the service delivery needs and the capacity to meet them on a short, medium and long term basis. The cost of implementing the Asset Management Strategy has been incorporated within Council’s Delivery Program (four-year financial estimates) and Long Term Financial Plan (ten-year financial estimates/three scenarios). However, it should be noted that this strategy reflects Council’s intentions at the time of publication. As with any plan or budget, the actual results may vary from that forecast. The total current value of preferred projected infrastructure capital expenditure over the life of the Long Term Financial Plan is as follows:18

Scenario 3‘Preferred’

Scenario 2 ‘Planned’

Projected Capital Renewal $133,604,000 $85,004,000 Projected Capital Upgrade/New $36,855,000 $29,810,000 Total Projected Capital $170,459,000 $114,813,000

18 This table is to be updated post exhibition.


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Monitoring and Evaluation

Council must prepare its asset performance reports in accordance with the requirements of the:

Local Government Act 1993 and Regulation 2005; Local Government Code of Accounting Practice and Financial Reporting; and Australian Accounting Standards.

Every six months Council prepares a report as to its achievements with respect to the implementation of its fixed term Delivery Program. Similarly within five months after the end of each financial year, Council must prepare its Annual Report in respect to the implementation of its Operational Plan. This report includes:

the assets acquired by Council during that year; and

the assets held by Council at the end of that year, for each of Council’s principal activities;

a report on the condition of the public works under the control of Council (Special Schedule 7) as at the end of that year, together with an estimate (at current value) of the amount of money required to bring the works up to a satisfactory standard, an estimate (at current value) of the annual expense of maintaining the works at that standard and Council’s program of maintenance for that year in respect of the works.

Special Schedule 7 (reported in the Annual Report) flows directly from the Delivery Program which includes performance indicators for both existing and proposed levels of services. These performance measures are used to quantify the upgrade costs (or degree of over-serving) between existing and target service levels. In addition to the performance measures referred to above, Council will also measure its asset management development in response to the key areas for improvement identified through the gap analysis, by tracking its maturity improvements in accordance with the targets identified in the Asset Management Improvement Plan.


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Workforce Management Strategy 2013/14-2016/17


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Overview An effective workforce management strategy provides an organisation with the best people able to achieve its strategic direction, through the development of innovative approaches to complex human resource issues and delivery of effective and efficient services. The benefits of workforce planning outweigh mere legislative compliance. Workforce planning assists Council to plan for the future, anticipate change and manage its workforce to meet business goals and objectives. It aims to avoid crisis management, such as talent surpluses or shortages, by identifying potential changes and contingencies in advance. Council’s Workforce Management Strategy is a living document used and updated regularly to guide its human resource needs to meet the people-challenges of the future and to make Council a great place to work. Council has been committed to workforce planning for some time. In 2005 Council first prepared a Human Resources Strategic Plan which focused on two major external drivers - industrial relations and emerging labour market characteristics. That plan guided the development and management of Council’s workforce until 2009/10, at which time Council prepared its first Workforce Management Strategy in accordance with IPR requirements. In conjunction with the commencement of a new term of Council, the previous Workforce Management Strategy has been reviewed and a revised strategy prepared. The strategy describes Council’s current workforce (human resource capacity and capability) and details where Council wants to be in the future, in terms of achieving the community’s long term goals (outcomes) as outlined in the overarching Community Strategic Plan. It also describes Council’s position as an employer of choice, addressing the human resource requirements aligning to Council’s Delivery Program 2013/14 - 2016/17. Workforce management planning is not solely the role of Council’s Human Resources Department - it is collectively driven by the senior management team (MANEX), managers (Extended MANEX) and supervisors/team leaders.

The key steps in preparing an effective Workforce Management Strategy include:

1. Workforce Analysis - analysis of the existing workforce profile/demographics as well as identification of roles as being non-discretionary, core or discretionary. This analysis helps to identify the level of risk associated with the impact on the business if these roles were to become vacant or the incumbents were to be absent. It is important to establish a clear understanding of Council’s strengths and weaknesses and the internal and external factors (eg external labour forces) that influence current and future labour demand and supply.

2. Future Needs Forecasting - forecasting anticipated changes to the delivery of Council services through scenario building and the development of assumptions about future staffing needs, by understanding future work requirements and identifying future skill and competency needs.

3. Gap Analysis - using workforce analysis findings and forecasting to identify the gaps between workforce demand and supply, then prioritising work and identification of potential actions.

4. Environmental Scan - identifies external drivers that could impact on the workforce and the workplace.

5. Strategy Development - involves the planning and design of strategic programs and projects to address gaps in demand and supply of labour/skills, including contingency plans to address incumbent absences in non-discretionary/core roles. There are a number of key initiatives identified under the three key priority areas which are Organisational Development, Workforce Structure and Sustainability and Employee Support and Productivity.


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6. Strategy Implementation - includes implementation of the identified strategic programs and projects (ie action plan) that will be implemented over the four-year period aligning with the term of Council; and renewed each four years.

7. Monitoring and Evaluation - involves measuring success and taking any remedial actions, as necessary.

The following diagram illustrates the key steps in workforce planning:

Source: State Services Authority - www.ssa.vic.gov.au


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Current Workforce Analysis North Sydney Council is an employer of choice with the ability to attract and retain a diverse workforce, employed in many different capacities, under a range of flexible employment structures. The primary sources of Council’s current workforce data are its Human Resources information and payroll systems as well as employee surveys findings in 2005, 2008, 2011 and 201319. Where possible Council’s current workforce data have been compared to benchmarking survey results including the 2010 OLG Census of Local Government Employees (August 2011), OLG comparative information, salary surveys, employees surveys and metrics benchmarking surveys. Analysis of Council’s current workforce helps to identify potential risks to the delivery of services. This information helps Council to better understand the structure of its current workforce, its strengths and weaknesses and the external factors that can influence current and future labour demand. Employee Establishment The organisational structure as 30 June 2012 (i.e. the budgeted employee establishment) comprises 388 full time equivalent (FTE) positions. The FTE comprises of a headcount of full time, part time and casual workers is summarised in the following table for 2012 to 2015.

Full Time Part Time Subtotal Casual Total 2012 346 80 426 175 601 2013 320 69 389 46 435 2014 326 66 392 92 484 2015 337 62 399 103 502

Casuals are employed on ad hoc basis across Council to meet unplanned employee absences or additional workload. The following three Divisions have specific seasonal needs:

CLS - mainly Vacation Care (Community Development) and Stanton Library

(Library Services). EPS - mainly Works Engineering (Depot). OSES - mainly in Mollie Dive Function Centre, North Sydney Olympic Pool

including Lane 9 Gym and Street Cleaning (Environmental Services) which includes New Year’s Eve clean up crew.

Council’s FTE is above the OLG Group 2 average of 279.29 positions20. While Council may have more employees that the Group 2 average, our FTE takes into account the range of discretionary services that we provide in response to community needs compared to other councils e.g. street cleaning, environmental sustainability. Diversity As at 30 June 2012, Council’s gender balance of full time and part time employees is relatively balanced, with approx 54.5% males and 45.5% females. This is consistent with the NSW local government workforce in which women make up 46%. The following table on the following compares Council’s gender data between 2010 and 2012. Division Male Female Total

2010 FT & PT

2012FT & PT

2010FT & PT

2012 FT & PT

2010 FT & PT

2012 FT & PT

GM’s Office 1 3 3 8 4 11 CLS 13 14 44 48 57 62

19 The 2013 results will be incorporated into the plan during the exhibition period. 20 In 2009/10 Most recent comparative data available; figures released November 2012.


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Division Male Female Total 2010

FT & PT 2012

FT & PT 2010

FT & PT 2012

FT & PT 2010

FT & PT 2012

FT & PT CS 47 25 68 55 115 80 EPS 37 40 10 12 47 52 OSES 82 92 32 32 114 124 PDS 26 43 21 33 47 76 Total Headcount 206 173 192 224 384 397

Note: The large differences in the head count totals in CS and PDS is reflective of the organisational restructure in April 2012.

