Reinstate Sound Financial Management
Storm clouds are brewing on Fremantle’s finances:
- Council voted to raise rates by 3.95% for Financial Year 2021/22
- Admin Centre debt has blown out to $20 million
- Services have been slashed while infrastructure decays
- $70 million of investment properties sold
- Cash squandered and property income lost
- Major decisions made in secrecy
- Big property sales occurring without public tenders
2016 Auditor’s Warning:
Fremantle Council were warned by their auditors in 2016 that trouble was brewing with the city’s finances, and that Council needed a change of financial direction to address these concerns.
“The auditor suggested that Council and management need to consider ways to improve the operating position either via increasing revenue or by decreasing expenditure (or a combination of both).“
Fremantle Council did the exact opposite – they sold off several more income producing investment properties and spent $50 million on a new Admin Building they did not need and could not afford.
It is hardly surprising that the city’s finances have deteriorated even further.
2020 Audit warnings on Fremantle’s finances
The Audit of the City’s financial statements for the year ended 30 June 2020 found that :
(1) the Debt Service Cover Ratio, which is a measure of a local government’s ability to service its debt, has been below the Department of Local Govt, Sport & Cultural Industries (DLGSCI) standard for the last 3 financial years which in the Auditor’s opinion indicates a ‘significant adverse trend.’ Given the new $20 million debt incurred by Council for the new Admin Centre, a serious question is raised – can the Council produce enough money to pay its debts?
(2) the Operating Surplus Ratio, which is a measure of a local government’s ability to cover its operational costs and have revenues available, has been below the Department of Local Govt, Sport & Cultural Industries (DLGSCI) standard for the last 3 financial years which in the Auditor’s opinion indicates a ‘significant adverse trend.’
(3) 2 matters of non-compliance with legislation were identified in the Audit.
Adele says “Fremantle needs to focus on getting its finances in order as a matter of urgency.”
Businesses have left in droves since 2010
The Retail Model Plan commissioned by Fremantle in 2010 (see Freo Issues Retail for link) found that there were 600+ businesses and offices in the Fremantle CBD precinct and that the vacancy rate was at only 7%. Since then, we have lost key retailers like Myers and Woolworths, with only Target and Coles remaining. Vacancy rates have dramatically increased to close to 40% and one only has to look at all of the ‘For Lease’ signs in the CBD to be alarmed.
We need to understand the cost of delivering services at the City and the effectiveness of the services so that we can make the best investment decisions. We need to start looking outwards for best practice models to see how effective Councils are managed. Benchmarking performance is key to this challenge. Click link below for KPMG’ s Report ‘Benchmarking City Services. Finding the Courage to Improve.’
Where has the money gone
This is most alarming considering the fact that Council has raised more than $44 million by selling the City’s investment properties in recent years – Where has the money gone?