Draft Long Term Financial Plan 2026 - 2036 by FederationCouncil

1.0 11/03/2026 Draft prepared for public exhibition 73/2026FC

1 INTRODUCTION

Federation Council's Long-Term Financial Plan (LTFP) is a rolling ten-year plan, annually updated and revised as needed, to drive long-term financial sustainability. It aligns service delivery (outlined in the Community Strategic Plan, Delivery Program, and Operational Plan) with responsible financial management.

The LTFP is based on a detailed financial review and asset renewals as recommended in the Strategic Asset Management Plan (SAMP). Principles of sound financial management, consistent with the Local Government Act 1993, guide the development of the LTFP, emphasising responsible spending, sustainable infrastructure investment, effective asset management, and intergenerational equity.

An independent review in mid-2023 by the University of Newcastle provided 77 recommendations to address financial sustainability and community concerns. Implementation of these recommendations is ongoing with quarterly updates provided to Council

In 2026/27, Council continues to prioritise the following:

• Renewal of existing assets, particularly roads and drainage, before the creation of new assets.

• Emphasis on addressing needs before wants.

• Pricing review to establish appropriate price signals.

• Focus on asset maintenance.

• Delivery of flood recovery activities as funded through NSW Disaster Assistance Arrangements or Council’s insurance policy.

• Recommendations from the 2023 independent review by Professor Joseph Drew of the University of Newcastle.

Financial Planning

Scenarios

Council is proceeding with the final year of the Special Rate Variation (SRV) that will increase general rates by 11.8% in 2026/27. This follows the Independent Pricing and Regulatory Tribunal's (IPART) approval on 14 May 2025, which recognised the Council’s need for improved financial sustainability while balancing the impact on ratepayers1. To ensure long-term stability, this Long-Term Financial Plan (LTFP) models three primary scenarios for the period 2026/27 to 2035/36:

• Planned: This scenario is Council’s planned budget to advance asset maintenance and renewal over the term of the LTFP. It maintains current service levels through targeted efficiencies and renews infrastructure at significant portion of the level recommended in the Strategic Asset Management Plan. This model adopts a conservative fiscal baseline, assuming that no external grant funding is secured for key infrastructure projects: renewal of the Athole bridge, construction of the Howlong water reservoir or renewal of the Corowa Sewage Treatment Plant.

• Favourable: This model assumes an optimistic funding environment where Council successfully secures external grants for the renewal of the Athole bridge, construction of the Howlong water reservoir and renewal of the Corowa Sewage Treatment Plant. This scenario factors in potential grants and assumes no significant negative external events, allowing for more comprehensive asset renewal and reduced pressure on ratepayers and water and sewer customers

• Unfavourable: This scenario serves as a risk assessment, modelling the impact of delivering the Planned scenario without achieving productivity improvements or securing renewal funding. While the resulting severe financial implications and significant reduction in asset renewal are considered unacceptable, this model provides a necessary framework for understanding the Council’s position in the absence of funding and the potential need for significant service reform.

1https://www.ipart.nsw.gov.au/sites/default/files/cm9_documents/Final-Report-Federation-Council-Special-VariationApplication-for-2025-26-May-2025.PDF, page 2

This report presents a comprehensive set of financial statements for the period 2026/27 to 2035/36.

2 ABOUT FEDERATION COUNCIL

2.1 Federation Council

Federation Council was formed in May 2016 from the merger of the Urana and Corowa Shire Councils. Federation Council is located in the Southern Riverina Murray area of New South Wales. Council has an estimated resident population of 13,0752. The Council area is 5,685 square kilometres and comprises vast productive farming land (mostly dry land and some irrigation to the south and central areas), that is predominantly used for cereal cropping and to lesser extent livestock, including sheep, cattle and pigs. The larger towns in the south also support some other industries including manufacturing and construction, retail, transport and agriculture related industries.

The bulk of the population reside in the southern sections of the Council area, including in the Murray River towns of Corowa, Howlong and Mulwala whilst the rural areas of Corowa Rural and Urana and Surrounds contain a mix of small towns, villages, localities and those who live on farms.