Full Time and Part Time staff by Gender

Year Female Male 2007/08 180 220 2008/09 177 223 2009/10 206 173 2010/11 216 170 2011/12 168 214 2012/13 177 212 2013/14 176 216 2014/15 178 221

In terms of position type, as at 30 June 2012, 83% (5) of senior staff were male, in addition to a female General Manager. By comparison more than 79% of men hold executive positions in metropolitan NSW councils. 68% (19 of 28) of manager positions are held by men, compared to 64% in metropolitan NSW councils. Workforce Demographics Council’s age distribution is relatively well spread which means that it is not as exposed as some councils to the ageing workforce issue. As at 30 June 2012, Council has had 79 (20%) permanent employees over 55 years of age, of whom 26 (5.5%) are were over 60 years of age. Despite the 2009 financial downturn (i.e. GFC), these employees may be planning to retire in the short to medium term and so it will be critical to ensure contingency plans are in place and that transfer of corporate knowledge occurs before they retire. In 2014/15 Council’s workforce was made up of 52% employee being over 45, 23% are over 55 and 3.25% are 65 and over. The following table shows the age distribution of Council’s workforce as at 2014/15.

2014/15 <25 11 (2.75%) 25-34 79 (19.79%) 35-44 103 (25.81%) 45-54 105 (26.31%) 55-64 89 (22.30%) 65+ 13 (3.25%)

As demonstrated by the following graph, Council has a more balanced age profile than many other councils in NSW.


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Figure 12: Age distribution compared to 81 NSW councils Length of Service An indication of the rate of retention can be the number of years employees are employed at Council. In 2007/08, almost half (48.9%) of Council’s workforce had been with Council for less than five years. This figure dropped steadily per annum to 40.4% in 2011/12. This trend indicates that more employees are remaining in Council’s employment for a longer period of time. This may be attributed to the 2009 GFC, the ageing demographic (i.e. not wishing to change employment when close to retirement), general level of uncertainty regarding the economic environment and/or the uncertainty relating to the potential amalgamation of councils.

Figure 13: Length of service

In 2014/15 41.55% of Council staff had 10 or more years of service. This demonstrates that Council is able to retain its staff but also means that staff are aging in their positions and will have greater levels of entitlement to all types of leave i.e. sick leave, annual and long service leave.

Figure 13 - Length of service 2014/15

Employee Turnover A desirable turnover rate is considered to be approximately 10% to 12% per annum. The following table summarises Council’s employee turnover between 2005/06 and 2011/12, which is higher than the overall local government sector turnover average of 9.5%.


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No. of Terminations

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

No. FT and PT terminations

63 (16.2%)

47 (11.9%)

65 (15.9%)

51 (12.3%)

37 (10.3%)

38 (7%)

60 (14.8%)

44 11.54%

34.1 8.71%

49.8 12.3%

No retirements

n/a 2 5 0 0 2 4 3

1 5

Council’s high turnover rate between 2005/06 and 2007/08 (16.2%, 11.9% and 15.9% respectively) is reflective of a skills shortage, while the 2011/12 rate reflects restructuring which included Council-initiated turnover and retirements. The lower turnover rate in 2008/09 and 2009/10 is was likely to be reflective of the impact of the GFC. Council’s turnover rate is consistent with many other Sydney councils and industry norms, which is approximately 10-12%. The decrease in turnover during 2006/07 may be a result of Council’s review of remuneration and benefits as well as the introduction of new retention strategies including two employee wellbeing programs (Health Matters and Money Matters) and a transport allowance. 2007/08 was an ‘employee’s market’, making it easier for employees to find other job opportunities i.e. Council lost a lot of skilled people. Council’s 2005 and 2008 Employee Surveys indicated that 5% of employees were considering retirement. While the specific retirement intention question was discontinued in 2011, the survey found that more than half of the workforce was intending to still be working at Council in five years’ time and that some employees may be considering retirement within the five year period. This information is reflected in the following table. As at 30 June 2012, nine (32%) managers who are over 58 years could choose to retire at any time. The low retirement rate could be due to poor financial performance of superannuation funds caused by the GFC. However as noted previously, as the economy improves, and as the number of older employees retiring increases, contingency planning will become more critical.

2005 2008 2011 2013 2014 Survey response rate 78%

(304) 65% (247)

76% (300)

73% (316)

71% 283

Overall Satisfaction - Overall, I am satisfied with Council21

66% 70% 72% 79% 75%

Retirement Intentions - I am seriously thinking of retiring in the next 12 months

5% 5% n/a not asked

not asked

Resignation Intentions - I am seriously thinking of resigning in the next 12 months

15% 25% 20.6% 16% not asked

Intentions regarding future employment - I am likely to still be working at Council in 2 years’ time

n/a n/a 60% 73% 75%

Intentions regarding future employment - I am likely to still be working at Council in 5 years’ time

n/a n/a 52% 57% 68%

With regards to skills shortages22 Council’s recruitment experience to date has identified that the following roles, as shown in the table below, fall into the ‘hard to recruit’ category. Positions that fall into this category require either specialist local government experience, specialist qualifications and/or are difficult to fill because of the very nature of the work, remuneration level or travel times or distance to/from the workplace of likely candidates.

21 Workplace Diagnostics (who conducted the 2005 and 2008 Employee Surveys) expects a response rate of between 65% and 75% for surveys of this type. The 2011 and 2013 Employee Surveys were conducted by the Voice Project, Macquarie University. 22 The Government Skills Australia (GSA) Environmental Scan 2009 identified that local government will experience difficulty in attracting and retaining the following employee categories - Engineering, Planning, Building Surveying, Environmental Health and Accounting.


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Organisations experiencing both skills shortages and constrained employment budgets may increase their reliance on external contractors. The positives include quick implementation of expertise into delivering a project/service without the long term employment costs. The negatives include lack of skill development of existing employees which has a flow on effect through reduction of ongoing human resources capacity. In addition employment costs are masked as contractors may not be considered employment costs but operating costs. Leave Entitlements One of the most significant indicators of an organisation’s strength and vitality can be measured through the level of unscheduled absences. The following table compares leave data shows an increase in sick leave absenteeism and carer’s leave.

Unscheduled Absences 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12Sick Leave hours 18,340 18,050 19,974 17,884 19,544 20,153 21,949 Carer’s Leave hours 1,867 3,042 2,495 3,031 2,676 3,661 2,747 Total 20,207 21,092 22,469 20,915 22,219 23,814 24,696 % Ordinary hours contracted to work

3.5% 3.6% 3.8% 3.6% 3.9% 4.1% 4.4%

2012/13 2013/14 2014/15

18, 327 21,660 20,943.52

Positions Division Reason/CommentAccountants CS Low turnover. However if vacancy occurs, shortage of

applicants with both the specialised qualifications and local government experience required.

Building Compliance PDS Conflict associated with the role, making it less attractive to applicants. Increases in legislative requirements will mean increased training required.

Drivers (MR Licence)

OSES Overall shortage in supply; currently sourced most successfully via labour hire.

Engineers - Traffic and Assets

EPS Low turnover. However, if vacancy occurs, shortage of qualified candidates with local government experience.

Environmental Health PDS Difficulty recruiting those with extensive experience. Geographical Information Systems (GIS) Mapping Officer

CS Low turnover. However if vacancy occurs, shortage of qualified candidates with local government experience.

Library (Shorelink) CLS Unusual mixture of Library and IT qualifications; Turnover low. However if vacancy occurs, short supply. Is currently a shared resource between neighbouring councils.

Lifeguard OSES Specialised qualifications; shift work required to cover opening times; currently sourced most successfully via specialist sports agency.

Low skilled employees ie labourer, street cleaner

OSES Remuneration low; travel distance to work (due to shortage of affordable housing in North Sydney and surrounding areas).

Parking Services Officer PDS Enforcement nature of role; Council receives numerous applications, but the quantity of candidates with suitable skills, abilities and motivation to do the job is low.

Rates Officer CS Low turnover. However, if vacancy occurs, shortage of applicants with both the specialised knowledge and experience required.

Town Planners (with experience)

PDS Historically a shortage of supply, but recently in less demand due to general reduction in building work across local government. Private certification has also impacted.

Tradespeople EPS Short supply, particularly arborists; other shortages include stonemasons, carpenter, painters, etc. Due to recent flooding in NSW, QLD and VIC it is likely that the labour market for trades (building, horticulture etc) and blue collar workers may become much tighter as the infrastructure in flood-damaged areas is rebuilt.

