Preparing your council’s Fit for the Future proposal Templates and Self-Assessment Tool November 2014

Agenda Fit for the Future overview Understanding the Criteria Choosing your Template Completing the Templates Key issues and questions

Where have we come from? The journey so far… Destination 2036 2011 2012 2013 2014 Today Destination 2036 Councils came together to plan how local government could meet the challenges of the future. TCorp Sustainability Review Conducted a comprehensive, independent analysis into the financial sustainability of every council in NSW. Fit for the Future – Local Government Will lay the foundations for a stronger system of local government and stronger local communities. Local Government Infrastructure Audit Provided information in relation to the infrastructure backlog in NSW and identified infrastructure needs by area and asset type. Independent Local Government Review Conducted wide consultation to develop key recommendations regarding local government structures, governance models and boundary changes. Local Government Acts Taskforce Looked at ways to modernise legislation, to ensure that it would meet the future needs of councils and communities.

Fit for the Future councils Where are we going? Fit for the Future councils Scale and capacity Financially sustainable Efficient Effective services and infrastructure

Total reform package Legislative reform Fit for the Future Proposals Cutting red tape, streamlining procurement. A new Local Government Act from 2016 Fit for the Future Proposals Councils review structural options and develop improvement plans by June 2015 Financial reforms A new State borrowing facility, rating review and FAGs redistribution Joint Organisations New council organisations for Regional NSW. Pilots begin February 2015. Roll-out to all regions by September 2016 State Government support Help with preparing proposals, support for merging councils, seed funding for Joint Organisations, Small Councils Innovation Fund

What’s on offer for councils? $10.5m - $22.5m for Sydney council mergers $5m - $13.5m for regional & rural council mergers $13m state wide for Transition Committees $4 million Small Councils Innovation fund

Progress to date . . . September – October 2014 November – December 2014 Program launch Facilitators available Regional workshops Joint Organisations EOI Templates released Rural Council workshops JO Pilots announced, design begins Regional visits Far West forum Technical Panel available

Assess scale and capacity Make the transition, access the benefits What are we asking councils to do? Assess scale and capacity Prepare a Proposal Make the transition, access the benefits

Fit for the Future criteria Sustainability Operating Performance Ratio Own Source Revenue Building & Infrastructure Asset Renewal Ratio Scale and Capacity Use the Independent Panel recommendations as a starting point Efficiency Real Operating Expenditure per capita Service & Infrastructure Management Infrastructure Backlog Ratio Asset Maintenance Ratio Debt Service Ratio .

How were the criteria and measures developed? TCorp analysis & recommendations Accounting Code Infrastructure audit FFTF Criteria Independent Panel research and recommendations Some TCorp calculations refined following input from LG sector Some criteria refined following review and recommendations from IPART Input from OLG and specialist consultants

Why were these measures chosen? Sustainability Operating Performance Ratio Core measure of financial sustainability – indicates council’s capacity to meet ongoing operating expenditure requirements Benchmark: TCorp recommended at least break-even over the longer term – ongoing deficits are unsustainable Own Source Revenue Councils with higher own source revenue have greater ability to control their own operating performance and financial sustainability. Benchmark: TCorp recommended 60% as the minimum level to ensure councils have sufficient flexibility to manage external shocks & challenges Building & Infrastructure Asset Renewal Ratio Measures whether council’s assets are deteriorating faster than they are being renewed – indicator of whether council’s infrastructure backlog is likely to increase. Benchmark: Ratio of greater than 100% ensures community assets are managed in a sustainable way.

Why were these measures chosen? Infrastructure and service management Infrastructure Backlog Ratio Measures how effectively councils are managing their infrastructure. Increasing backlogs may affect council’s ability to provide services and remain sustainable. Benchmark: The benchmark of less than 2% ensures infrastructure backlogs are at manageable levels Asset Maintenance Ratio Measures whether council is spending enough on maintaining its assets to avoid increasing its infrastructure backlog. Benchmark: A ratio of greater than 100% ensures council’s infrastructure position is not deteriorating Debt Service Ratio Indicates whether council is using debt wisely to share the life-long cost of assets and avoid excessive rate increases. Benchmark: It is appropriate that councils should carry some level of debt to ensure inter-generational equity in funding major infrastructure. Efficiency Real Operating Expenditure per capita Indicates how well councils are utilising economies of scale and managing service levels to achieve efficiencies. Benchmark: Focuses on each council’s individual performance over time, rather than comparing with others. Decline in real expenditure per capita indicates improved efficiency (all things being equal).

