Council Releases Tough 2024-25 Draft Budget for Community Feedback

In a split decision and after some acrimonious debate, Council has endorsed the release of its draft 2024-25 Budget for public exhibition and community feedback. While the draft budget has been released for consultation, three out of the seven Councillors did not think it was responsible to endorse an unsustainable deficit budget for public consultation.

The draft Budget forecasts a $1.9 million deficit for the 2024/25 financial year on top of a deficit in excess of $4 million for the current financial year. The draft includes $5.5 million of new borrowings to support the delivery of capital projects and provide upgraded and new infrastructure. The draft also proposes a reduction in Council’s operational budget by $1.5 million, while seeking to minimise the consequent impact on service delivery.

Revenue collected through rates and charges, State and Federal Government grants and other sources, is projected to be $40.3 million. Rates will be increased in line with the State Government Rate Cap of 2.75%, well below the current CPI rate of 3.6%.

The budget also indicates that a further $4.06 million in permanent savings or increased revenue must be generated in the 2025/26 financial year if Council is to remain sustainable in the long-term. That $4 million shortfall is the equivalent of 20% of Council’s rates income or 12.5% of its cash operating costs. The budget includes the possibility of seeking an exemption from the rates cap in the 2024/25 financial year to increase revenue.

The cumulative effect of rate-capping below CPI and, in Hepburn Shire’s case, its relatively small population, inefficiencies arising from administering multiple population centres, and comparatively low rates revenue, all combine to constrain the financial outlook.

The officers recommendation was that the draft budget be endorsed by Council and released for public comment with submissions closing in mid-June with the budget to be formally endorsed on June 25 in advance of the mandated June 30 deadline.

However, Cr Hewitt introduced a motion to postpone release of the document for public comment and to seek an extension from the Minister for Local Government to enable further work due to the need for extensive community consultation. In speaking to the motion, she said that it was irresponsible to support a budget which forecast a $1.9 million deficit on top of a forecast deficit for the current financial year. The motion to postpone release of the draft budget was lost 4-3.

Cr Drylie proposed the officers recommendation with a modification that the budget be include $100,000 to resource the Affordable Housing Action Plan by delaying some capital expenditure. The motion was eventually passed 4-3 with Councillors Drylie, Bray, Simpson and Halliday voting in support and Councillors Hood, Henderson and Hewitt voting against.

In closing comments, the Mayor, Cr Brian Hood noted that it was unusual for a mayor not to support a draft budget. He said that, in his view, it was irresponsible and unsustainable to budget for deficits. He felt that the draft budget did not meet the requirements of stability and predictability for the community because of the uncertainty surrounding council rates and that the budget presented unacceptable risks. He also expressed concern that the three week time for community feedback on the draft budget was too short, particularly with the current community debate on the Town Structure Plans occupying considerable attention.

In releasing the draft budget for community comment, Cr Hood said that the draft Budget outlines revenue and expenditure projections for the following financial year, the need for reduced operating expenditure, increased borrowings and a significant trimming of the capital expenditure budget.

“As we deal with challenging economic times, we need to make tough and responsible decisions. We are managing our service delivery and capital works program in a financially responsible way. The draft budget highlights some opportunities for savings and for capital works investment that is necessarily lower than the expansive program of recent years.”

“In this coming year, it will be necessary for Council to reduce its operational budget by $1.5 million, while striving to minimise the consequent impact on service delivery. We remain committed to ensuring we deliver for our community by completing existing capital projects, investing in the renewal of existing assets and community infrastructure, and delivering services in line with the community’s vision,” said Cr Hood.

Cr Hood said the draft Budget makes the most of the limited funds available to Council. Both inflation and the Victorian Government’s Fair Go Rates Cap continue to severely impact councils.

“Times are tough for many in our community. We understand that. Inflation is hurting not only households, but businesses and all levels of government as costs continue to rise. The consequence of inflation poses significant financial challenges. The cost of materials, operating costs and capital works are increasing at a rate much higher than the rate cap.”

Chief Executive Officer Bradley Thomas noted that the financial challenges are not unique to Hepburn Shire and are being felt across many Local Governments.

“Major areas of investment throughout 2023/24 will see the completion or advancement of significant capital projects, including The Mechanics Trentham and Djuwang Baring (Creswick Trails), while the preparation of five Township Structure Plans and the Rural Hepburn strategy will contribute to the long-term economic benefit of the Shire, which we are proud of”.

“Hepburn Shire has been subject to significant costs associated with natural disasters and weather events. Over the last three financial years, we have incurred $15.04 million in expenditure associated with storm recovery works, resulting in a net cost to Council, after State and Federal Government reimbursements, of $4.46 million,” said Mr Thomas.

Council will continue with the delivery of recently adopted and existing strategies in a financially sustainable manner. These include Sustainable Hepburn; Early and Middle Years, Youth and Positive Ageing Strategies; Gender Equity Strategy, Arts and Culture Strategy and the Rainbow Action Plan.

The budget will deliver an $8.5 million capital works program for 2024/2025. Projects include:

Road renewal and resealing $2.58 million
Daylesford Town Hall $1.03 million – funding to finalise roof and electrical replacement to ensure the ongoing protection of this key heritage asset
Building works of $1.06 million, including the design for Daylesford Community Facilities $0.3 million and a further $100,000 to continue progression of the Glenlyon Recreation Reserve Pavilion
Recreational and Community facilities including parks and open spaces of $1.5 million, of which $1 million is grant funded.

Over the coming months, Council will prepare and adopt a revised Long Term Financial Plan that will outline a strategy for the sustainability of Hepburn Shire over the next ten years. Council will engage with the community in July on the Long-Term Financial Plan (10-years) and look to adopt the plan at the September 2024 meeting. Continued collaboration with the community remains essential for:

Assessing and prioritising our service offerings.
Determining feasible and affordable levels of expenditure.
Identifying assets necessary for delivering prioritised services.
Evaluating surplus assets for potential disposal.
Adjusting resources to support the delivery of prioritised services.
Reviewing borrowing levels.
Reviewing opportunities for additional revenue, including an application for a rate cap variation.

Consultation is open until 13 June, and given the financial limitations of Council, will focus on the inclusions in the draft 2024/25 budget, noting consultation on services, revenue and the future financial direction of Council will occur in July as part of the Financial Plan development (long-term financial plan). The draft Budget and feedback form are available at https://participate.hepburn.vic.gov.au/draft-budget

Hepburn Shire Not Financially Sustainable