Work Health and Safety Advisor

CS Shortage of supply of candidates with the necessary qualifications and experience.


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2012/13 2013/14 2014/15 3,452 4,177 3,245.55 18,6779 25,837.5 24,189.07 2.53 3.52 3.32

The increase in carer’s leave is largely due to the increase in “supporting carer’s” leave on the birth of a child, a benefit that was extended from one week to two weeks in the 2010 Local Government (State) Award, which removed the clause that limited carer’s leave to 10 days per annum. Analysis of the sick leave used reflects an increase in use by a small number of long-serving (and ageing) employees who are experiencing serious illnesses. Travel Distance Most councils draw a significant portion of their labour force from within their local area, however North Sydney Council is different in that high housing prices precludes many employees from living within the local government area. As at June 2012, 15.24% of employees live within 5km of Council. The median one-way distance travelled to work by employees is 18.86km and the average one-way distance is 22.89km. The following graph illustrates that 128 employees travel 10km or less to work, while approximately 15.2% of employees travel 50kms or more daily. Travel times and the difficulty finding parking is a significant detriment to many potential employees.

Figure 14: Employee Travel Distance

Source: Council’s Payroll system

EEO and Family Friendly Initiatives Maintaining market competitiveness is essential to achieving the balance of attracting the right people with the right skills; it also has an impact on employment costs, through salary packages that reflect market rates and include market recognised incentives such as motor vehicles, flexible work practices and learning and development opportunities. Similarly, as employees are remaining with Council for longer periods the challenge is to continue to motivate them throughout their employment. This can be accomplished through job sharing, encouraging employees with formal and informal learning opportunities and identifying projects and implementing working parties in which employees can participate. Over the last two years Council has provided opportunities for employees to gain formal qualifications in management. Five employees commenced the Frontline Management Certificate IV, while 13 employees commenced a Diploma of Government (Management). The organisational objective of these courses was to enhance the skills of our frontline supervisors and potential managers. The competencies for both courses were industry specific. They are formal qualifications which hold national recognition.


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Over the last two years, 20 employees accessed the Education Assistance program to continue their professional development. In the outdoor area this has mainly been through acquisition of Certificate IV or Diploma qualifications in Parks and Gardens; whilst indoor staff have utilised this provision to study for formal qualifications at diploma, degree and post graduate level. Employee Costs As outlined in the Long Term Financial Plan, in order to meet its obligations to the community in the future, it is important for Council to manage its operational expenditure, of which a substantial proportion (approximately 40%) is employment costs. The Long Term Financial Plan indicates that, whilst maintaining the current staffing levels, total employment costs have been forecasted to increase by a maximum of 4.1% per annum (taking into account such factors as Award increases, salary increases as a result of performance appraisals, and employer superannuation liabilities). As early 2013, the following new positions/functions or staffing changes have been identified through the Community Strategic Plan and contingency planning process and forecast for in accordance with the Delivery Program: Division Position/Justification GM Events Officer - specific position to coordinate Council and public events, arising

under Direction 3 of the Community Strategic Plan.23 Economic Development function - to address priorities arising under Direction 3 of

the Community Strategic Plan (to be investigated). 24 Communications Officer (part-time) - to respond to demand for improved

communications.25 CLS Nil CS Nil EPS Property Officer - Property Assets Department identified in response to new

legislation regarding contractors and management of Council’s property portfolio.26 Traffic Planning Officer - Traffic Services Department identified in response to

increase demand for parking and traffic services.27 PDS Additional strategic planning coordination required, as identified though the

contingency planning process, an additional supervisory position and administrative support is required.28

Ranger and Parking Services Department may undertake significant change due to the implementation of the Replacement Parking Meter Solution, which may increase the need for employees to support the technology.29

23 This function was introduced in 2014/15 under the Communications Department, which was re-titled Community and Events Department, reallocated the Corporate Services Division. 24 This function was introduced in 2015/16 under the Integrated Planning and Special Projects Department within the City Strategy Division, within the re-titled existing role of Community and Business Engagement Coordinator. 25 This position was introduced in 2015/16. 26 This position was introduced in 2013/14. 27 This position was introduced in 2012/13. 28 Within the Strategic Planning Department two Team Leader positions were created following a re-grading of existing roles; a Student Planner position was introduced in 2014/15 and a Student Planner position was introduced 2014/15. Within the Administration Services function, the Manager position was made redundant and reintroduced as a Team Leader in 2014/15. 29 Changes occurred within existing staffing levels to respond to this need.


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Planning Assumptions The section involves analysis of Council’s labour demands and gaps in relation to its ability to deliver projects and services that help achieve the community’s long term goals. The following Australian Bureau of Statistics (ABS) data reveals external labour market factors that may impact on Council’s workforce. Similarly the Government Skills Australia (GSA) Environmental Scan 2009 identified common themes affecting, or likely to affect, future productivity including the impact of the ageing workforce (employment implications are productivity, safety; caring for family members; health care benefits; and flexible working arrangements); the ongoing effects of the GFC (e.g. reduced training budgets); legislative and regulatory change; climate change; recruitment and retention issues; achieving productivity improvement with current staffing levels and skill base; and limited access to, and use of, public-funded training. This information has informed the formulation of strategies to either leverage or mitigate trends as detailed in the Improvement Plan outlined in the next of this strategy. Ageing Population Australia is also expected to experience significant demographic changes over the next few decades. By 2051, over 25% will be aged over 65 years of age. Due to falling fertility rates and increased longevity, the median age will increase from 37 to 42 years by 2050. This represents both micro and macro issues surrounding the projected increase in the supply of mature age workers in the coming decades30. Council is currently preparing an Ageing Strategy which will include internal strategies assist planning of Council’s workforce as well as external agencies. Legislative Changes Legislative changes or reforms that will impact on local government in the near future include (but are not limited to):

National Employment Standards - effective from 1 January 2010, the Federal Government introduced 10 minimum standards required for all modern awards. These are covered largely by the 2010 Local Government (State) Award; however there is increased support for employee flexibility through these standards. A new Award is due to come into effect in November 2013 - it is unknown, at this stage, what impact a new Award will have.

Accreditation changes - for example there is uncertainty regarding recently proposed

changes to the accreditation process for Building Surveyors. Impacts on employment costs and employee retention in this area can be expected.

Paid Parental Leave Scheme 2011 - this Federal initiative provides more support for

parents, therefore not compelling them to return to work as quickly. Furthermore, there are additional costs (being borne by councils) associated with the ‘top up’ payments for women as well as the secondary carer.

The Local Government (General) Amendment (Long Service Leave) Regulation 2011

- this regulation enables councils to approve an employee’s application for Long Service Leave to be taken at double pay or half pay. If Council were to approve applications for half pay, then there are implications for business operations. If it is necessary to continue with the service(s), rather than suspend it, then Council will carry additional employment costs and may also experience a loss of skills for the duration of the leave.

30

http://www.health.gov.au/internet/wcms/publishing.nsf/content/ageing-ofoa-research accessecon.htm/$file/popageing.pdf


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Work Health and Safety (WHS) Act 2011 - has increased emphasis on a pro-active approach to workplace safety. Due diligence for 'officers' is clearly spelt out so 'Persons in Control of a Business or Undertaking' know what to include in a work health and safety system and so that monitoring practices within the organisations are robust. In response, in due course, Council will need to introduce more auditing by internal and external personnel.

