Richmond Valley Council, Casino.
Richmond Valley Council, Casino. Jasmine Burke

Council records $6m loss after 'triple whammy' hit

RICHMOND Valley Council has recorded a loss of almost $6 million in the last financial year after being hit with a "triple whammy" of depreciation, asset write-offs, and loan break costs.

The 2017-18 financial statements, presented on Tuesday night's meeting, recorded a $5.87 million loss before capital grants and contributions.

The negative financial turn has been blamed on a combination of a $2.5 million increase in depreciation write-downs, a $1.8 million net loss on asset disposals, and $1.5 million in loan break costs.

The loss contrasts with the council's 2016-17 surplus of $3.424 million.

The council's general manager Vaughan Macdonald said the majority of the asset disposal loss related to the Casino saleyards upgrade, in which old assets were replaced to ensure the new facility was properly modernised.

Under the accounting code, the old assets hadn't reached the end of their life so had to be written off when they were replaced. It was a "book" loss, rather than a cash loss.

The $1.5 million in loan break costs comes after the council negotiated better interest rates on $16 million worth of loans. Long-term, the new interest rates will actually save the council a little over $2 million or, a net gain of $500,000.

The $2.5 million increase in depreciation was mainly due to a significant increase in the book value of the council's water and sewerage assets, meaning more funds had to be allocated to their replacement each year.

"Depreciation is important because it is designed to ensure that today's users pay their fair share for the amount of council's assets they consumed, essentially through wear and tear," Mr Macdonald said.

"This is something council believes reflects good governance and stewardship of our community's built up investments."

Richmond Valley has received $11.5 million in capital grants over the past financial year, which saw long-awaited projects such as the Stage 1 upgrade of the Northern Rivers Livestock Exchange come to fruition.

However, Mr Macdonald said with new assets came the expectation of higher service levels and increased depreciation expenses - which will hit the council's bottom line over the long-term.

He said the value of the improved livestock exchange had increased from $6.5 million to $14 million, making council's required depreciation costs significantly higher.

While the council received State and Federal Government grant funding for capital projects, the ongoing costs of maintaining the new infrastructure was often left to the council.

Rate increase?

Mr Macdonald said given the possibility of further shortfalls, consideration had to be given to a follow-on special rate variation as the NSW Government's imposed 2.8 percent rate peg did not keep pace with expenditure increases.

"Council is being open and transparent with its ratepayers, and we are saying now the budget is stretched," Mr Macdonald said.

The council has increased its rates beyond the rate peg for the last five years, starting with a 12 per cent rise in 2014 followed by four years of 5.5 per cent increases.

Mr Macdonald said councillors would have a workshop in November to consider making another application to increase rates beyond the peg.

"If the community wants us to continue to deliver the levels of services that are delivering, we will have to," he said.

With rates revenue contributing under 20 percent of total revenue, Richmond Valley Council, like most councils, is heavily reliant on grants from the Federal and State Government.

Roads, water and sewerage focus

Mr Macdonald said more than half of the council's $60 million budget in 2018-19 will be spent on roads, drains, footpaths, and water and sewerage infrastructure.

He said the increased spending on infrastructure was unavoidable but it limited the council's choices in providing other services.

The council has flagged a number of proposals in the near future to deal with funding reductions and cost pressures on services.

"To continue to deliver services such as safe roads and walking paths and bridges, well-maintained sportsground facilities and effective stormwater management infrastructure, council must manage and maintain its many assets," Mr Vaughan said.

"Council does not want to have to compromise between 'do we put the money into road repair', or 'do we put the money into other amenities, like undercover equestrian arenas, riverside park upgrades and heated swimming pools'.

"Council wants to build good quality and appropriate infrastructure for the enjoyment of all community members and visitors. Doing this also boosts our local economic activity to benefit business and community prosperity.

"The Richmond Valley local government area has the potential and opportunity to achieve great things in the next decade, and the community's advice and opinions are vital as plans need to be flexible to withstand further changes to our local economy and our community as we grow."

The good news

Mr Macdonald said this year's financial statements highlighted improvements in some key performance measures, with the majority remaining above industry benchmarks.

Two notable improvements were in the Buildings and Infrastructure Renewals Ratio, which measures council's ability to keep pace with infrastructure maintenance - increasing from 79.15 per cent to 101.07 per cent - above the benchmark of 100 per cent, and the Outstanding Rates and Charges Percentage from 8.25 per cent to 6.31 per cent, demonstrating the council's progress in addressing its outstanding debts.



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