Business Victor Harbor calls for clarity and transparency on CVH’s 2021/22 Annual Business Budget and Plan

Business Victor Harbor is driven by its mission to be the voice of the business community as a positive advocate for the future direction and opportunities for the South Coast region. 

Updated 12/07/2021: The City of Victor Harbor responded to questions and feedback from Business Victor Harbor. Read the reply at the bottom of this page or by clicking here

The chamber actively works to safeguard and support private enterprise so it can thrive in our city and help to sustain and create ongoing employment and investment opportunities. We support any activity undertaken by the City of Victor Harbor that contributes to a sustainable, vibrant and diverse economic future for our region.

We are also charged with highlighting council activity that we believe may cause undue financial burden on current and future ratepayers, and impact on the long-term sustainability of the City of Victor Harbor’s financial position.

As such, BVH recently provided feedback to Council on the City of Victor Harbor’s ‘2021/22 Annual Business Plan and Budget’, putting forward in a letter the concerns that both BVH members and the wider business community have on the quantum and timing of expenditure of several of the key projects outlined in the proposed plan.

“Whilst Business Victor Harbor broadly supports the general activity outlined in the Council’s Annual Business Plan and Budget, we are genuinely concerned that it lacks a clear linkage to an endorsed long-term financial plan for the City. We question the overall direction and detail contained within the business plan which may highlight the future rate burden for rate payers and our ability to attract and generate private investment to our area”

Michael Schubert, Chair of Business Victor Harbor

Some of the concerns raised by Business Victor Harbor on the ‘2021/22 Annual Business Plan and Budget’ include the following:

  • Details regarding how Council plans to resolve car-parking issues within the city, in particular, the McKinlay Street site;
  • The lack of action items that aim to create and support an Investment Attraction Strategy for the city, particularly given this is a key objective of the recently released ‘CVH Economic Development Strategy 2020-2030’;
  • The overall debt levels envisaged for funds expended for both capital and operational expenses that have the potential to drive debt up for CVH to levels that may not be sustainable in the long-term and how this debt is managed and measured under the Council’s Key Financial Indicators (as outlined in the plan).

“Business Victor Harbor is not opposed to borrowing for public infrastructure and see that it is necessary in most cases to ensure the ongoing viability and future of our City. However we have highlighted in our letter to council our concerns with some of the key projects outlined in their business plan and budget and whether the outlays for these projects are viable and sustainable. We also believe it is problematic to ask the ratepayer to review and provide feedback on a business plan or budget in isolation from a well-considered long-term financial plan”

Kirsten Pitman, Deputy Chair of Business Victor Harbor

BVH have asked the Council to provide clarity on the following projects listed in their 2021/22 Annual Business Plan;

  • Community services;
  • Community facilities;
  • Roads, footpaths and bridges
  • Car parking and traffic management;
  • Open spaces and recreation, in particular, the Fleurieu Regional Aquatic Centre;
  • Plant and Depot;
  • Business activity;
  • Public safety and
  • Library and Cultural Services.

Business Victor Harbor has also raised concerns about a lack of direction and potential confusion by Council around activities and projects that contribute to ‘economic development’.

“We recently wrote to the Council highlighting the importance of the business community having input into how the Council allocates the differential business rate,” said Michael Schubert.

“We believe that the business community is best placed to understand what will drive economic development in the city,” Michael said.

The chamber also made reference to its recently submitted responses to council on the proposed ‘Arts & Culture Centre re-development’ and the ‘Differential Rating Review’, which the Association is still waiting on a response on.

“Business Victor Harbor always appreciates the opportunity to provide feedback to the City of Victor Harbor on behalf of its members and the wider business community on Council projects, initiatives and activities that impact on the region’s economic development and environment,” said Michael Schubert.

“We look forward to our ongoing relationship with Council and continuing to work alongside them and our members to create a sustainable, vibrant and diverse economic future for our region,” he said.


Response from the City of Victor Harbor

“It is important to note that the City of Victor Harbor is a level of government that provides its community with services and infrastructure. While the Council always strives to deliver efficient and value for money services, for the most part these services are delivered at a cost and funded through a tax (Council rates)”

The following provides answers to questions raised in the Business Victor Harbor submission:

Key Financial Indicators

Business Victor Harbor is correct, there are numerous references to the proposed targets within the document. Whilst the draft indicators have not been formally adopted, the ratios have been considered and discussed on numerous occasions with Elected Members and the Audit Committee with a general sense of agreement as to the appropriateness of the draft targets. Thus the draft targets have been incorporated into the draft Annual Business Plan and Budget with a view to adoption and inclusion in other relevant strategic documents.

