We impact the City’s Budget Cost Impact Analysis!
We offer approximated knowledge and hope it gives food for thought!
Recently, one of the most powerful heads of council in Perth remarked, “… a CEO’s role is never safe!!!”.
Nor should it be if the City cannot produce value for money. Canning’s culture of in-housing services is antiquated, weighing us down financially, and the City tends to appeal to the public emotionally, like how it wants to “keep the services our community deserves” to justify what seems to be an unwillingness to be more reflexive to rising cost pressures.
In this blog we look at:
Staff enterprise agreement
How staff/Commissioners tried to shape incoming Council
Powers of Mayor/Councillors
The Budget Cost Impact Analysis put in place to justify rate rises
The cost of Sustainability
The final irony…
The area in which fear of outsourcing has been most prominent is that of aged (and disability) care provision – if we outsource it quality and range of services will fall! It certainly has that sector of community concerned, but the City itself may have contributed most of all to the unsustainable state* of Care Services with the decision to include aged care workers in the massive enterprise bargaining agreement of 2013 (staff received 13.25% pay rises in 18 months). That decision, alone, given this area of operation is believed to have around 200 paid staff, presumably means this state and federally funded program is now outright subsidised by ratepayers.
(The EBA of 2013 included not only pay rises, study leave funding and assistance, merit pay opportunities, and training, it gave all staff an additional $1000 “TAFE” voucher. On top of this we find, courtesy of the City trying to win a category in WA Training Awards [it did not] that we are funding scholarships for staff too? We have 1200 staff, a fortune was splashed and now its our new baseline from which the next EBA, due January 2016, springs forth)
Councils’ sources of revenue are limited: rates, fees and charges, increasingly restrained grants (tied and untied – councils have been using untied grants to fund wages for years), interest on investments – although too much interest can affect grant allocation. They can generate very little revenue otherwise, and its unlikely the business sector would sit quietly and let the State allow councils to compete against them for services, using in-house equipment and staff.
What to do, to ensure Canning can keep going for another 172 years (reference to its inception)?
There’s been a few indicators the Commissioners and staff have gotten together to put out a sense of how the new Council should behave, and what they should do.
First we saw the attempt to get the councillors to view themselves more as Board Members (the language of local govt reform)
Then a video was compiled, featuring a lovely old former Mayor of another council, explaining the Council had “no authority”
Along the way Chairman Commissioner Cole attached a statement to this year’s budget brochure suggesting the next Council go along with the apparent bid to get an additional [$6m?] out of ratepayers to help Canning’s “big ship”*
Now, at the final Council Meeting featuring Commissioners, a “Budget Cost Impact Analysis” has come out, which presumably is what they and the staff would like the new Council to absorb, so as not to question that rate rise too much.
However, Canning’s first council in years has the opportunity to take the City in a whole new direction, financially, and set new priorities, with the CEO’s contract coming up for renewal in June. New start, new council, new priorities, new CEO holds the promise of a more affordable future for Canning than what we are seeing today, and perhaps we can get newer blood in to the executive. Its staling and/or a little too predictably compiled, ie, some Directors have been there for years one way or another, or don’t have degrees, or are planners but now placed in charge of the new business unit, Economic Development, moving from council to council– doesn’t seem to be a lot of private enterprise experience amongst them, certainly not recent, and when our Director of Corporate Services moved to take up the CEO of City of Albany position recently, the former Deputy CEO there, also its Corporate Services Director, ended up with us, in more or less the same role…. Time to throw open the doors, perhaps?
And before we go any further, does the Council have power? Of course:
- Council appoints the CEO and sets the strategic direction
- It controls the supply of money
- Policies, delegated authorities, etc, as we understand it, come up for review annually, and that’s an opportunity to bring in change and momentum.
So, the City has just released a “Budget Cost Impact Analysis” HERE (see pages 29-38 inclusive)
The Analysis was brought in for some sort of acknowledgement by the Commissioners, at their last official Ordinary Council Meeting, as follows:
“Requests the Chief Executive Officer [prepare] a report…. on all significant cost increases imposed on the City of Canning annualised over the past 10 years, including those costs imposed by agencies of the State Government, which impact on the overall costs of sustaining the level of service that the community enjoys and seeks to have maintained”.
In what’s become a standard pitch under this administration, the City basically falls back on how it’s just a little guy, struggling away, the big bad State Govt/Feds make life Hell when its all meant to be about the community in the end. [The quick version].
One of the Commissioners suggested it be sent to the Minister, etc but we can’t think why – it is about as general as its gets. That’s why we’re having a shot at it now!