Political Environment Functions from State and Federal Governments are, from time-to-time, devolved to Local Government (ie cost-shifting), often with little funding to undertake such functions. The Government of the day also drives initiatives that will have long term impacts on the labour market. Examples of current areas of reform include the education sector and changes to the skilled migration program and population policy. During 2012/13 the Independent Local Government Review Panel, appointed by the NSW Minister for Local Government, the Hon Don Page, in March 2012, is exploring new council structures, models and governance arrangements to strengthen communities in NSW. It is the first initiative arising from Destination 2036, a state-local government partnership to consider the next 25 years of local government in NSW. Part of the exploration of new structures and models includes the potential for (forced and/or voluntary) amalgamations. At the time of preparing this document the Taskforce is still formulating its recommendations and no changes/proposals have been announced, therefore, this is a potentially significant impact that should be given consideration in the management of council workforce in the medium to long term. Technological Changes Changes in technology present unique challenges to both employees and employers. Organisations may be impacted by the lack of technology literacy among workers, including reduced productivity31. In 2010 the Information Technology Association of America warned that one in every 10 jobs requiring information technology skills is going unfilled due to a shortage of qualified workers; there is a decline in graduates with appropriate tertiary qualifications and or job related experience. In Australia, with both an ageing workforce and some employees with low level foundation skills in language, literacy and numeracy, this issue will continue to be challenging for employers. The emergence of mobile devices is expanding ‘mobility’ in the workplace and an increasing number of organisations are supporting the growing number of employees who use mobile devices such as smart phones and tablet devices to do their work at the office, at home and on site/whilst travelling.32 Council has embraced the use of mobile devices, including providing tablet devices to Councillors to enable ‘paperless’ business papers and to outdoor staff working on site eg Rangers. The benefits of such devices can include increased employee responsiveness and decision making speed, resolving internal issues faster and increasing worker productivity. As this is a new and emerging internal resource/service for Council, maintenance and support devices is currently in its infancy and related policies and procedures are currently being developed and revised. Skills Australia recommends that to ensure potential productivity growth and more fully realise change, new tools to equip organisations to more effectively use the skills, expertise and talent of their existing employees33 are required. Training and skills development costs will remain a constant and necessary expense for organisations.

31 According to the National School Boards America’s Change and Technology Education Leadership Toolkit more than half of new jobs require some form of technology literacy. http://www.nsba.org/sbot/toolkit/tnwp.html (April 2010) 32 ‘The expanding role of mobility in the workplace’, prepared by Forrester for CISCO Systems. whttp://ww.cisco.com/web/solutions/trends (February 2012) 33 Skills Australia , Australia Workforce Futures: 2010 A National Workforce Development Strategy, http://www.skillsaustralia.com.au (April 2010)


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Environmental Changes Employee expectations reflect those of the wider local and global community. People want to work for organisations that value the environment and incorporate sustainability into all aspects of their operations. Issues such as global warming, climate change, carbon emission trading schemes and water conservation continue to be major issues to be addressed in the coming years. Council has long been a forerunner in sustainability, having adopted a quadruple bottom line (QBL) approach to its planning, reporting and decision making. Council’s Green @ Work Program encourages employees to implement sustainability in the workplace by sharing case studies and celebrating success stories. Council has also prepared a number of related strategies to address sustainability issues, including the Climate Change Adaptation Plan, which explores the potential insured exposures for Council from either its action or inaction to climate change impacts. Globalisation As clearly demonstrated during the GFC, we now live in a global world. Australia’s economic growth is strongly linked with the growth of our major trading partners, particularly in the Asia Pacific region. Globalisation is also having profound effects in the workplace. The effects of globalisation on work include jobs in services rather than manufacturing, workers provide services rather than “do a job”, end of “lifetime” employment, individuals manage their own affairs and greater personal freedom34.

Mercer’s Workplace 2012 forecasts that the working week is unlikely to include five days in the office and may be worked within a global time zone with remote management35. Council’s flexi-time and home based work policies, both of which have been in operation for many years, provide maximum flexibility for employees and assist in attracting and retaining employees. Nationwide, with regards to patterns of work (non-traditional hours) the proportion of all employed people who work part-time almost doubled between 1979 (16%) and 2009 (30%). The proportion of all employed people who work casually increased from 1992 (17%) to 1996 (20%), but has since remained level. Additionally social networking websites will be encouraged and used to build global and virtual business relationships internally and with clients. The growth of social networking also provides an opportunity for exchanging business ideas, innovations and knowledge. Demand for Council Services Council delivers services through 27 departments/functions. Analysis and community consultation has shown that if Council is to meet the objectives and targets of the Community Strategic Plan, all of these services need to be maintained at their existing level and some services will require enhancement in service levels. Ongoing reviews of service levels, in consultation with the community and having regard to their full service delivery costs are undertaken on a regular, planned and ad hoc basis to ensure that funding allocations are both justifiable and sustainable. This includes periodic reviews of Council’s Service Level Agreements to ensure that current service levels meet community needs and expectations. This review complements Council’s periodic Customer Satisfaction Survey. Council periodically conducts a Customer Satisfaction Survey to determine community attitudes towards the services and facilities it provides. This provides Council with feedback about the quality and appropriateness of each of its services, and this information is used in the development of the Delivery Program to ensure areas that are not meeting community

34 Alan Oxley, Australian APEC Centre 35 Workplace 2012: What does it mean for employers?, http://www.mercer.com.au/workplace2012 (April 2010)


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expectation are reviewed and form the basis of the suite of indicators used to measure Council’s performance. For full details regarding the 2013 survey findings refer to pages 23 to 25. The GSA Environmental Scan 2009 identified the following impacts/expectations regarding service delivery which are consistent with feedback obtained through the 2013 community consultations regarding the review of the Community Strategic Plan. In summary, the environmental scan (planning assumptions) revealed the following:

increased community expectations - particularly in areas of asset management and maintenance and emergency management;

increased responsibility for provision of human and welfare services; and taking a lead role economic and social development.

In summary the key challenge for councils is to deliver affordable services at levels the community considers satisfactory, and which are supported by sustainable financial, asset management and human resource planning; the Long Term Financial Plan details Council will do this.


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Gaps and Future Needs After analysing the current workforce data, comparisons can be made between current supply levels and forecasted labour demand based on the priorities outlined in the Community Strategic Plan and Delivery Program. Forecasting Council’s future needs includes identifying what capabilities, competencies and service levels are needed in our workforce. It is vital to recognise that some positions are strategically more critical than others36. Each Division has identified the position(s) within our current workforce structure that are responsible for ‘non discretionary’ and ‘core’ functions/services ie those positions that are critical to achieving the Community Strategic Plan and Delivery Program. Contingency Planning Contingency planning aims to ensure business continuity if employees in any of these positions were to leave the organisation or be absent for a period of time. The contingency planning process identifies available resources to cover ‘high-risk’ positions and highlights potential gaps and strategies to assist in covering/filling vacancies. In 2012 Council prepared contingency plans for all positions that were identified as high risk. The following risk categories associated with each position and were assessed by the responsible manager:

Knowledge/skills ie lead time needed to learn the skills related to the position; Knowledge complexity of the position; Financial risk of the position in relation to loss of revenue if not filled; The service level of the position in relation to the category of the position ie core non-

discretionary and discretionary; The number of this type of position within the organisation; The likely flight risk of the incumbent in the position; Retirement risk; and General labour supply for these position types in the workforce.

Twenty two positions (5.6%) were recognised as high-risk positions. Each contingency plan has identified other employees who could undertake the role, if needed. Most high-risk positions had at least one other employee who has valuable knowledge of the position and who have had a number of ‘higher duties’ opportunities. Other strategies highlighted were to clearly document procedures which would be saved in Council’s electronic management system. Another method recognised as valuable to retaining organisational knowledge was to spread the knowledge and skills over several positions thus creating new challenges to existing team members. The positions that were seen as being the most challenging to cover are positions which had a high level of educational attainment accompanied by many years of experience. Council’s education assistance program is invaluable in encouraging employees to continue their studies by offering fee assistance. Within the contingency planning process, managers were asked to identify whether they had adequate staffing in order to meet the actions within Council’s Delivery Program. Most managers identified they had adequate staffing levels only when there were no long-term absences or vacancies. Six managers (20%) identified that changes in demand for services was impacting and that additional resources were desirable. Some were already taking steps to address this. A number of managers identified that if their preferred software requirements were implemented that there would be increased demand for information technology support staff.

36 The focus is on the scope of the position not the incumbent. If such positions were to be vacated Council may not be able to provide services/programs to expected levels of service.


