The Budget Process

Budget

I imagine most people wouldn’t be fully aware of what is involved in this important Local Government function. It mainly consists of discussions on the planned expenditure for the coming year and which community and club requests can be funded. From this information, the required income is then known and rates are set.  It is a long time-consuming process held over several months, and it all culminated with last night’s  (30/06/15) council meeting where the 2015-16 budget was adopted. 

The Officer’s wrote in their report that to meet the planned expenditure for the coming year, rates would need to increase 3.75%. It was moved by a Councillor that this be reduced to 3% but I just couldn’t agree with the reduction unless there was a corresponding reduction in expenditure.  The problem centres around how the funding shortfall is covered, and in previous years it has simply been a transfer from reserves (essentially savings). So if you spend say $75,000,000 but only bring in $73,000,000, you simply transfer the missing $2,000,000 from the reserves and call it a ‘balanced budget’. You don’t need to be a financial planner to see that this is akin to your household income being $100,000, spending $110,000 and transferring $10,000 from your mortgage or savings and saying you have a balanced household budget. There is also only so long that this can go on, because unless you stop spending more than you bring in, ultimately the reserves will be gone and you’ll either need to borrow money or sell other assets to top up the reserves. I don’t consider it responsible, sustainable or fair to the future ratepayers.

Last year I voted against the budget because of this very thing.  Fortunately a number of Councillors agreed with what I was saying to the point of inserting the below into the motion last year.
reduce the reliance on ratesIn fact I’m really pleased to say that most Councillors agree that expenditure needs to meet income. If you want to keep the rates low then we need to cut down on the expenditure. This year I was instrumental in pushing for the circa $35,000 Mayoral dinner to be held every other year instead of every year. So too the Early Settler’s circa $100,000 lunch. The glossy annual budget documents will no longer be professionally designed, printed and distributed; instead an in-house designed copy will be on the internet with a few copies available at the library and the Annual Electors Meeting. This will save circa $18,000. In my role as chair of the audit committee i have also requested a report on how many trees are pruned when they are not under power lines. I believe this practice will make it harder for Bayswater to achieve their new tree canopy objective and could present a decent cost saving if ceased. And it is a fairly common practice ….

Tree 3Tree 4tree 1

To end I want to stress that I have no problem in using reserves, but only they are used for a deliberate strategy such as funding the greening of our City, or some major development. In fact, rather than taking from reserves for operational costs (running costs), I’d like to see the council contribute to reserves. For example, council approved the expenditure of circa $37,000 for a parking strategy in Maylands and I presume when it is done it will require some action and something to be funded. I see reserves as a way to meet this purpose, and consideration should be given to putting, say, $250,000 into a ‘Maylands Parking Strategy’ reserve every year for the next four years so that it can be funded. This should be considered for all major projects Council are planning in the future.

*** UPDATE ***
The Sunday Times published the below article on the 9th of August stating that the City of Bayswater has the most affordable rates throughout the Perth metropolitan area. It shows that prudent financial management works well, especially as the City of Bayswater services are widely considered superior to other local governments.:
CoB Rates

Power to the people.

(Please be aware that these views are my own and have not been endorsed by the City of Bayswater.)

4 thoughts on “The Budget Process

  1. Thank you for making this so clear. Well done on making the savings you mentioned and agree with when possible building reserves.

    Sent from Surface

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