Chief Financial Officer's Report
In 2018/19, our operating result including capital grants and contributions was a surplus of $54.3 million, which reflects our sound financial position and commitment to robust financial management. It should be noted that this result was influenced by a number of significant items, including the receipt of $42.3 million in capital income (including developer contributions) which will be allocated to future projects within Council’s Delivery Program.
The City of Ryde aims to produce an operating surplus before capital revenue so that the recurring services provided by Council are funded by sustainable revenue sources. In the 2018/19 financial year, our surplus before capital grants and contributions was $12 million. Achieving these results allows the City of Ryde to allocate funds to replace assets and deliver on the outcomes identified in the Community Strategic Plan.
Key features of the 2017/18 Result
We invested $42.59 million in capital expenditure, with major funds spent in the following programs:
- Catchment program – $3.88 million
- Centres and Neighbourhood program – $1.61 million
- Community and Cultural program – $0.40 million
- Environment Program – $0.50 million
- Foreshore program – $1.41 million
- Internal Corporate Services program (including Plant and Fleet) – $4.22 million
- Library program – $0.86 million
- Open Space, Sport & Recreation program – $10.62 million
- Paths and Cycleways program – $2.92 million
- Property Portfolio program – $0.76 million
- Regulatory Program – $0.1 million
- Roads program – $11.15 million
- Traffic & Transport program – $3.64 million
- Waste and Recycling program – $0.51 million
How does our financial performance compare against benchmark indicators?
The Key Financial Performance indicators are outlined in the Code of Accounting Practice. The indicators allow for inter-council comparisons to be made across the NSW local government sector. The indicators are as follows:
Operating performance ratio
Operating performance ratio (%) 2018/19
This ratio measures the City of Ryde’s capacity to contain operating expenditure within operating revenue. It is important to note that this ratio is focusing on operating performance and hence capital grants and contributions, fair value adjustments and reversal of revaluation decrements are excluded. Our operating performance ratio was 10.39 percent which is above the benchmark of zero.
Unrestricted current ratio
Unrestricted current ratio
This indicator measures the City of Ryde’s financial liquidity and how these assets are used to meet short-term liabilities as they fall due. Our Unrestricted Current ratio is above the benchmark of 1.5. This benchmark will be used in the development in Council’s Long Term Financial Plan to ensure that the City of Ryde is financially sustainable and able to meet its ongoing short term financial obligations (payroll and creditors).
Rates and annual charges outstanding percentage
Rates and annual charges outstanding (%) 2018/19
This ratio is the percentage of outstanding rates as a proportion of the total amount of rates and charges levied for the financial year. Our Outstanding Rates and Annual Charges ratio is approaching the benchmark of 5 percent. We have recently adopted a revised debt recovery policy and have commenced debt recovery in the 2019/20 financial year (noting that no debt recovery action is taken against eligible pensioners).
Own source operating revenue
Own source operating revenue (%) 2018/19
This ratio measures fiscal flexibility. It is the degree of reliance on external funding sources such as operating grants and contributions. The City of Ryde’s Own Source Operating Revenue ratio is above the benchmark of 60 percent which means that it has a relatively low reliance on grants to fund operating expenditure. This indicator assists when developing the budget to ensure that ongoing operations are funded from reliable and sustainable funding sources.
Debt service cover ratio
Debt service cover ratio 2018/19
This ratio measures the availability of operating cash to service debt including interest, principal and lease payments. Our Debt Service ratio is above the benchmark of 2. We are capable of servicing our existing loan obligations as they are secured against rates income and factored into the budget. City of Ryde’s total debt is considered extremely low at $1.7 million.
Cash expense ratio
Cash expense ratio (months) 2018/19
This liquidity ratio indicates the number of months the City of Ryde can continue paying for its immediate expenses without additional cash inflow. Our Cash Expense Cover ratio is above the benchmark of three months. This will begin to diminish in the next financial year as cash reserves are used to fund large capital projects.
How does our infrastructure spending and conditions compare against benchmark indicators?
The City of Ryde currently has a net value of infrastructure assets totalling $1.18 billion. These infrastructure assets include roads, bridges, footpaths, drains, cycleways, lighting, seawalls, wharves, buildings, parks, playgrounds, sporting and leisure facilities and natural areas. These assets, which are used by the community, deteriorate (depreciate) over time and require ongoing maintenance, renewal or replacement.
A summary of the indicators show that Council is exceeding the benchmarks in all asset-related categories. Council is spending more on its renewals than it is depreciating but still has a backlog of approximately $12 million that needs to be addressed. Funds have been allocated in the current Four-Year Delivery Program to address this backlog.
The age of our assets, and their regular and growing use, means we need to invest in renewal programs to ensure our assets continue to meet community needs and expectations. Our infrastructure asset indicators are a summary of Council’s infrastructure conditions for the financial year and are as follows:
Buildings and infrastructure renewal ratio
Buildings and infrastructure renewal ratio (%) 2018/19
This measure is used to assess the rate at which these assets are being renewed against the rate at which they are depreciating. The benchmark is 100 percent.
Infrastructure backlog ratio
Infrastructure backlog ratio (written down value) 2018/19
Infrastructure backlog ratio (cost to bring assets to agreed service level) 2018/19
This ratio shows the proportion of backlog against the total value of a Council’s infrastructure. A benchmark of 2 percent has been set. A separate ratio to determine the Infrastructure backlog in accordance with the City of Ryde’s service level for each asset class has also been disclosed.
Asset maintenance ratio
Asset maintenance ratio (%) 2018/19
This ratio compares actual versus required annual asset maintenance. The benchmark is greater than 100 percent. The minor underfunding in asset maintenance is more than offset by the additional funding allocated towards infrastructure asset renewal (ratio of 102.0 percent exceeds the benchmark of 100 percent). This ensures that Council’s backlog will continue to decline over time.
While our financial indicators reflect that we are in a sound financial position, the City of Ryde will continue to face a number of challenges in the years ahead associated with maintaining and improving infrastructure whilst the local government area is growing. This will be done are through Council’s Resourcing Strategy, which will see ensure that City of Ryde is adequately resourced in working towards achieving the outcomes outlined in its Community Strategic Plan.
Chief Financial Officer