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Managers were also asked to identify skills gaps which could impact on service delivery currently and to highlight any likely changes to these in the future. Skills gaps identified were very specific to each area and there were no generic skills gaps identified across departments. A flexible approach will need to be developed in order to fill these individual training gaps. Council has a centralised training budget that is accessed by all departments. Much of this budget is used for individual training requests for specific skills targeted training. Council is also conscious of the need to ‘grow our own’ through the provision of appropriate learning and development and career progression opportunities, so that employees are well equipped to compete as internal applicants. Key Focus Areas A key objective of Council’s Workforce Management Strategy is to retain ‘its best’ and maintain a qualified and capable workforce able to meet service expectations. The reality is that Council will be operating in a ‘restrained, non-growth’ period where budgets and resources are limited and where there are ongoing pressures to ‘do more with less’. It should be noted that during the GFC, which impacted the 2009/10 budget, Council eliminated or reduced a number of services and/or service levels. In turn, in order to minimise redundancies, Council sought expressions of interest in voluntary redundancy, invited applications for a reduction in working hours, froze recruitment of some vacancies (leaving them unfunded) and reduced a number of attraction and retention benefits (including its reward and recognition scheme, health improvement program, training and development budget). Council’s employee establishment was reduced by 24 FTE positions. Many of these reductions were sustained from 2010/11 to 2013/14. Post the GFC, the economy is still unsteady and there are many applicants in the market due to companies downsizing. Currently, Council is receiving a higher rate of applications per position, while at the same is retaining its long serving employees, with 59.5% of employees having over five years service, as indicated on page 7. Talent management, motivation and continual development will become an organisational priority:

leaders need to be prepared for managing employees in this period to ensure our employees are productive and engaged; and

attraction and retention policies need to be maintained and resourced over the long term, to embed Council as an ‘employer of choice’ and ensure that employees choose to stay at Council continue to grow and develop and remain motivated.

Given that a high number (6 employees or 21%) of the 29 Managers at Council are aged 58 years or older and could retire at any time, Council has developed contingency plans around these positions which concentrate on documenting key knowledge and developing internal employees who are capable of assuming key duties. Instead of looking to additional staffing levels, Council needs to constantly (and consistently) explore opportunities for more efficient ways of working, focusing on opportunities for low-cost workplace innovation, leveraging technology to reduce workload, opportunities to be ‘resource smart’ or to tap into resources, eg funding that may become available. Council will need to structure jobs and the workplace through smart redesign of job functions and adopt progressive employment practices, to develop more ‘demand’ side solutions to skills shortages to overcome predicted ongoing limitations in supply.”37 The following actions are categorised under three key focus areas - Organisational Development, Workforce Structure and Sustainability and Employee Support and Productivity - will help Council meet its identified needs. The focus areas reflect the importance of Council’s employees in the organisation and the value we place on their development,

37 Draft “Local Government Workforce Development Blueprint 2009” from Local Government Workforce Development Steering Committee 2009, part of ACELG


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retention and wellbeing. The Improvement Plan (outlined below), encompasses initiatives that help employees develop, improve, balance work and life, and lead within the organisation and the community. Each of the key focus areas include initiatives that will be rolled out across the organisation. Council’s Human Resources Department will collaborate with the organisation, business units (departments and functions), managers, coordinators and supervisors as well all employees to assist in the achievement of these initiatives. Council’s Workforce Management Strategy proposes actions to enable the objectives of the Community Strategic Plan and Delivery Program to be achieved. The following strategies contribute to achievement of the following desired outcomes and strategies within the Community Strategic Plan: Direction Outcome Strategy 5. Our Civic Leadership 5.6 Council is an employer of

choice

5.6.1 Attract, develop and retain highly skilled staff and provide a safe work environment

5.6.2 Implement best practice human resource policies and strategies

1. Workforce Structure and Sustainability In order to deliver services as stated in the Community Strategic Plan and Delivery Program and to meet statutory obligations, Council needs to have an effective, efficient and flexible organisational structure with appropriate staffing levels. Council also need to be able to respond to emerging priorities, objectives and changes expected to workforce demographics in the short and medium term. In early 2012 the organisational structure was reviewed and realigned with the five Directions (key themes) within the Community Strategic Plan. As a continuing next step in strengthening workforce planning, priorities for the next four years includes further analysis of Council’s workforce requirements through improved data collection and information management systems; and responsiveness planning to some of the major issues facing the local government sector, including future skills shortages, potential for amalgamations and business continuity planning. This focus area also encompasses a number of initiatives addressing women’s participation in local government, particularly in leadership roles as well as attracting and retaining both young workers and mature aged employees. Council will continue to provide opportunities for young people via formal opportunities for the employment of trainees and apprentices and informal opportunities such as work placements.

Action Responsible Department/ Function

Timeframe

1.1 Review contingency plans, ensuring they exist for all critical/core positions and include replacement timeframes, where applicable

HR Department Managers

Annually

1.2 Provide support to employees to enable them to identify and address strategic staffing needs, taking into account ageing demographics, ensuring business continuity and organisational goals are met

MANEX HR

Ongoing


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Timeframe

1.3 Implement systems to ensure transfer of knowledge MANEX HR

Ongoing

1.4 Ensure key work practices and procedures are documented

MANEX Department Managers

Ongoing

1.5 Review current job design process, ensuring demonstration of linkages to the Delivery Program and budget

MANEX HR IP&SP

Ongoing

1.6 Improve integration between HRIS and budget/payroll systems

HR Financial Services

Ongoing

1.7 Benchmark key HR and WHS performance metrics HR Ongoing

1.8 Improve collection and analysis of demographic data from HRIS

HR Ongoing

2. Organisational Development By fostering a work environment in which excellence is encouraged, recognised and celebrated and continuous learning is ‘the norm’, Council will be better equipped to satisfy community expectations into the future. Organisations, in which employees are fit and healthy and have a good work-life balance, experience reduced turnover, reduced incidents/injuries and increased employee satisfaction. It is vital that Council assists employees to maintain their health and wellbeing so that they are able to continue working productively for as long as they desire as well as enjoying their leisure pursuits and/or retirement. Council has an ageing workforce and it is quite likely that more employees will continue to work later than their predecessors. This focus area requires a progressive review of all staff policies to ensure that they maintain currency and provide a best practice approach to governance and employee relations.


Timeframe

2.1 Review EEO Policy and Management Plan HR Ongoing

2.2 Promote Council’s values and corporate behaviours MANEX Ongoing

2.3 Implement Leadership and Culture Program MANEX HR

Ongoing

2.4 Integrate Council’s values and corporate behaviour into performance agreements.

HR IP&SP

2014/15

2.5 Include reference to Council’s mission and values in dealings with suppliers, contractors, partners (MoUs, Contracts and Tenders)

Financial Services Risk Management

2013/14


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Timeframe

2.6 Develop employee branding message, promoting Council as an ‘employer of choice’

HR Communications

Ongoing

2.7 Review recruitment and selection policy/procedures to include values/behaviours as well as the required skills/knowledge

HR Ongoing

2.8 Prepare targeted approach for sourcing or developing necessary skills to serve the organisation’s needs

HR Ongoing

2.9 Participate in career expos, industry conferences and tradeshows

HR Ongoing

2.10 Employ new technology (eg internet and social/ virtual networks) to enhance recruitment strategies

HR IT Communications

Ongoing

2.11 Review/further develop exit interview process to better understand employee exit reasons

HR Ongoing

2.12 Participate in LGMA Management Challenge MANEX Annually

2.13 Conduct Employee Engagement Survey and respond to actions arising

HR Biennially

2.14 Examine connections between employee wellbeing and organisational performance

HR IP&SP

Biannually

2.15 Continue to explore innovative, flexible work options such as phased retirement

HR Ongoing

3. Employee Support and Productivity Research shows that organisations that invest in the learning and development of their employees realise higher productivity levels, increased employee satisfaction, improved morale and reduced absenteeism. Learning and development opportunities assists employees in realising their potential, whilst at the same time providing Council with a skilled, capable and flexible workforce that can effectively respond to changing business needs and that can maximise the benefits of technological developments. To increase productivity and employee engagement we will continue to assist our employees with low levels of English literacy, numeracy and technological skills to better use their skills and improve their social participation in work as well as in their communities. Council recognises the importance of valuing differences and maximising the benefits of diversity in a planned way. The achievement of both the community and Council’s strategic goals and objectives can only be achieved by supporting, training and developing current employees and attracting new, competent and qualified employees. In order to compete effectively with other employers in both the public and private sectors, employment branding, competitive salaries and other benefits need to be reviewed in line with policies and budget.


