Council’s Millions – A Simple Explanation
Do you enjoy reading financial reports? The vast majority of the community don’t, so I can understand how you could be under the impression that we, the City of Darwin, are sitting on a pile of dollars.
It’s easy to get the wrong impression, especially since we are often slated in the media for holding onto cash reserves.
Unless someone takes the time to read all our financial reports, rather than just some of them, there can easily be a perception that we have a pile of cash.
Yes, we do have some cash. Some of it is working capital and some is in our reserves.
These are monies that have been collected for a specific purpose and we cannot spend it on any other purpose.
Each reserve that Council has is for a specific purpose.
The majority of money in restricted reserves is in the Car Parking Shortfall Levy and the Car Parking rate. These are a levy that developers pay if they build a building that does not have the required amount of car parks.
For each car park short, the developer is required to pay half the cost of an equivalent car park to be built by Council. That’s why it’s called a Car Parking Shortfall.
And here is the stinger. The contribution plan specifies that the car park is to be built on the Cavanagh St car park. Further, it needs to be an 800 bay car park. So at the moment the cost of a carpark is roughly $45,000 per bay. We collect approximately $23,000 from the developer and so it takes two payments to collect enough for one bay.
To build a simple parking garage like the one on Smith St called Chinatown Carpark will cost around $38 million.
Currently the balance of the two restricted reserves put aside for this purpose is around $26 million. So we are almost there and in fact, it is in our long term financial plan to commence the project in 2018/2019 financial year.
Waste Management Reserve
We run the Shoal Bay Waste Management Facility. While there is a considerable amount of time to go before it closes up, we do need to be making provision for the remediation of the site for up to 20 years before the closing date.
Once the site is closed there will be no income to manage it. Conservatively this could be an ongoing cost of about $8 million in today’s terms. So we do have to be making some provision for that eventuality.
Internal Borrowing Policy
For the last couple of years we have chosen to institute an internal borrowing policy. This allows us to borrow from the reserves to undertake major projects.
Two of these projects are the Nightcliff Foreshore Café and Leachate Management Work at Shoal Bay Waste Management Facility. This is good use of the reserves as it allows us to undertake projects without increasing rates to cover the borrowings. Both these projects pay back the loan with interest.
Statement of Reserves
Council receives a Quarterly Statement of Reserves. This is a part of the financial reporting and is a matter of public record. Anyone can check our quarterly financial statements on our website.
Unlike other levels of Government, Council is legislatively restricted from bringing in a deficit budget.
As we are moving towards our budget announcement, it is worth noting that the City of Darwin has also worked with a principle of low debt and this means that we need to ensure that we are not spending money we do not have.
If you have any questions about the financial aspects of the City of Darwin, I welcome you to contact me.