We’ve seen all this before – remember Fight For Canning? The rushed out campaign to whip up community anger to cover up the poor handling of Canning’s potential opportunity in the reform process? In proposing Canning be merged with Gosnells, as former Commissioner Linton Reynolds and his Chief Advisor, CEO Lyn Russell committed us too when other councils fought to remain independent, Canning faced being ceased. So the City pumped out, more or less, the above sentiment and more:
- if we are parcelled off to other councils our rates would shoot up
- our aged care services would not be sustained
- our facilities could be vulnerable…
- Oh, and the City was financially strong.
A year later and it seems those comments were hypocritical to say the least – even to the point where it was burbled the huge pay rises accorded to staff were because the deal was struck at a better time. In hindsight, that was when now? The EBA was finally agreed to retrospectively, circa first quarter of 2014, and had to be backdated, all that money, all those benefits, to the beginning of 2013.
As for rates, they were considerably higher under Commissioners, then they jumped – and yet our City’s own costs seem to keep rising….way before you get to the “impact” of external pressures on its budget, and still the City wants another big injection of cash next year to keep up what appears a bloated, inefficient entity, for all the award ceremonies the CEO keeps entering us in to attempt to show otherwise.
Our aged care service costs are now unsustainable, and the millions the staff pushed through on facilities, even though reform was imminent, is most likely part of the reason for our financially strained state today.
Today, we are going to put out at a few indicators of some of the inefficiencies, and/or questionable financial decisions undertaken, or enduring. Naturally it can only be indicative, but it may prompt thoughts about getting more information and cost/benefit analyses on a few things at least 🙂
(It should be noted that former councillors called for a fully independent audit of the City as early as 2013, and now all councils may face auditing by Colin Murphy, the Auditor General, whose findings are reported to Parliament. Canning would most likely be one of the first to receive his steely gaze. However, that will not occur in the near future as this requires legislative changes to be negotiated, the Auditor General determining resources he would need, etc. It is therefore up to the Council to move to contain our costs, before additional outside factors or agencies do.)
Paging through the Budget Cost Impact Analysis:
Essentially what has happened over time is that Councils have had their substantial subsidies on cost of street lighting lifted, moving them closer to cost reflective pricing (as the State is doing with mums’n’dads). We recall Mike Nahan has disputed some of the claims Canning made about how much its electricity costs have increased (…. as a percentage of the budget?), but that is research for someone else. It should be noted that former Mayor Delle Donne, a 3o year veteran of Western Power, repeatedly encouraged the executive to sub-meter the many streetlights across our enormous local govt area, as we are being billed whether those lights are blown, working properly, or staying on all day long. To our knowledge this advice has never been implemented. The former Council also requested solar panels to bring down costs years ago, but these have only been implemented in the last 18 months. The City has recently advertised its progress in reducing electricity costs significantly, in the local paper, and of its use of a utility revolving fund to have those savings returned to it in order to fund more efficiencies. From the beginning we have felt this fund was not as accountable as it could be, and in fact approached former Commissioner Reynolds about it originally. It is also ludicrous to claim savings while the City internalises a consultant fulltime to watch over these efficiencies, which is very likely to be reducing our 000s of dollars of savings a year in electricity costs by around $100,000 or more. In fact the City may even be about to internalise another consultant on efficiencies, with a slightly differently named position advertised for what appears to be the same job.
Emergency Services Levy (and as at Table 3 of the Budget Cost Impact Analysis)
This is passed directly on to ratepayers and has nothing to do with the City, which receives a fee for collection of the additional levies loaded on to ratepayer statements.
Workforce Labor Costs
This commentary would have to be viewed as generic, but we can create a few cracks to shine some lights in:
- Having to compete with the mining sector is an old chestnut and we can’t see how that relates to how much employees being put on new contracts today are being paid – especially since our blog of yesterday reveals it is not particularly increasing our ability to retain staff.
- We recall it was part of the 2013 Enterprise Agreement to increase employee superannuation to a new high, which is now one per cent above the statutory Superannuation Guarantee Levy, for what is a large staff, many on high salaries.
- While the City persists in retaining a lot of unnecessary services in-house, instead of outsourcing, from (potentially) Care and Disability Services, Waste Services, Community Wellbeing (security patrol), parks/gardens, road works and others, right down to the running of the leisureplexes, we will have a more expensive workforce and rates, fees and charges in one form or another will continue to rise more so than they need to. It will be interesting to see, for instance, how Care Services’ costs can be reined in without affecting service provision, unless the City does outsource or raise fees
- One option available to the new council is to require a new or renewed CEO to review staffing requirements and prune back what is unnecessary – Canning, under CEO Russell, appears to be in-housing many consultants as employees, which essentially means we pay for them year round. This was a practice objected to by the previous council, for just this reason.
- We also seem, at times, to have an employee for everything. Increasingly local councils are saying they have a lot of pressure put on them by the community to provide an ever-widening range of services. Responsible management surely means we can only do so much.
WATC Loan Guarantee
We were at a loss to understand why the loan fee from WATC is even relevant, its so piddling in the scheme of things. Interest rates are in the vicinity of 2%. What’s more significant is what has been whacked on to the loan facility, why and what are its implications:
- Yes, Canning has had to pay $12m in order to leave the troubled SMRC (rubbish processor), because it was costing ratepayers too much (circa $300/year). Our understanding is that this cost remains factored in to our rubbish collection fees, but in several years, once the SMRC debt is paid off, our rates should drop $110 per ratepayer.
- The City made a decision to continue on with putting a geothermal heating system in to the Riverton Leisureplex, even though all indications were that this facility would go on to a council due to absorb us. If that had been the case there was a strong possibility the absorbing council would have sold the facility off, so forcing through this now large debt to ratepayers at that time, as part of several questionable decisions the CEO and Fmr Commissioner Reynolds made at an inappropriate time, could well have resulted in us paying for a huge public benefit to a private operator, with sale proceeds going to the City of Melville. At the time Melville was due to take over the leisureplex there was no sign of any agreement that they would take on the estimated $1.1 to $1.6m in costs we have to pay for the geothermal pump, that grants do not cover. The City of Canning justified this decision at the time by saying they had grants in place, and to not take the option to use those funds would damage the chances of the City getting any further grants for the future. All things considered, however, putting the geothermal pump in could have been deferred. Our understanding is that the energy savings made annually from the pump would go towards its eventual replacement as it is. As at April 2015 the City said whacking the cost of this project on to WATC debt does not need to “presently” occur, however this may change. One to watch, perhaps.
- We are unsure if the new and expensive War Memorial and sound stage in the grounds of the civic centre (we already had a powered sound stage) is money that has had to be borrowed, in addition to the grants it may have received or funded variously from within. The decision to build a new memorial seemed odd in that some in the community complained about parking, access to toilets, seats, etc at the original site at the intersection of Albany Hwy/Manning Road, which would have cost a great deal less to make changes to (the original plan). Ironically, those changes may be necessary still, as our veterans plan to still kick off ceremonies at the original site, then lead a procession down Albany Hwy to the new memorial on the grounds of the City’s main civic centre. As it was, the building contractor collapsed during this project, which ultimately delayed a project Linton Reynolds set up to do, regardless of what would happen to Canning.
Fuel & Petroleum Gas Apparently councils receive some sort of discount for these costs, but we cannot expand further. However, much of what the City is claiming as “Major Cost Drivers”, ie, Vehicle rego, water, and fuels are a cost of living reality and as with all of us adjustments have to be made to accommodate rising costs (such as outsourcing quite a few services for the most competitive price possible – our business would be sought after by suppliers, such is the size of our ops), and until that happens cost pressures on various fuels needed in-house presumably are passed directly on to ratepayers.
Financial Assistance Grants The City details that Financial Assistance Grants are to be frozen for the next three years. Let’s see what happens here as this occurred in the Abbott/Hockey era and may not be continued with. However, capping grants or rates (as both flavours of state govt seem to want to do) will leave Councils with the same operational reality: cut back costs to live within means. Overall, however, the cutback in what the City could have expected is only just over $200,000 per year. Today, that’s the cost of two and one bit of employees from Canning’s very large staff load.
Points of interest here:
- Reiterating from earlier – Canning paid $12m to leave the troubled SMRC (rubbish processor), because it was costing ratepayers too much (circa $300/year). Our understanding is that this cost remains factored in to our rubbish collection fees, but in several years, once the SMRC debt is paid off, our rates should drop $110 per ratepayer. Melville and Cockburn continue to take their rubbish to the SMRC facility, and presumably factor in that cost to ratepayers another way.
- One of the reasons, apparently, that Canning’s rates are lower is that as a City it is essentially built out and the majority of what the state requires of us to build to accommodate population growth must therefore now come from infill (ie, roads, civic structure, most facilities already in place). Cockburn and Gosnells, by comparison, have a lot of land still to develop and seeks funds for that. Readers may remember Minister for Local Govt, Tony Simpson, said that one of the reasons Gosnells was to absorb Canning under reform was that it needed our healthy industrial rates base (we have two industrial areas) to help fund that development. The fact that Canning has two industrial areas is one of the reason the former Councils were able to keep our rates as low as they have. Not sure what’s changed today.