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Timeframe

3.1 Undertake sector comparative salary survey to inform decisions about market relativities

HR Ongoing

3.2 Continue to improve career development opportunities

HR Ongoing

3.3 Implement change management programs for all senior and middle management

MANEX HR

Ongoing

3.4 Prepare and educate workforce at all levels for ‘new ways of working’ (as needed)

MANEX HR

Ongoing

3.5 Promote employees assistance scheme (EAPs) - access and services

HR Ongoing

3.4 Improve health and wellbeing of employees through Health Matters and Money Matters programs

HR Ongoing

3.5 Increase harm minimisation culture through safe work practices eg Collaborative Safety Program and Resilience Program

HR Ongoing

3.6 Analyse leave patterns and identify liability reduction strategies

MANEX HR Financial Services

Ongoing

3.7 Analyse overtime patterns and identify cost reduction strategies

MANEX HR Financial Services

Ongoing

3.8 Implement WHS objectives HR Ongoing

3.9 Improve WHS Management System HR Ongoing

3.10 Improve injury management HR Ongoing

3.11 Improve staff accommodations MANEX Ongoing

3.12 Improve technology solutions/systems and internal project management services

IT Ongoing

3.13 Improve internal communications Communications Ongoing


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Resourcing Implementation of the Workforce Management Strategy is directly aligned with the objectives of the Community Strategic Plan and Delivery Program. Responsibilities have also been allocated within the action plan in the preceding section. The responsibility for implementing Council’s IPR Framework, including this strategy, rests on all internal stakeholders. However, the level of responsibility differs amongst the various stakeholders. The following outlines the key stakeholders’ roles and responsibilities:

The Mayor and Councillors delegate responsibilities to the General Manager and senior staff to develop and oversee the implementation of the Community Strategic Plan, Delivery Program and Resourcing Strategy in accordance with the legislative guidelines as well as leading community engagement;

The General Manager is responsible for overseeing the preparation of Council’s IPR Framework and reporting progress and performance regularly;

The Senior Management Team (MANEX) is responsible for ensuring the key focus

areas and related strategies for 2013/14-2016/17 are agreed and resourced;

Council’s Human Resources and Corporate Planning and Governance Departments provide support to the Senior Management Team and are responsible for monitoring implementation and performance reporting;

Managers and staff are responsible for supporting the Senior Management Team in

implementing the Community Strategic Plan, Delivery Program, annual Operational Plans and the individual components of the Resourcing Strategy.

The Consultative Committee is a key forum for consulting staff when developing an

appropriate workforce structure. This is essential to the change management process required to drive any significant changes and improve ownership of the Workforce Management Strategy.

The cost of implementing the Workforce Management Strategy has been incorporated within Council’s four year financial estimates and accompanying Long Term Financial Plan. However, it should be noted that this strategy reflects Council’s intentions at the time of publication. As with any plan or budget, the actual results may vary from that forecast.


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Monitoring and Evaluation Council will periodically monitor and evaluate implementation of the Improvement Plan within the Workforce Management Strategy to ensure it is appropriate to organisational needs. Performance will be monitored by Council’s Senior Management Team via annual progress reports tracking implementation of the four-year actions and the key performance indicators outlined below. These reports will be prepared as part of annual budget preparations. The following indicators are also included in the Delivery Program: Key Focus Area Key Performance Indicators 1. Workforce Structure and

Sustainability Percentage employee turnover Percentage of staff satisfied with the organisation Percentage of staff on exit who recommend Council is a

‘good organisation’ to work for Percentage of staff who understand how their job

contributes to the overall success of Council Total workforce by employment type and gender38

2. Organisational Development

Average hours of training per year per employee Percentage of personal performance appraisals (PPAs)

completed

3. Employee Support and Productivity

Average unplanned absence days per full time employee Annual leave liability (percentage controllable hours) Lost time injury frequency rate Number of workplace safety incidents Workers compensation premium rate Percentage of WHS risk assessments completed

In addition, Section 345 of the Local Government Act 1993 details the requirements for Council’s EEO Management Plan and the Local Government (General) Regulation 2005 details the requirements for reporting on activities to implement Council’s EEO Management Plan. Monitoring will be complemented by periodic performance reporting against related activities within the Delivery Program and Annual Report.

38 Note: not in the Delivery Program. GRI indicator within Council’s Annual Report.


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Appendix 1: Glossary In the context of this Resourcing Strategy the following definitions apply: Assets

Is a fixed item or facility used to satisfy a service potential or enabling the Council to meet its corporate objectives.

Asset Class

Grouping of like asset categories, eg all pavement, seal, kerb and gutter are all part of the asset class of roads.

Asset Condition Assessment

The process of continuous or periodic inspection, assessment, measurement and interpretation of the resultant data to indicate the condition of a specific asset so as to determine the need for some preventative or remedial action.

Asset Management

Is the systematic process to guide the planning, acquisition, operation and maintenance, renewal and disposal of assets to provide the required level of service in the most effective manner.

Building and infrastructure renewals ratio

Assesses the adequacy of renewal of building and infrastructure assets compared to rate at which those assets are depreciated. It is calculated by dividing the amount expended on building and infrastructure renewals by the amount expense in depreciation for building and infrastructure assets.

Budget The annual financial activities and financial statements Council has adopted to monitor its performance. The budget is subject to an annual audit at the end of the financial year.

Capital Expenditure Defined as expenditure on all asset classes plus the net transfer to the plant replacement reserve and transfers to the infrastructure reserve.

Capital Sustainability If the cost of council’s recurrent operations are met from its recurrent revenues over the medium term (eg 5 years) and not partly funded from its capital revenues (eg proceeds from asset sales, developer contributions and capital grants) it is considered to be financially sustainable on a recurrent basis. But if is reports operating deficits greater than 10% of its operating revenues in any one year, it is considered financially unsustainable.39

Capital Works Defined as buildings and engineering works to create an asset, as well as constructing or installing facilities and fixtures with, and forming an integral part of those works.

Consumer Price Index (CPI) Measure of price movements of a standard basket of goods including food, alcohol, tobacco, clothing and footwear, housing and housing contents.

Core Describes those roles which provide services for which there is a high community need and high community/customer expectations that there service will be provided. Also refers to asset management capacity.

39 IPART Report on the Revenue Framework for Local Government, page 78


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Cost Cost is the resources sacrificed or foregone to achieve a specific objective. Costs are measured in monetary units that must be paid for goods and services.

Current Replacement Cost The cost of replacing the service potential of an existing asset, by reference to some measure of capacity, with an appropriate modern equivalent asset.

Debt Service Ratio Represents Council’s ability to service debt out of uncommitted or general purpose funds available for operations.

Depreciation

Depreciation is a measure of the average annual consumption of service potential over the life of the asset. Depreciation is not a measure of required expenditure in any given year.

Discretionary Describes those roles/services, that are not classified as either non-discretionary or core roles. Council chooses to recruit such positions because they assist Council to deliver community expected services in line with priorities identified in the Community Strategic Plan and Delivery Program.

Economic/Useful Life The period from the acquisition of an asset to the time when the asset, while physically able to provide a service, ceases to be the lowest cost alternative to satisfy a particular level of service. The economic life is at the maximum when equal to the physical life; however obsolescence will often ensure that the economic life is less than the physical life.

Fair Value The amount for which an asset could be exchanged or liability settled, between knowledgeable, willing parties, in an arm’s length transaction, normally determined by reference to market or comparable prices. Generally, there is no market for Council’s infrastructure assets and Fair Value is current replacement cost less accumulated depreciation.

Income Statement A statement of income and expenditure for a period, usually a year.

Infrastructure Assets Are typically large, interconnected networks of or portfolios of composite assets such as roads, drainage and recreational facilities. They are generally comprised of components and sub-components that are usually renewed or replaced individually to continue to provide the required level of service from the network. These assets are generally long lived, are fixed in place and often have no market value.

Level of Service Is the defined quality and quantity of services delivered by Council to meet community expectations. In the context of asset management this applies to assets such as parks and reserves, roads, buildings, drainage etc.