2 ABS Data by Region - https://dbr.abs.gov.au/region.html?lyr=lga&rgn=12870

2.2 Benchmark

For the purpose of analysis, councils are compared, where relevant, with the ‘group average’. The Office of Local Government (OLG) groups are based on the Australian Classification of Local Governments (ACLG) determined by the Australian Bureau of Statistics (ABS). NSW councils have been condensed from 22 ACLG categories into 11 groups, to better reflect the councils in NSW.

The OLG has also classified councils by type into large rural, metropolitan, metropolitan fringe, regional town/city and rural3 .

Council uses the information to analyse the performance against councils within the same classification and acknowledges that the groupings are based on broad demographic variables and there are often large differences between councils in the same group.

Modelling against other councils would usually be included in this LTFP Council is currently awaiting the release of 2024/25 sector data by the Office of Local Government to prepare this modelling

3 Australian Classification of Local Governments and OLG group numbers, page 1.

Council’s service delivery extends beyond the essential legal duties of maintaining roads, bridges, and water systems. Council understands that a truly vibrant community relies on the services that enhance our daily lives: the libraries where our children learn, the Corowa Aquatic Centre where families connect, and the vital support provided through mobile preschools and event management.

Federation Council currently manages a broad portfolio of 45 separate services. While many of these are mandatory under the Local Government Act 1993 and other state laws, Council also provides a variety of additional services to meet local community needs. These services are divided between direct community delivery and enabling services that support Council operations behind the scenes.

Direct Community Services

These services are delivered directly to residents, businesses, and visitors:

• Aerodrome

• Bridges

• Caravan Parks

• Cemeteries

• Community Services

• Corowa Saleyards

• Development Assessment & Building Control

• Domestic Waste

• Drainage

• Economic Development

Enabling Services

• Emergency Management

• Environmental Services & Natural Resources

• Event Management

• Footpaths

• Land Management

• Landfills

• Libraries

• Mobile Pre-School

• Regulation & Compliance

• Roads

• Service NSW

• Sewerage Operations

• Sporting Playgrounds Presentation

• Strategic Land Use Planning

• Swimming Pools

• Tourism

• Waste Management

• Water Operations

These essential functions provide the internal support, governance, and technical expertise required to facilitate Council’s front-facing operations:

• Communication & Engagement

• Council Buildings

• Customer Services

• Depots

• Directorate Support

• Electrical Services

• Engineering & Design

• Executive Services

• Finance

• Fleet Management

• Governance

• Grants

• Human Resources

• Information Technology

• Procurement

• Quarries

• Risk & Safety

Providing this broad range of services requires a careful and constant balancing act. Because many of these programs are not self-sustaining, they must be supported by general rate revenue. This task is made more complex by the ongoing challenge of "cost-shifting", where responsibilities traditionally held by higher levels of government have transitioned to the local level without the necessary funding to match. Despite these external pressures, Council remains focused on protecting these services, recognising that they are essential to the region’s liveability and unique character.

Beyond providing services, Council serves as a partner in the local economy. By managing industrial land developments, caravan parks, and the Corowa Saleyards, Council is actively working to stimulate business growth and create local jobs. These are strategic investments intended to generate independent revenue for the region, which will eventually help reduce the financial burden on local households.

Ultimately, Council is responsible for planning and prioritising all services through the LTFP, which requires balancing the financial needs of these services with the affordability of rates and charges for the community

Clear principles for the development of the Operational Plan and Annual Budget were adopted by Council in December 2025. In summary these principles have three main themes:

a) Strategic alignment: Directly supporting the four-year Delivery Program.

b) Fiscal responsibility: Ensuring financial sustainability by adhering to the Long Term Financial Plan objectives.

c) Community focus: Prioritising community needs and essential services, such as a safe and healthy community and well-maintained, planned infrastructure.

These are framed around the principles for sound financial management, as defined in the Local Government Act 1993 and are available on Council’s website.

In developing plans for 2025/26 to 2028/29, Council also prioritised the following4:

• Recommendations from the independent review by the University of Newcastle.

• Renewal of existing assets, particularly roads and drainage, before the creation of new assets.

• Emphasis on addressing needs before wants.

• Pricing review to establish appropriate price signals.

