INGRID WALTHAM is deputy mayor of Fremantle. In this week’s THINKING ALLOWED she explains why Fremantle council’s financial health index took a bit of a tumble in 2015/16.
IF you’re a fan of the Hitchhiker’s Guide to the Galaxy, you’ll know that the number 42 is the answer to the ultimate question of life, the universe and everything.
Harry Potter discovers he’s a wizard on page 42 of The Philosopher’s Stone. The Doctor Who episode entitled “42” lasts for 42 minutes. Titanic was travelling at 42km/hour when it collided with an iceberg. Elvis Presley died at the age of 42. And in The X Files, Fox Mulder lived in Apartment 42. Conspiracy theorists love that number!
There are also a few theories around why the city of Fremantle’s Financial Health Index fell last financial year to a rating of 42. Given the significance some people around town have given this number, it is important to step back, take a breath and think about what it really means.
According to the state government’s ‘My Council’ website, the FHI “is a measurement of a local government’s overall financial health. (It is) calculated from seven financial ratios…(and) awards a score out of 10 for each financial ratio. An FHI of 70 and above indicates sound financial health.”.
For the 2014/15 financial year, Fremantle’s FHI was a healthy 78. In the latest financial year 2016/17, soon-to-be confirmed audited figures support an even healthier 85.
So what happened in 2015/16?
Some of the dip was a process anomaly. A change in accounting methodology occurred in June 2016 that resulted in overheads being reassigned from capital costs to operating costs, giving the impression of a significant and inexplicable operating cost increase but which had no net effect on the city’s cash position.
Some of it was about timing—as part of the accounting standards requirement for a revaluation every three years, a book write-down occurred of some assets for the city and the city’s partnership in the Southern Metropolitan Regional Council.
Also, the city was unable to provide figures for one of the financial ratios, so naturally scored poorly on that section. This has since been rectified.
Now the city—with almost $566 million on its asset sheets—is reinvesting into infrastructure that will take us into the 21st century.
Kings Square will be home to an exciting new civic building with amenities such as a world-class library, over 55’s home, community hub, meeting rooms, toddlers’ playground, public toilets and change facilities and much more, that will benefit the entire community.
The new civic building and public realm will be one that befits Fremantle’s position as Perth’s second city and be something we can all be proud of (as opposed to the current building, which for years has struggled with concrete cancer, asbestos, lack of universal access and decent community meeting rooms, poorly designed office space and a lack of openness to the public).
This is the most pro-business and pro-economic development council this century.
We are about to undertake the biggest transformation in a generation, and as with any major investment, there will be some belt tightening and a couple of lean years before the benefits and operating surpluses start to kick in. But this is a significant, long-term project and that is to be expected.
The city’s draft 10-year financial plan demonstrates that our peak debt will remain within WA treasury policy limits and all debt could be retired and reserves reinstated within 10 years.
This is a conservative forecast, and can be achieved with rate increases maintained at CPI.
In my six years on council, I have only ever witnessed robust, sound, transparent and accountable financial governance. No audit has ever indicated any significant issues with the city’s financial viability.
This week, council formally received the report from the city’s external auditor Moore Stephens, which included the forward estimate of the FHI score of 85.
So let’s get rid of that conspiratorial number 42 once and for all, and look ahead to a revitalised and confident economy and an exciting future for the heart of this wonderful city!