This is not misleading – the ABP clearly states that the targets are proposed with analysis based on the targets within the draft Long Term Financial Plan. It would be misleading to omit the words ‘proposed’ or ‘draft’.

Different councils (or the same Council at a different point in time) may have very different targets – all of which could be equally responsible and financially sustainable. The draft Net Financial Liabilities target has been considered in conjunction with a number of factors including that the City of Victor Harbor is a growth council, has a large capital works program and increasing community expectations. The draft Long Term Financial Plan demonstrated that these ratios allow for financial sustainability as well as an increased capital works program.

Concerns about progression of car parking in McKinlay Street

The City of Victor Harbor has made a commitment to partner with the developers of the Anchorage Hotel and accommodate car parking required for the development on council owned land in McKinlay Street. This commitment remains unchanged. The expression of interest that Council is undertaking to explore potential private sector partnerships for the site does not impact on the Anchorage Hotel development progressing. In fact, the Council has clearly mandated that any proposed development for the site must support the parking needs of the Anchorage Hotel development.

While the City of Victor Harbor has confirmed its support through a resolution at a council meeting, a legal agreement is currently being negotiated between Council and the Anchorage Hotel developer. The agreement outlines the terms of the collaboration and firms up the commitment of both parties.

Investment Attraction Strategy

The opinion of Business Victor Harbor is noted.

There is a key planned activity in the draft 2021/22 Annual Business Plan to develop an Investment Attraction Strategy in collaboration with Business Victor Harbor that will set a direction and outline specific activities to support investment attraction in our City.

The approach to investment attraction will also need to be consistent with the outcomes of the redesign of Victor Harbor’s destination brand, a project that Business Victor Harbor is directly involved with.

Contrary to Business Victor Harbor’s opinion, evidence suggests Victor Harbor is well positioned to build on and enhance investment attraction. As highlighted in the Council’s Economic Development Strategy, in recent years Victor Harbor has seen a surge in investment in our city with developments of major retailers in the vicinity of $60 million. There is also the current proposal for the $45 million development of the Anchorage Hotel (for which Council has made a commitment to support car parking requirements), $22 million redevelopment at McCracken Country Club, $3.5 million Wohlers proposal and two significant tourism development applications worth a combined $3.8 million.

The Council’s own investment in Victor Harbor could be considered a catalyst for this investment with the delivery of the Mainstreet Precinct upgrade and Railway Plaza redevelopment, both of which were offset by 50% funding from the SA Government. The SA Government has also invested significantly in Victor Harbor through the $43 million Causeway Upgrade and $6 million on the Wild South Coast Way project.

The development of the Investment Attraction Strategy will assist to stimulate greater levels of business investment and attraction. It will provide clear direction and build upon the current environment. It will also define targets for investment and regulatory mechanics that will facilitate investments that drive our economy per the Economic Development Strategy.

A response to the four questions raised in the Business Victor Harbor submission on the rating review has been forwarded to the Executive Officer and Chairperson (Click here to read the response).

Budget Activity Areas

  • It is important when reviewing a council budget (or any level of government) to remember that councils deliver services, many of which are not, and will never be, cost recoverable. Many council services operate at a ‘deficit’ as they are services that would otherwise not be provided and would result in a reduction in the wellbeing and liveability of its community.
  • It is a challenge to strike a balance between the provision of services expected by the community and minimising tax on ratepayers for the provision of those services. Council has an ongoing commitment to reviewing current services and service levels, as well as efficiency and continuous improvement to minimise increases in costs.

Community Services

  • Community Assistance – The recent review of community services shows a high dependency on these services by a large portion of our population and it is not anticipated that these services will be withdrawn or reduced. The large ‘deficit’ in the Community Assistance area is due to the provision of Council’s contribution to each community service and should be considered in conjunction with all the community services areas. The total expended on Aged Services, Caring Neighbourhood Program, Community Transport, Fleurieu Families, Youth Development, Star Club and Community Assistance is $775,900.
  • Community Bus Service There is no public bus service in Victor Harbor. This bus service provides door to door service to and from central Victor Harbor. A small fee is charged for the service. Increasing the fee would likely impact any disadvantaged or isolated member of the community that would no longer be able to afford the service. It is unlikely that a private operator would be willing to offer the service at an affordable rate for participants.

