MELVILLE council is sitting on a $171 million pot of gold after doubling its investment reserves over the last decade.
While homeowners have only recently emerged from a period of historically low interest rates, the council has been squirrelling enough of their rates away each year to have earned the reserves a compounded annual return of at least 7 per cent.
CEO Marten Tieleman confirmed the City’s financial investments had increased from $80.5m at June 30, 2013, to $171m at the end of June this years.
“Of the 171m in reserves, approximately $105m is reserved for asset management,” Mr Tieleman said.
“In the last 10 years, WA construction indices have increased by approximately 30 per cent and the City is responsible for maintaining approximately $1.5b of built assets.
“Reserves are an important part of the City’s long-term financial planning and ensure we have enough funds to maintain and renew assets for our growing population into the future.”
Mr Tieleman said the investments grow through a combination of returns and being topped up with municipal rates, and are drawn on “heavily” each year for capital works, programs and projects and to smooth out big-ticket budget items.
“We have a strong focus on asset management and intergenerational equity, ensuring assets are maintained and renewed without placing an unfair burden on future ratepayers.
“A major review of the Long Term Financial Plan which guides our financial sustainability is currently underway and will demonstrate the high demand for these funds to meet the needs of our community and manage and maintain assets.”
The council’s latest Corporate Business Plan says “priority number one” for its investments is about diversifying the revenue base to offset the increasing/changing demands on the rates.
Given the doubling of rates, the Chook was a little surprised by mayoral candidate Russell Aubrey’s election pitch to voters, which claimed the city’s investments had fallen by $100 million since he was mayor. It was also picked up by the Melville Residents and Ratepayers Association which used question time at this week’s agenda briefing forum to try and wedge mayor George Gear between defending the city’s finances and calling out his opponent for bending the truth.
Mr Aubrey says the brevity needed for his election material meant he’d used the over-arching term “investments” and he’d not the space to explain that he was including the City’s asset base in his assumptions.
He took aim at the current council’s decision to turn three sites in the Canning Bridge precinct into open spaces, when they’d be purchased with the intention of being developed.
“I am advised these land holdings had a combined commercial value of approximately $100m prior to the council decision.
“It could be said that each ratepayer had an interest of approximately $1360 in this land with a potential return of $4m per annum to reduce rates, yet the council never consulted ratepayers on its intended rezoning, which effectively turn its asset value into a liability.
“I know of no other local government that has given away such a valuable asset for the benefit of so few people.”
Mr Aubrey also lamented the “abandonment” of the wave park proposed for Alfred Cove, saying it cost the council $1m in additional rates every year which had a noticeable impact on the city’s score on the local government department’s Financial Health Indicator.
by STEVE GRANT