Information Session for Stakeholders

1. Information Session for Stakeholders The impact of the potential secession of Sunbury from Hume City Council For Local Government Victoria 6 June 2013

2. Agenda • Stage 1: Hume City Council service provision in Sunbury • Background and scope of Stage 1 report • Defining the potential Sunbury municipality • Process • Results • Stage 2: Estimate of the financial impact of secession • Attributes of hypothetical municipalities – Sunbury and Hume without Sunbury (HWS) • Scope of current work • One-off costs of establishing two separate councils • Methodology for forecast revenue and expenditure • Methodology for balance sheet allocation of assets and liabilities • Estimates of additional ongoing costs • Testing estimates with comparator councils

3. Stage 1: Hume City Council service provision in Sunbury

4. Stage 1: Hume City Council service provision in SunburyBackground and scope of Stage 1 report • The overarching premise of the report was that residents with similar characteristics should, as far as possible, receive access to similar levels of services irrespective of their location within the municipality • The report: • compared the level of local government services currently delivered to the Sunbury community to the rest of the municipality; • focused on those services where Hume City Council determines service levels (ie not Commonwealth/State specified services); and • was indicative and based on best available data

5. Stage 1: Hume City Council service provision in Sunbury Defining the potential Sunbury municipality Defining ‘Sunbury’ • Compared the three ABS Statistical Local Areas (SLAs) in Hume City Council • Sunbury SLA was used as the proxy for the Sunbury municipality (Sunbury) • Remaining areas are referred to as ‘Hume Without Sunbury’ (HWS) The Deep Creek boundary reflects a recognised geographical feature and a ‘natural’/accepted boundary

6. Stage 1: Hume City Council service provision in SunburyProcess Step 1 Identify possible infrastructure and services to be included • 88 separate areas divided into six categories Step 2 Develop and apply criteria for inclusion or exclusion of infrastructure and services • Level of government? • Importance in budget? • Resident views on relative importance of service? Step 3 Review data availability • Information available (Hume City Council, ID Consultants, KPMG Demographics, ABS and the Department) Step 4 Develop and test draft indicators • Infrastructure • Family and Community Services • Customer service • Parks and Open Space • Recreation • Planning Step 5 Analyse data (collect and prepare draft indicators) • Analysis limited by data currently available at the SLA level

7. Stage 1: Hume City Council service provision in SunburyResults

8. Stage 1: Hume City Council service provision in SunburyResults (continued) The full report can be found on the on the website of the Department of Transport, Planning and Local Infrastructure (the Department) under News and Events, Hume Council sets high level of Sunbury services (21 February 2013) (http://www.dpcd.vic.gov.au/localgovernment/news-and-events/news/hume-council-sets-high-level-of-sunbury-services)

9. Stage 2:Estimate of the financial impact of secession

10. Stage 2: Estimate of the financial impact of secession Attributes of hypothetical municipalities – Sunbury and HWS Stage 2: Estimate of the financial impact of secession Attributes of hypothetical municipalities – Sunbury and HWS • Hume City Council currently has the scale of a large metropolitan municipality (5th largest in Victoria) • HWS would still have the scale of a large metropolitan municipality (~13th) • Sunbury would be a relatively small (~ 43rd out of 79) municipality Roads • Hume City Council currently has 77 per cent urban and 23 per cent rural roads • Sunbury would have 51 per cent urban and 49 per cent rural roads

11. Stage 2: Estimate of the financial impact of secessionScope of current work One-off costs • Estimates of one-off cost of separation, such as establishment costs and transition costs Ongoing income and expenditure • High-level cost estimates for two hypothetical entities over a four-year period from 1 July 2012 to 30 June 2016 • These ongoing estimates of income and expenditure are based on overarching assumptions that: • the hypothetical municipalities will continue to deliver the same levels and standards of service; • the hypothetical municipalities will not be significantly more or less efficient than Hume City Council or other similar municipalities; and • the reserves will remain at a level sufficient to maintain the capital works program These estimates will give an indication of the ‘order of magnitude’ of the net cost impacts of separation in order to inform the poll • It is not designed to provide: • a detailed implementation plan or roadmap to effect a separation; • a feasibility study into setting up an actual Sunbury municipality; or • a study into running a sustainable Sunbury municipality or different methods of service provision

12. Stage 2: Estimate of the financial impact of secession Estimates of additional ongoing costs Total estimated one-off costs adjusted to 2013 figures ($million) • Includes – management; legal and accounting advice; corporate identity and communications; information systems; and human resources costs

13. Stage 2: Estimate of the financial impact of secession Methodology for forecast revenue and expenditure • Extract 2011-12 income and expenditure from audited accounts • Identify the main drivers of cost (such as population growth, FTE numbers and salary inflation) and revenue • Where operating costs or revenues are clearly related to location based on infrastructure or service (e.g. running costs of a library) they have been allocated according to location • Other costs were allocated between Sunbury and HWS on the basis of the main drivers of cost. This is mainly population – resulting in a 20:80 split • With the exception of the Victoria Grants Commission grants, it has been assumed that there will be no change in revenue from the separation • An indicative general purpose grant for the hypothetical entities will be provided by the Victoria Grants Commission for inclusion in the model

14. Stage 2: Estimate of the financial impact of secession Methodology for balance sheet allocation of assets and liabilities • Utilising HCC’s audited balance sheet as at 30 June 2012 to create an indicative opening balance sheet for each entity • Operating assets will be allocated to the hypothetical municipality in which they are geographically located • Other assets and liabilities, including fixed assets which are not held for the purposes of service delivery, have been apportioned (based on net book value) between the entities in line with their comparative size

15. Stage 2: Estimate of the financial impact of secession Estimates of additional ongoing costs Additional costs Unit cost of delivery • Creating two entities out of one will result in additional on-going costs. These consist of: • Fixed costs, including: • a management structure for each municipality (e.g. additional councillors, CEO, management structure); • infrastructure (e.g. IT systems, municipal offices); and • sufficient operating assets to deliver services within each geographic location (e.g. additional waste collection trucks); • Increase in unit cost of delivery (or cost per head of population) caused by the hypothetical municipalities change in attributes • Total cost of delivery for Sunbury, and some major service delivery areas, will be compared to those of other municipalities with similar attributes, to ensure the indicative estimates are reasonable and realistic • Six councils have been selected for comparison with the potential Sunbury municipality • Detailed accounts have been received from the Victorian Grants Commission to facilitate comparison • Warnambool and Wodonga have been identified as the closest comparators

16. Stage 2: Estimate of the financial impact of secession Testing estimates with comparator councils