Liability Is a present obligation for the entity arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits

Life Cycle Cost Is the ‘whole of life’ cost depreciation expense plus operations and maintenance expenditure.

Life Cycle Expenditure Is the provisional average expenditure over 10 years planned for operations, maintenance and capital renewal.


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Maintenance and Renewal Gap Difference between estimated budgets and projected

expenditures for maintenance and renewal of assets.

Non-discretionary Describes those roles which provide services that Council has a statutory obligation to provide.

Rates and annual charges ratio Is designed to assess the impact of uncollected rates and annual charges on Council’s liquidity and the adequacy of recovery efforts. The rates and annual charges ratio is calculated by dividing the rates, annual and extra charges outstanding by rates, annual and extra charges collectible.

Recurrent Sustainability A council is considered to be financially sustainable when its

service and infrastructure levels and standards are met over a ten year period according to a long term plan and consistent with key financial benchmarks; that is where the council’s long term financial requirements are matched by its long term financial capacity. A council is considered to be financially unsustainable on a capital basis if is not able to meet its asset renewal requirements over a ten year period.40

Revenue Arises in the course of Council’s ordinary activities and is referred to by a variety of different names including sales, fees, interest, dividends and rent.

Section 94 Section 94 funds are developer contributions. Section 94 of the Environmental Planning and Assessment Act 1979 enables Council to levy contributions, from developers, for public facilities required as a consequence of development. Section 94 contributions are adjusted annually by CPI, and are detailed in the Fees and Charges Schedule for the current year and Council’s Section 94 Contributions Plan.

Remaining Life The time remaining until an asset ceases to provide the required service level or economic usefulness. Remaining life is economic life minus age.

Risk Management The allocation of probability and consequence to an undesirable event and subsequent actions taken to control or mitigate that probability and/or consequence.

Sustainability Factor The ratio between the average annual asset consumption and

average actual renewal expenditure.

Service Level Target Target set for level of service to be achieved in the next reporting period.

Special Schedule 7 A schedule required under section 428 2(d) of the Local

Government Act which shows in the annual report: The condition of infrastructure assets; The amount required to bring assets to satisfactory; The amount required to maintain assets at a

satisfactory level; The actual expenditure.

Unplanned Maintenance Anticipated maintenance due to abnormal usage, faults,

accidents and natural disasters (eg additional grading of roads, and cleaning of drainage pipes due to floods, repairs

40 IPART Report on the Revenue Framework for Local Government, page 80


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to recreation facilities due to storm damage or vandalism).


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Appendix 2: Asset Management Policy 1. STATEMENT OF INTENT

1.1 North Sydney Council is responsible for a large and diverse asset base. According to Council’s Charter under the Local Government Act 1993 with regard to asset management, Council should: a) Provide directly, or on behalf of other levels of government after due

consultation adequate, equitable and appropriate services and facilities for the community and to ensure that those services are managed efficiently and effectively;

b) Have regard to the long term and cumulative effects of its decisions; and

c) Bear in mind that it is the custodian and trustee of public assets and to effectively account for and manage the assets for which it is responsible.

1.2 The objectives of this Policy are to set a broad framework for implementing

consistent asset management processes throughout North Sydney; and to ensure adequate provision is made for the long-term replacement of major assets by: a) Ensuring that Council’s services and infrastructure are provided in a

sustainable manner, with the appropriate levels of service to residents, visitors and the environment;

b) Safeguarding Council assets including physical assets and employees by implementing appropriate asset management strategies and appropriate financial resources for those assets;

c) Creating an environment where all Council employees take part in overall management of Council assets by creating and sustaining asset management awareness throughout the Council;

d) Meeting legislative requirements for asset management; e) Ensuring resources and operational capabilities are identified and

responsibility for asset management is allocated; f) Demonstrating transparent and responsible asset management

processes that align with demonstrated best practice. 2. ELIGIBILITY

2.1 This Policy will apply to all Councillors, employees of Council and external consultants employed as representatives of Council.

3. DEFINITIONS

3.1 An ‘asset’ refers to any resource with a financial value attached to it, normally acquired to ensure local service delivery. Council assets include finances, plant and equipment, infrastructure, buildings, open space, other property and any other resources under its ownership or care and control.

3.2 The term ‘asset management’ describes the combination of management,

financial, economic, engineering and other practices applied to physical assets with the objective of providing the required level of service in the most cost effective manner.


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4. PROVISIONS

This Policy is linked to implementing Council’s vision, mission and core values as outlined in the Community Strategic Plan. The following provisions outline the guiding principles of effective asset management that must be observed by Councillors, employees and consultants for all Council activities.

4.1 A consistent Asset Management Strategy must exist for implementing

systematic asset management and appropriate asset management best-practice throughout all Council departments.

4.2 All relevant legislative requirements together with political, social and

economic environments are to be taken into account in asset management.

4.3 Asset management principles will be integrated within existing planning and operational processes.

4.4 An inspection regime will be used as part of asset management to ensure

agreed service levels are maintained and to identify asset renewal priorities.

4.5 Asset renewals required to meet agreed service levels and identified in the adopted asset management plans and long term financial plans will be fully funded in the annual budget estimates.

4.6 Service levels agreed through the budget process and defined in the adopted

Asset Management Plans will be fully funded in the annual budget estimates.

4.7 Asset renewal plans will be prioritised and implemented progressively based on agreed service levels and the effectiveness of the current assets to provide that level of service.

4.8 Systematic and cyclic reviews will be applied to all asset classes and are to

ensure that the assets are managed, valued and depreciated in accordance with appropriate best practice and applicable Australian Standards.

4.9 Future life cycle costs will be reported and considered in all decisions relating

to new services and assets and upgrading of existing services and assets. 4.10 Create an environment where all Council employees take part in overall

management of Council assets by creating and sustaining asset management awareness throughout the organisation by training and development.

4.11 Future service levels will be determined in consultation with the community. 5. RESPONSIBILITY/ACCOUNTABILITY

5.1 Council’s Engineering Infrastructure Department is the key stakeholder of this Policy. However all related Departments/Council staff who have direct or indirect responsibility for the whole or part lifecycle management of Council assets are also responsible for asset management.

5.2 The effectiveness of this Policy shall be reviewed at least once during the

term of Council. 6. RELATED POLICIES/DOCUMENTS/LEGISLATION

The Policy should be read in conjunction with the following Council policies and documents:


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Asset Accounting and Capitalisation Policy Asset Management Plan Asset Management Strategy Community Strategic Plan Delivery Program Financial Management Policy Infrastructure Asset Management Plan Long Term Financial Plan Property Asset Management Plan

The Policy should be read in conjunction with the following documents/legislation: Local Government Act 1993

Version Date Approved Approved by Resolution No. Review Date

1 21 June 2010 Council 361 2012/13 2 18 February 2013 Council 61 2016/17

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Appendix 3: 10 Year Financial Model - Scenario 1

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94

95

96

Appendix 4: 10 Year Financial Model - Scenario 2 (Amended)

10 Year Financial Plan for the Years ending 30 June 2023INCOME STATEMENT

Scenario 2: Base Case + Additional $115 million for Capital Expenditure from 2013/14 to 2016/17

Actual Actual Forecast

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Income from Continuing OperationsRevenue:

Rates & Annual Charges 43,550 46,336 48,917 51,219 53,666 53,948 54,236 54,591 56,238 57,934

User Charges & Fees 22,709 24,812 24,499 23,755 24,230 24,836 25,457 26,221 27,007 27,818

Interest & Investment Revenue 4,022 4,613 3,358 2,030 1,150 1,150 1,150 1,150 1,150 1,150

Other Revenues 35,005 20,184 21,630 17,469 18,583 19,060 19,550 20,136 20,741 21,363

Grants & Contributions provided for Operating Purposes 3,457 4,656 6,336 4,134 4,213 4,314 4,418 4,546 4,677 4,813

Grants & Contributions provided for Capital Purposes 11,414 15,543 4,599 4,048 4,048 4,048 4,048 4,048 4,048 4,048

Other Income:

Net gains from the disposal of assets - 75 253 270 270 270 270 270 270 270

Total Income from Continuing Operations 120,157 116,219 109,592 102,925 106,160 107,626 109,129 110,961 114,131 117,395