Community Facilities

  • Cemetery – Council recently undertook a review of the fees and charges for the cemetery including benchmarking. These fees and charges are also reviewed on an annual basis. Further increase would reduce affordability and have a major impact on those least able to afford the fees at an already stressful time.
  • Property and GIS – The $2,450,000 included in the capital budget has been provided principally for strategic land purchases. These purchases are currently under negotiation / investigation with details redacted from the public at this stage due to being commercial in confidence and to ensure that Council receives best value for money.
  • Details have not been included on page 27 as this purchase is not considered a Key Plan Activity at this stage. It is included in the capital works project list on page 52 as it is significant expenditure.

Roads, Footpaths and Bridges

  • Kerbing and Footpath – The Encounter Bikeway along Franklin Parade is a high traffic area, utilised by both pedestrians and cyclists. Acknowledging this, widening has been identified as a safety measure. The intent is that the Encounter Bikeway runs the breadth of City of Victor Harbor providing a safe and enjoyable experience. Since the draft 2021/22 Annual Business Plan and Budget was released for consultation, the Council has been successful in securing $150,000 in grant funding to the State Bicycle Fund to contribute to the cost of this project.
  • Streetscaping – As a part of the project planning for Stage 4 of the Victor Harbor Mainstreet Precinct Upgrade there will be significant engagement with Traders in the Precinct to keep them informed of the project and to prepare them for the construction period.

Car Parking and Traffic Management

  • Car parking – The Car Parking activity area is not a full ‘user pay’ activity and more detailed information is provided to Elected Members during budget workshops. In the draft 2020/21 Budget, expenses (including depreciation) are fully offset by user pays income excluding a car park lease arrangement at the Civic Centre (where no fees are charged for parking).

Coastal Protection and Environment

  • Whilst Business Victor Harbor makes no specific comments in regards to these activities – it should be noted that these services also run at a significant ‘deficit’ of over $780,000 thus creating an inconsistency in Business Victor Harbor’s comments regarding other activity areas and the need for private operators and/or user pay charges that recover costs.

Waste Management

  • Whilst Business Victor Harbor expresses congratulations in regards to the operations of FRWA – it should be noted that this service also runs at a significant ‘deficit’ of approximately $1.7million for the City of Victor Harbor thus creating an inconsistency in Business Victor Harbor’s comments regarding other activity areas and the need for private operators and/or user pay charges that recover costs.

Open Space and Recreation

  • Sports – The Aquatic Centre was never proposed to be a profitable business in cash terms – but was considered in terms of social and wellbeing benefits. It should be noted that the operating ‘deficit’ of the Centre is due to a joint decision of the constituent councils to withdraw cash funding of depreciation. Were this not the case, the amount of the ‘deficit’ would be included in the council contributions and would provide the Centre with a balanced budget similar to the Fleurieu Regional Waste Authority.
  • The Beachfront Caravan Park is a good example of a council business that can be effectively outsourced as it is a true user pays activity, is low risk and does not impact on the general wellbeing of the community as it is tourist based. This is not the case for most council activities. Council undertakes regular reviews of service levels in order to assess whether there are more suitable management models that can be implemented across its activities.

Plant and Depot

  • Plan and Machinery – Council has a Plant and Vehicle Replacement Program which is reviewed annually in consideration of usage, downtime, repair and maintenance costs, trade-in offsets and safety. The plant replacement requirements have been considered during budget workshops as well as the possibility of deferring replacements. No deferrals are proposed at this time.

Tourism and Economic Development

  • Economic Development (Business Victor Harbor partnership) – The contribution for the Business Victor Harbor and City of Victor Harbor Partnership is set at a fixed amount of $100,000 and is not indexed.
  • Economic Development (Economic Development Differential) – Refer to the response provided in question 3.

Tourism Marketing – Refer to question 3.

Two events have been identified as having economic development drivers and are funded by the Economic Development Differential in the draft budget. These are:

  • Rock and Roll Festival $5,000
  • SANFL Champs $15,000

In addition, $15,000 is also funded for the Festival and Events Grants Program which brings a number of different activities to Victor Harbor each year.