Waste Services (separate paragraph in document, below Table 1) Yes, the City does operate its own waste collection service, but the question is why? This is just the sort of service that could be outsourced. We own our rubbish trucks, employ our own garbos, we purchase our own equipment. Depreciation on the trucks alone brings tears to the eyes (apparently bought for around a third of a million each, they are worth very little 5yrs later). Picking up rubbish is…. picking up rubbish – it is hard to see how the service is improved being kept internal in this day and age (and apparently we’ve been doing it since 2003).
Cost of community events
This used to be around $100,000 a year, but now it seems the City is funding (in full or in part) considerably more community activities than ever before – and to some degree losing valuable naming rights, ie, parked alongside Act Belong Commit is somewhat genericizing the event. The City now brings us the Blessing of the River, Carols by Candlelight, News Years Day Fireworks, Friday Night Movies, Canning World Arts Exchange, Canning Music Series, Harmony Day and a Speaker Series, which seems to involve flying people in to some extent, ANZAC Day Blues Concert, WA Day, Canning Arts Awards and NAIDOC week. The recent community perceptions survey indicated the community wanted even more events funded, and we seem to recall the City hired additional staff to facilitate all of this, but it all has a cost, and those dollars have increased significantly for what could be questionable gain.
Rate Capping? What does that mean?
There is another way of looking at rate capping – a sign that we need to live within our means, and in so doing reduce cost pressures on the community. In Canning’s case there does seem to be a lot of room to move, from reducing staff numbers to outsourcing services, ie, we have our own concrete batching plant and the agitator truck that goes with it. Why can’t we outsource for kerbs and crossovers (section of concrete that separates council verges from road)?
Is it costing us $2m a year to maintain our green areas?
Why aren’t we tendering out on parks/gardens’ maintenance and care of our active/passive areas?
The City continues to hire more people, while the real-time reduction of employees levied at us around the issuing of rates earlier this year is low overall (it includes employees hired for a ridiculously expensive “pop up” – see below – that only had an actual life of around seven months). The below is just a sampling of hiring practices, as we have only so much room:
- Why is the City continuing to hire for new positions, ie, Human Resource Partner/more partners who seem to do the job of consultants but, again, we appear to be internalizing? Do we not have a Human Resources Dept? Is the CEO unsure she can contain her staff’s now very high expectations, based on last EBA?
- Why are we paying a 2nd-3rd year uni student pro-rata of $66,000 to work for us one day a week when councils like Freo have an active cadetship program, unpaid but with attribution towards their future careers and producing important documents like its Cycling Plan?
- We seem to engage an enormous amount – and we do mean an ENORMOUS amount – of consultants, quite a few of whom appear to be flown in. At some point, can the executive cope without this?
The cost of “sustainability”(the textbook version)
Sustainability means almost nothing these days. It’s a word splashed over everything, but as part of a whole its tends to fade in significance and value as much of the time we carry on with business as usual… yet Canning has seized on it as though it’s some kind of golden child, when under the previous council the practical advantages of solar panels and geothermalizing our leisureplexes was already being requested (Western Power expert, former Mayor Delle Donne, suggested the city lease its large roof areas out for commercial solar activity, leaving it without eventual liabilities like superseded solar technologies and having to replace the lot in as little as 10 years. In the last 18 months, and over the next six, the City will have paid out circa $600,000 for old business models, own/operate, basically).
However, a truly ridiculous cost has gone in to sustainability concepts at Canning, from a 10 minute long “back to the beginning” video production that tends to grind after the first 30 seconds – but we had to pay for the City’s then City Futures division to make its own videos rather than use a plethora of information out there on open source… but the most breathtakingly expensive, aspirational, one might say misguided, and failed concept the City undertook was the Spice Road Pop Up.
This now defunct project only lasted seven months (and was behind schedule already when it opened), but it cost a screaming fortune, and from some figures we’ve seen in a recent auditor’s document the originally slated cost in the 2014 Budget brochure, City Centre Reserve, Town Square Place Activation of $495,000 seems to have blown out to what appears ultimately to have been over $700,000 , according to proposed budget amendments 31 December 2014 (D15/77827) from the Audit Committee Meeting March 2015, item 12, as appears in the OCM of 17 March 2015.