Expenses from Continuing OperationsEmployee Benefits & On-Costs 35,559 38,756 39,864 41,262 42,706 44,415 46,191 48,270 50,442 52,712

Borrowing Costs - - 269 338 832 832 832 832 832 832

Materials & Contracts 29,275 30,891 32,963 30,351 30,958 31,732 32,525 33,501 34,506 35,541

Depreciation & Amortisation 15,283 15,684 14,860 16,543 16,847 17,247 18,502 18,780 19,062 19,347

Other Expenses 8,442 8,308 8,075 8,262 8,427 8,637 8,853 9,119 9,393 9,674

Net Losses from the Disposal of Assets 4,851 - - - - - - - - -

Joint Ventures & Associated Entities 4 5 - - - - - - - -

Total Expenses from Continuing Operations 93,414 93,644 96,031 96,755 99,770 102,863 106,904 110,501 114,234 118,107

Net Operating Result for the Year 26,743 22,575 13,561 6,170 6,390 4,763 2,225 460 (103) (712)

Net Operating Result before Grants & Contributions provided for Capital Purposes 15,329 7,032 8,962 2,122 2,342 715 (1,823) (3,588) (4,151) (4,760)

Projected Years

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North Sydney Council10 Year Financial Plan for the Years ending 30 June 2023

INCOME STATEMENTScenario 2: Base Case + Additional $83 million for Capital Expenditure from 2013/14 to 2016/17

Actual Forecast

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Income from Continuing OperationsRevenue:

Rates & Annual Charges 43,550 46,290 48,475 50,827 53,385 55,535 57,237 58,992 60,800 62,664

User Charges & Fees 22,709 20,979 21,607 22,437 23,110 23,804 24,518 25,253 26,011 26,791

Interest & Investment Revenue 4,022 4,183 2,358 1,558 1,562 1,562 1,559 1,565 1,565 1,565

Other Revenues 35,005 17,960 20,994 17,200 17,716 18,248 18,795 19,359 19,940 20,538

Grants & Contributions provided for Operating Purposes 3,457 4,459 4,295 4,204 4,226 4,353 4,244 4,371 4,503 4,638

Grants & Contributions provided for Capital Purposes 11,414 5,755 4,042 4,043 3,022 3,023 3,023 3,024 3,025 3,026

Other Income:

Net gains from the disposal of assets - 287 253 253 261 268 276 285 293 302

Total Income from Continuing Operations 120,157 99,913 102,025 100,522 103,283 106,793 109,654 112,849 116,136 119,524

Expenses from Continuing OperationsEmployee Benefits & On-Costs 35,559 37,850 39,868 41,621 43,405 45,268 47,211 49,239 51,356 53,564

Borrowing Costs - 162 335 446 418 390 360 328 294 258

Materials & Contracts 29,275 30,673 30,292 29,856 30,752 31,675 32,625 33,604 34,612 35,650

Depreciation & Amortisation 15,283 15,996 16,918 17,903 18,232 18,665 20,023 20,324 20,629 20,938

Other Expenses 8,442 8,640 7,878 8,440 8,714 8,998 9,292 9,595 9,909 10,234

Net Losses from the Disposal of Assets 4,851 - - - - - - - - -

Joint Ventures & Associated Entities 4 - - - - - - - - -

Total Expenses from Continuing Operations 93,414 93,320 95,291 98,266 101,523 104,995 109,511 113,089 116,799 120,644

Net Operating Result for the Year 26,743 6,593 6,733 2,257 1,760 1,798 143 (240) (663) (1,121)

Net Operating Result before Grants & Contributions provided for Capital Purposes 15,329 838 2,691 (1,786) (1,262) (1,225) (2,881) (3,264) (3,688) (4,146)

Projected Years

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Appendix 5: 10 Year Financial Model - Scenario 3

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100

101

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END OF DOCUMENT

Summary of Proposed Amendments to the Resourcing Strategy 2013-2023 - April 2016

Page No. Rationale/Justification for Change 3 Table of contents - to be updated post exhibition. 6 Update currency of paragraph post the finalisation of these external reviews. And

repetition removed. 9 and 10 During the 2015 review of this Strategy two risks, identified in 2013 when the Strategy

was initiated (underfunding of resealing roads and stormwater management) were deleted. It is recommended that these be reinstated as Council expenditure in 2014/15 and 2015/16 (above the original Scenario 2 forecasts) is reflective of efforts undertaken by Council to address these areas i.e. the rational for such expenditure was justified by the original version of this Strategy. A footnote reference has been added to explain that Council has, in part, addressed the defects in the stormwater network through the introduction of the Stormwater Management Charge, effective from 1 July 2014. 1

19

This table is to be updated post exhibition (i.e. graphic design version) to remove Cr Burke who resigned.

35 A footnote reference has been added to reflect the organisation structure changes that occurred in 2014/15.

37 A footnote reference has been added regarding the $9.5m that was borrowed by Council in 2015/16 for both the Alexander St Car Park ($5m) and Parking Meter Solution project ($4.5m).

39 to 43 Scenario 2 has been updated to reflect the increase in capital expenditure that occurred by Council resolution in 2014/15 and 2015/16. Figure 3 has been updated i.e. the version on page 42 with strikethrough is proposed to be deleted. Figure 4 has been updated i.e. the version on page 43 with strikethrough is proposed to be deleted.

55 to 56 During the 2015 review of this Strategy text was deleted. It recommended this be reinstated and the Medium term life cycle costs table be amended to reflect the 2013 and 2015 ratios. The table on page 56 is to be updated post exhibition.

57 and 58 Updated as per page 9 rationale. 59 During the 2015 review of this Strategy reference to North Sydney Oval was deleted. It

recommended this be reinstated as Council has spent significant expenditure in recent years towards improvement of this asset. This amendment is consistent with page 9 (i.e. unamended reference to Oval).

61 This table is to be updated post exhibition. 66 Minor edit. Original footnote 17 is to be removed as the 2013 data was added in a

previous review but the footnote was overlooked/left in. Employee establishment - figures have been updated to for the period 2012 to 2015. It is also proposed that the paragraph and footnote related to original footnote 18 be deleted, as it is out of date in light of the proposed amendments to the preceding table/more recent comparative OLG data not available.

67 Diversity - table comparing staff gender has been updated to include data for the period 2012/13 to 2014/15. Workforce demographics - data added to reflect 2014/15 actuals i.e. included for current context; Figure 12 to be removed - removal of this graph affects numbering of subsequent Figures (to be addressed post exhibition).

68 Length of service - data added to reflect 2014/15 actuals i.e. included for current context; Graph to be replaced with updated pie chart.

69 Employee turnover - amendment to table proposed; removal of 2005/06 and 2006/07 data affected following paragraph, therefore paragraph has been updated to include

1 Note: The charge is between $5 and $25 per year depending on the property category for rating purposes and the type of property. The charge is dedicated to stormwater management upgrades and provided approximately $500,000 in additional funding for the stormwater works program in its first year.

Page No. Rationale/Justification for Change reference to the data removed from the table i.e. for context. The 2014 Employee Survey results have been added.2

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Leave entitlements - amendment to table proposed; removal of 2005/06 and 2006/07 data for consistency in format as proposed by amendment to page 69; 2012/13 to 2014/15 data to be added.

72 Employee costs - footnotes have been added to reflect actual changes to organisation structure as indicated in Attachment 1.

96 Appendix 4: Scenario 2 Income Statement (Amended) has been updated, i.e. the version on page 97 with strikethrough is proposed to be deleted. The amended Balance Sheet, Equity Statement and Cash Flow Statement are to be inserted post exhibition, the reasons for this that they need to reflect the post exhibition amendments to the 2016/17 Budget - at the time of preparing this report several amendments to 2016/17 Budget have been identified during tis public exhibition period, these amendments will be reported to Council at its May 2016 meeting.

2 Note: the survey was conducted as part of Council’s Performance Improvement Order.

Draft Amended Resourcing Strategy 2016 v2...Council resolved at its meeting held Monday 21 March 2016 to place the Draft Amended Resourcing Strategy 2013-2023 on public exhibition

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