It should also be noted that Council is currently developing a Festivals and Events Strategy which Business Victor Harbor has been directly involved in shaping to provide clarity on the strategic direction for events and festivals in the Council area.

Fleurieu Peninsula Tourism Membership

  • Business Victor Harbor’s feedback in relation to membership of Fleurieu Peninsula Tourism is noted.
  • The regional partner councils of Fleurieu Peninsula Tourism recently participated in a review of the organisation through which the regional tourism industry was widely consulted. An outcome of this review was shifting the board to industry representatives.

Business Activities

  • Horse Tram – Capital outlays for the Horse Tram have been and continue to be considered during budget workshops. The timing of some of these works has been fast tracked due to the new causeway construction. It is unlikely that the Horse Tram will ever be cost neutral to Council but theAuthority is working to diversify its income streams and reduce the reliance on council funding.
  • Town Planning: Whilst Business Victor Harbor makes no specific comments in regards to this activity – it should be noted that this service runs at a significant ‘deficit’ of over $1,000,000 thus creating an inconsistency in Business Victor Harbor’s comments regarding other activity areas and the need for private operators and/or user pay charges that recover costs.

Public Safety

  • Parking Control – Fees for parking infringements are legislated under the Private Parking Areas (Expiation Fees) Variation Regulations 2020, appear in the Government Gazette and are unable to be varied by Council.

Library and Cultural Services

  • Cultural Services – The Arts and Culture Centre project is still progressingthrough various steps prior to Council endorsing the project for construction. Council is continuing to consider this project as new information becomes available. A prudential report will be required for the project to ensure that the project objectives and operations meet requirements.
  • Library – The inclusion of the library upgrade construction was a result of a council decision on 26 October 2020. The project is based on outcomes from the Library Services Review completed in 2019. The $1,601,500 included within the draft budget is to continue the works associated with the upgrade of which detailed design is well underway. Council has also been successful in receiving grant funding for this project of $643,686.
  • Victa Cinema – Council has considered a number of management options for the operations of the Cinema. This activity is also a significant part of the broader Arts and Culture Precinct. Revenue and expenditure has been closely reviewed with part of the former profitability of the business due to the lack of drawings by the previous owners. The budget sets out a forecasted income based on historical and recent income from the business, noting possible disruption due to stage four of the Mainstreet Precinct Upgrade as well as potential COVID-19 .

Administration

  • Loan Interest – Finance Costs of $279,000 in the Statement of Comprehensive Income on page 58 is made up of $268,700 in debit interest and a book entry of $9,900 for Right of Use Assets as per Australian Accounting Standard 16. The inclusion of this amount in the ‘Finance Costs’ section of the Statement of Comprehensive Income is as per the Ministerial endorsed Model Financial Statements.
  • Investment Income includes not only the $12,300 for community loan credit interest but also interest on operating and reserve accounts totalling $35,900. This can be further broken down into general credit interest of $33,000 as per the revenue table on page 23 and $2,900 for other reserve credit interest in the car parking and economic development activities.
  • The Statement of Comprehensive Income shows the amount required for the year in question only. Forecast finance costs are expected to fall for the 2021/22 financial year as a number of fixed term loans have matured in the current year (2020/21) as well as a final payment of $1.3 million in 2021/22.
  • New loans are expected to be required in the later part of 2021/22 and as such will not have a direct impact on interest payments until six months after the date they are drawn (which will be in 2022/23).

Corporate Services

  • Corporate Systems Review ($50,000) – The $50,000 has been included at this point as an allocation whilst further scoping was undertaken and costing estimates were calculated. Council will consider a development and implementation plan with full project costing prior to budget adoption.

Our Measures of Success

a. Net Financial Liabilities Ratio
i. Definition of Total Operating Revenue – The Net Financial Liability Ratio is calculated as required by the Model Financial Statements that are approved by the Minister each year. This is a requirement of the Local Government (Financial Management) Regulations 2011, Section 7 that states:
ii. Interest Rates – Interest rates are considered in the development of the Annual Budget and when assessing risk in regards to Council’s Treasury Policy. The Long Term Financial Plan further considers interest rate sensitivity and risk. The potential risk of radical changes to interest rates within the forthcoming 12 months is assessed as low.

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