The concept was to create an idea of what the City Centre could eventually have: small bars, more food venues, fresh fruit’n’veg markets etc. We were told that it was a tool to encourage developers, ie, “deals about stadiums are made on days when there is a big footy crowd”, but it struggled and frankly looked terrible.
It was also one of the reasons used by CEO Russell to locate staff associated with “overseeing” the project, a mere 600ms down the road from the civic offices, at Carousel. We’ve seen a lot of pictures where the staff were having a good time at Spice Road, supporting the project, but remove those numbers and the patronage level would have fallen even more!
Overall, patronage numbers were dismal. We were subsidising vendors all over the place, and at one point a vendor remarked, “they are going to have to subsidize us more at this rate [so little return]”.
The City fought hard to get the word out there, it seemed to have a huge advertising budget, and a lot of money was spent on putting together furniture (made from recycled materials – not sure how “sustainable” paying for that was – furniture from the many second-hand/charity shops in the area would also have sufficed as sustainable activity: recycling, cheap and convenient to transport).
However, it defeated itself with its own enthusiasm. We appear to have paid for a huge no. of bands to play for 10 to 30 people at best, several days a week, week in/week out. Some interesting concepts were there, but they didn’t provide much that wasn’t already available elsewhere in a more appropriate setting (Spice Road was quite small). Nor was it necessary to recreate what other councils might provide… at least not at this cost, this setting, this short duration.
Originally there were plans to set up solar panels, battery storage, etc – as this concept drawing showed, but the cost of this for the value of such a tiny venue, for such a short period of time in this day and age of solar awareness? It simply isn’t necessary anymore to be some sort of model of sustainability…. But it indicates how much money was so easily being made available to the team at City Futures – now Economic Development.
We may have staff trained at, or still working today part-time for sustainability institutes at universities, but there is no such thing as an “expert on sustainability”, and demonstration projects have become obsolete as much of the practicality of sustainability, in the form of renewable energy devices, community gardens, farmers markets, more public transport use is already in play (Canning will make a play for light rail, but so are many other councils).
Canning would be better served working on rolling out ways to increase bus patronage and coverage now, plus finally getting widespread, properly constructed bike paths out there [edited] while making provision in long-term planning for light rail, however perhaps even this needs to be reviewed with news Carousel has received approval to increase its net leasable area by 50% and also its parking allocation, meaning we will eventually see circa 45,000 cars a day accessing this, one of the state’s largest shopping centres, which is already well served by buses and bus connections from Cannington Train station. Additionally, the City appears to want as many apartments as possible built in the area, which will most likely mean knocking down trees, and it remains aspirational – as with Freo – that people will leave their cars behind, or agree to buy units without parking bays.
The death of the Spice Road pop up saw several employee contracts end, which made up some of the indication on staff reductions the CEO floated around this year’s rate setting scrutiny– clearly this doesn’t represent a substantive reduction in permanent staff load, as those particular contracts were short-term anyway.
Finally, on the subject of sustainability, four “principles” are applied to each motion put to Council by staff, a sort of ruler run through it. Interestingly enough, those “principals” seem to be easily waived, as occurred when the City was considering entering in to a new rubbish disposal facility arrangement that has toxicity experts concerned. Today, those arrangements are kept confidential…..
Which is ironic, as the former council got pinged for how many items were kept “confidential” from the public but today the numbers of confidential items are building all over again.
What CEO Lyn Russell has done here at Canning may not necessarily be what Canning “needed”. It is well-known former Commissioner Linton Reynolds allowed huge levels of spending to occur, for little real benefit discernible to the community. We’ve always been happy with its services, development was occurring. It hit our finances hard, however. As for CEO Russell, it seems that what she’s done here, she’s done elsewhere so, in the end, were things changed signficantly at Canning because they needed to be, or because it could be – in the absence of a Council of the people who pay for a lot of it.
We thought we’d leave you with this stunning declaration from communication attributed to Chairman Commissioner Cole, conducted between the City and CanningAccountability recently:
[Paraphrased] The City needs its community members to keep their queries to the City as “circumspect” as possible, because each query made is costing money and if we (the community, the scrutinisers of Councils like CanningAccountability and ratepayer groups) ask more Qs, then the City will have to employ more people and that means it will have to lift rates higher.
Where would YOU rather cuts were made, in order to make sure that excuse is never used to justify rate hikes?
*Per Commissioner Cole’s budget statement
Please note: all images used in connection to Spice Road Pop Up came from Prezi.com and the Pop Up’s Instagram account.