“This budget is based on sound financial sustainability principles and employs a strategy to return Council’s operating result to a balanced budget within the shortest possible time.However there appears to be a not insignificant deficit with operating expenditure at $38.78m well in excess of operating revenue at $33.71m. This compares with a balanced budget for the remaining Cairns Regional Council which hiked rates by 1.5%. So it leaves a Douglas resident with a comparable cost disadvantage of more than 3% on council rates relative to Cairns.
Douglas claim the increase is significantly less than the increase predicted by QTC. I don't claim any expertise in council budget accounting but would have thought a comparison would depend on any assumptions implicit in the QTC forecasts? A balanced budget would require a rate increase more in line with their numbers.
The budget outlook provided over the next two years indicates a reduced deficit but this is based on further rate increases of 5.2% p.a. while the depreciation expense is held unchanged? In 2016/2017 the operating deficit will still be more than 7% of revenue!
Funding for depreciation is one of the more significant council operating expenses at 25% of the budget for Douglas and 33% for Cairns. There appears to be some anticipation of financial engineering on this to assist the deficit:
“With depreciation a significant operating expense, Council is working with the State Government to devise new methods which lessen the burden on ratepayers to fund it and we should start to see the results of this in our next Budget.”I will await further details on that with some interest and in the meantime withhold judgement on the sustainability of Douglas finances and the validity of the QTC analysis.
Update: Pete Faulkner has also posted comments and analysis at the new Conus website: De-amalgamated council budget