2020/21 Draft Annual Budget / Business Plan
Council has recently endorsed its 2020/21 Draft Budget for the purpose of public consultation, and we welcome community feedback regarding it.
Whilst the Council would normally be seeking to adopt its Budget before now, our extensive consideration over recent months of a suite of financial relief measures to help soften the economic and financial impact of the COVID-19 pandemic on our community, has meant that our 2020/21 Budget will not be adopted until late August 2020.
Like many Councils’, our immediate initial financial relief measure in early April 2020 was to provide the capability for ratepayers, who have been facing financial hardship as a direct consequence of the COVID-19 pandemic, to defer their Rates payments for a period of 6 months. At the same time, Council also decided to defer various rent payments due from commercial tenants and to defer lease/licence fees for local sporting clubs and community groups.
Given the deepening economic and financial crisis that has unfolded since that time, in May 2020 Council extended its financial relief measures to waiving (instead of deferring) various commercial rents (for periods of 3-6 months), waiving lease/licence fees for sporting clubs and community groups (for 6 months), and deferring community loan repayments from local sporting clubs for 12 months.
Importantly, though, Council is proposing to now provide financial rates relief within its draft 2020/21 Budget for those ratepayers, both commercial and residential, who are experiencing financial hardship as a direct consequence of the COVID-19 pandemic. The proposal included in our draft 2020/21 Budget document, currently out for public consultation, is that commercial and residential ratepayers, upon application and subject to certain eligibility criteria being met, can receive up to a 25% ‘one-off’ reduction of their 2020/21 General rates payable. The proposed eligibility criteria is as follows:
Rate reduction criteria - Residential ratepayers:
- Ratepayer is receiving Federal Government JobKeeper payment; OR
- The Ratepayer has been made unemployed or underemployed as a result of COVID-19, and their income has reduced by greater than 30% for the 3 month period April-June 2020 (subject to independent evidence being received, e.g. from employer); AND
- The property the Ratepayer is claiming a General Rates reduction for is their principal place of residence.
Rate reduction criteria - Commercial ratepayers:
- Business providing a Statement from a Registered Accountant that their profitability has reduced by greater than 30% for the 3 month period April-June 2020; AND
- Business eligible to receive, or is receiving, Federal Government JobKeeper payments; OR
- Business had to close their doors (as a result of Commissioner of Police direction of 22 March 2020).
(The proposed eligibility criteria for commercial ratepayers has been developed in conjunction with the Gawler Business Development Group, who will be able to facilitate businesses obtaining an independent Statement from a Registered Accountant, if such assistance is needed)
The proposed rate reductions to be provided, upon application, are in consideration of the fact that the financial impact of the pandemic on businesses and individuals has varied significantly – ranging from businesses who had to close their doors to trade (such as hotels), to businesses who have anecdotally successfully traded through the crisis. Similar disparities also exist at an individual level.
The Gawler Council is one of only a few Councils who are proposing genuine ‘one-off’ rates reductions of this nature – based on a reduction of up to 25% in General rates, this would translate to up to a $400 reduction for the average residential ratepayer who qualifies, whereas for a major business which may qualify, like a hotel, this could mean a rates reduction of over $5,000 (value of reductions will naturally be dependent on individual property valuation).
Council is proposing to fund the $530,000 General Rates reduction funding pool for eligible ratepayers via the application of a modest 2.4% increase (inclusive of property valuation adjustments) in General Rate revenue from existing ratepayers, such that Council’s net General Rate revenue increase from existing ratepayers will be 0%. A 2.4% increase for the average residential ratepayer would translate to an increase of $0.75 per week ($39) in their General Rates.
Some other Councils are alternatively proposing to not increase their General Rate revenue across the board (i.e. they are not proposing any rate reductions to ratepayers experiencing financial hardship as a consequence of the pandemic), or they are electing to ‘freeze’ their Rate-in-the-$ which is used to calculate your rates (which does not take into account any increases in individual property valuations). Thus, in this scenario, if your property valuation increases by 3% then you will invariably incur a 3% increase in General Rates.
Economic Stimulus Package:
As part of its draft Budget, Council is also proposing a $2m Economic Stimulus package, including a series of projects and initiatives designed to achieve local employment / local supplier engagement outcomes.
One of the initiatives Council is particularly excited about is a proposed $200,000 grants scheme to local sporting clubs, incorporating a $40,000 grant to each of the four major sporting precincts (i.e. Gawler Central, Gawler South, Karbeethan Reserve, and Willaston). Each Club will need to provide Council with a list of projects it wishes to undertake, with the expectation that such projects will be able to facilitate local employment / local suppliers’ utilisation – we believe this scheme will assist sporting clubs who have also been substantially impacted by the COVID-19 pandemic.
Financial impact on Council:
These proposed financial relief measures in these extraordinary times will mean that Council will incur a ‘one-off’ operating deficit in the order of $1.7m, and increased short-term loan borrowings. Council notes that its external borrowing rates with the Local Government Finance Authority remain at all-time lows (currently 2.2%) – indeed, $2.9m of our borrowings will only incur an interest rate of 0.75% off the market rate over the next three years, meaning this component of our debt will only attract a current interest rate of 1.45%. Such low borrowing rates will minimise the additional interest expense incurred by Council as a result of the increased debt due to COVID-19 financial relief measures.
A copy of the Council’s draft 2020/21 Annual Budget and Business Plan can be viewed now, with further information provided on the Your Voice Public Consultation page.
Feedback comments are invited as follows: