By Mayor Cr Edward Crossland, Yarra City Council
Melbourne’s Yarra City Council has recently developed and launched its Financial Sustainability Strategy, designed to guide Council on how to best manage resources for the long-term in the best interests of the community. Here, we outline the key elements of the strategy for other councils looking to develop similar initiatives.
Yarra City Council is committed to the responsible management of ratepayer’s funds and ensuring our community can thrive, now and into the future. As part of our commitment to improve our financial health, we developed a Financial Sustainability Strategy. This Strategy is the first of its kind for a local council in Victoria and was endorsed by Council at Yarra’s December 2023 Council meeting.
What is a financial sustainability strategy?
Financial sustainability means consistently having sufficient reserves in the tank to meet unforeseen or emergency expenses, without relying on borrowing or compromising essential services. The Strategy will guide Council on how to best manage our resources for the long-term in the best interests of our community.
Like most Councils, Yarra currently has a Long-Term Financial Plan which helps inform Council planning and predicts the funding we will need to fulfil the needs of our community, along with where we are expected to be financially in the next ten years.
The Financial Sustainability Strategy looks at those predicted numbers and identifies strategic ways to address them, so that we are in an improved financial position and can deliver for our community both now and into the future.
What led to the creation of the strategy
Like all Councils in Victoria, we are facing challenges to our financial sustainability from rising cost pressures, rate capping and cost-shifting, along with increasing pressure and demand on our services and infrastructure from a rapidly growing population. We were proud to have provided additional financial support to our community through the COVID-19 pandemic and recovery.
However, the financial impact of this, compounded with legacy debt, means we have limited reserves left to meet the growing needs of the Yarra community. Thanks to hard work across the organisation, Council has made significant progress to improve our financial position and get back on our feet. In the last financial year we were able to deliver a $23.3m surplus – a $22m increase on the previous year – and we improved our risk rating based on ratios set by the Victorian Auditor-General’s Office (VAGO).
At the same time as delivering this surplus, we have improved project delivery, introduced a separated waste services charge and made commitments to ongoing improvements to resource management including expenditure controls, responsible management of debt and operational efficiencies, among many others.
Council is deeply committed to serving the best interests of the community and recognises that consistent effort is required to ensure we remain financially sustainable.
Strategic goals?
The Financial Sustainability Strategy has goals over both the short and long term to ensure financial sustainability for Council:
- 0-2 years: maintain a net positive position by delivering a surplus, ensure our operating activities no longer relies on borrowings, hold costs and start to build cash reserves for specified purposes
- 3-5 years: achieve a financial position where Council has sufficient cash reserves to repay borrowings, generate new revenue, can cover all known operating expenses without borrowing, deliver a long-term financial plan that more reliably reflects future financial requirements (unknown risks), and have cash reserves for risk and strategic growth
- Within 10 years: ensure that Council has sufficient cash reserves to meet unforeseen or emergency expenses and support population growth without relying on borrowing or compromising essential services
Levers for change
The Strategy identifies two types of levers for change to ensure Council’s long term financial sustainability:
- Strategic levers – to ensure that future investment decisions are based on need, underpinned by evidence and guided by informed strategies including detailed asset management plans, contemporary property management and community infrastructure planning and an ongoing program of service reviews
- Systemic levers – to manage expenditure, prudent debt management, operational efficiencies and capital works delivery management among others The Strategy will guide future decision-making so Council can transparently, proactively and prudently plan to be financially sustainable. It will ensure financial sustainability remains consistent with maximising our community impact and delivering efficient and effective services and infrastructure and meet our financial obligations both today and in the future.
Strategic levers
Within the framework of strategic levels, Council has identified seven key strategic levers, outlined in the Financial Sustainability Strategy, which will help us get to where we need to be and guide Council’s direction over many years. These are as follows:
- Sustainable cash reserves – We’ll build cash reserves for strategic purposes, enabling community infrastructure for a growing population and to respond to unforeseen events. We’ll also decrease our reliance on borrowings, ensuring a stable financial foundation.
- Well planned assets – We’ll maintain our community’s assets at a level that caters to current and future needs. Our focus will be on renewals and new infrastructure, ensuring the right blend to meet community needs.
- Increasing our revenue – We’ll optimise our revenue-generating assets and services, reflecting the true cost of services provided.
- Investing in transformation – Through technology, process improvements and careful planning, we’ll enhance the customer experience, service delivery and operational efficiency.
- Review of the service landscape – We’ll establish a new service planning and review framework to ensure all services are relevant, financially sustainable and can meet future community needs.
- Robust financial management – We’ll make fiscally responsible decisions and put in place effective financial planning and responsible budgeting processes.
- Partnerships and advocacy – We’ll strengthen partnerships and advocacy efforts to secure resources and navigate financial challenges.
A blueprint for the future
We believe the seven strategic levers outlined in the Financial Sustainability Strategy will help us get to where we need to be and guide Council’s direction over many years. “This Strategy is a representation of our commitment to the responsible management of ratepayer’s funds. By focusing on financial sustainability, we’re ensuring we can meet the service and infrastructure needs of our community, now and into the future,” said Yarra City Council Mayor, Councillor Edward Crossland.
“As the first Victorian council to create a strategy of this nature we hope to demonstrate its positive impacts in the years to come and be a leader in this space.” It is critical to ensure that decisions made are in the best long-term interests of the municipality, not only for now but for our community in the future.
Great progress on the strategy has been achieved already. One essential key to success has been the whole of organisation commitment to working together to ensure the financial sustainability in the future. Thinking financially has become part of the DNA of being an employee or Councillor at Yarra. We are very excited that we have a solid plan for the future and are collectively committed to making it happen.
This strategy is a representation of our commitment to the responsible management of ratepayer’s funds. By making this move we’re ensuring that we can meet the service and infrastructure needs of our community, now and into the future. As the first Victorian council to create a strategy of this nature we hope to demonstrate its positive impacts in the years to come and be a leader in this space.