Becoming Fit for the Future . . . Becoming Fit for the Future is a process Involves asking where are we now, how can we improve, what will success look like? Some councils will take longer than others to improve their situation Your Fit for the Future Proposal shows how you will move towards this goal Once your Proposal is assessed as Fit for the Future, you will have access to a range of benefits

The Fit for the Future toolkit Self-Assessment Tool Template 1 Council Merger Proposal Council Improvement Proposal (Existing structure) Template 2 Rural Council Proposal (to be released following further development) Template 3 Toolkit available at: www.fitforthefuture.nsw.gov.au

Deciding which template to use . . .

Deciding on Scale and Capacity . . . The Panel’s final report is the starting point for all Fit for the Future proposals The Independent Panel carried out extensive research and consultation on the subject of scale and capacity – no “one size fits all” approach. It is up to each council to decide whether it has sufficient scale and capacity, based on the Panel’s recommendations and your own assessment If the Panel recommended a merger for your council, this should be the first option that you consider You do not have to adopt the Panel’s exact recommendations, but your proposal should demonstrate that your council has sufficient scale and capacity

How can we improve our situation? How do we measure success? Completing the template The Templates all follow the same basic process . . . Where are we now? How can we improve our situation? How do we measure success? Does our council have the appropriate scale and capacity? (Use the Panel’s report as a starting point) How are we performing against the other FFTF Criteria? (Use the Self-Assessment Tool to review your performance) What other challenges do we face? (Use your IP&R documents) Choose the appropriate pathway (Merger? Rural Council? Performance Improvement Plan?) Prepare a plan Your plan will vary, depending on the Template chosen Model the outcomes Different levels of modelling required, depending on the Template chosen. How long will it take you to achieve the benchmarks?

Template 1 Section 1 – The proposed merger Section 2 – The outcome Identify the agreed merger and any boundary changes Explain how it will provide scale and capacity (if different from Panel recommendation) Section 2 – The outcome How will the merger help meet priorities and challenges? Identify the costs and benefits Section 3 – Community involvement How has the community been informed? What has the response been? Section 4 – Achieving the benchmarks Estimate the expected improvement in performance Only complete if the merger is agreed

Template 2 Section 1 – About your proposal Summarise your proposal Explain how you meet the scale and capacity criteria Section 2 – Current position Provide an overview of your council and community – key features, challenges, opportunities Identify your current and forecast performance against the benchmarks and explain why Section 3 – Becoming Fit for the Future Identify strategies and outcomes (including ones not implemented), and explain assumptions Prepare an action plan Section 4 – Expected outcomes Identify if the strategies and actions will help you meet the benchmarks by 2019/20 Section 5 – Implementation Explain how you will put your plan into action Only complete if your council has sufficient scale and capacity and you do not intend to merge or become a Rural Council

Meeting the benchmarks There may be reasons why your council finds it difficult to meet the benchmarks – the Template provides room to explain your situation You do not have to meet all the benchmarks by 2020 to become Fit for the Future – but you need to have a plan in place to continue working towards these goals. Some councils may not be able to achieve the own source revenue targets – but you must show that you are trying to improve your situation

Expert assistance with mergers Help with your proposal Relationship Manager Expert assistance with mergers ONE STOP SHOP Technical support Facilitators A single point of contact and assistance

Next steps. . . January – July 2015 November 2015 – September 2016 Template 3 available Template 3 workshops JO Pilots begin Expert Panel appointed FFTF proposals due 30 June January – July 2015 Expert Panel’s recommendations Councils begin implementation JO Pilots review Merger transitions in progress JOs rolled out across regional NSW November 2015 – September 2016

Questions… Feedback form