• Focus on asset maintenance.

• Delivery of flood recovery activities as funded through NSW Disaster Assistance Arrangements or Council’s insurance policy.

Flowing from this, the key objectives of this LTFP are to:

• Understand the cumulative effects of Council’s service requirements, asset management commitments and the community aspirations.

• Identify the financial opportunities and threats confronting Council.

• Provide a basis for sound and strategic decision-making

• Ensure that Council’s decision-making processes are undertaken within a framework of financial sustainability.

• Meet the requirements of the Office of Local Government (OLG) Integrated Planning and Reporting (IP&R) framework. 4

4 FINANCIAL SUSTAINABILITY

Financial sustainability is about ensuring Council has the resilience to provide essential services and handle unexpected challenges, both now and for the next decade. By looking ten years ahead, Council ensures that the decisions made today, whether regarding our budget, our infrastructure or our staff, are responsible and sustainable for the long term.

To achieve this, Council focuses on several key priorities:

• Meeting Community Needs: Ensuring we have the capacity to deliver the services our residents rely on every day.

• Investing in Infrastructure: Maintaining and upgrading the roads, buildings, water and sewer infrastructure needed to keep our community running safely and efficiently.

• Building Resilience: Strengthening our finances so we can absorb unexpected costs or economic changes without having to make sudden, disruptive cuts to services or sharp increases in charges.

• Accountable Leadership: Maintaining transparent systems for planning and community feedback, ensuring decisions are made with the community’s best long-term interest in mind.

• Planning for 2036: Working steadily toward a sustainable financial position over our ten-year planning horizon to secure the organisation’s ability to continue service delivery

4.1 Approach to financial sustainability

In recent years, Council has maintained a rigorous focus on addressing its long-term financial sustainability. While current performance does not yet meet all recommended industry benchmarks, Council is committed to a disciplined strategy to bridge this gap. This improvement plan is built upon several key focus:

• Proactive Asset Management: Transitioning from reactive repairs to a proactive maintenance model across all infrastructure, ensuring work is prioritised where it is needed most.

• Strategic Financial Planning: Establishing clear targets and monitoring performance measures to guide long-term decision-making and strengthen Council’s overall financial position.

• Efficiency and Cost Control: Identifying and implementing productivity improvements to contain operational costs without compromising service quality.

• Securing External Funding: Enhancing the quality of grant applications to compete more effectively for available State and Federal government funding.

• Optimising Alternative Revenue: Maximizing income from Council-owned assets, such as the saleyards, caravan parks, aquatic centres, and property holdings, to reduce the reliance on general rates.

• Community Alignment: Engaging directly with residents to review service levels and ensure that Council’s priorities align with community expectations.

In mid 2023, Council commissioned an independent review by the University of Newcastle, led by Professor Joseph Drew. The review was focused on the advantages and disadvantages of the merger and Council’s Financial Sustainability Journey. The report details 77 recommendations to address Council’s financial sustainability challenge and to respond to disenfranchisement felt by northern residents.

Work is continuing on implementing adopted recommendations, particularly those relating to Council’s financial sustainability challenge, and implementing improvement actions. A number of recommendations have been progressed and are included in this LTFP.

These recommendations include:

• Provide better price signals and targeting full cost recovery for non-regulated prices except where a clearly articulated subsidy is in place (Recommendation 1)

• For merit subsidies, Council should clearly articulate the nature, goal and review process of the subsidy (Recommendation 2).

• A renewed focus needs to be made on the core remit of Council (Recommendation 3)

• Establish a stronger focus on maintenance (Recommendation 4).

• Ball Park Caravan Park business needs to be divested (Recommendation 11)

• Service levels need to be reviewed (Recommendation 13).

• Decision-makers need to clearly convey to the community that financial sustainability concerns dictate that, in future, ‘needs’ must be prioritised over ‘wants’ (Recommendation 15)

• Strong support in the community for reductions to tourism expenditure (Recommendation 26)

• Councillors and staff should vigorously engage on the long list of tasks that need to be dealt with prior to being in a position to lodge a compelling SRV application (Recommendation 27)

• Additional resourcing allocated for the Planning and Development Team (Recommendation 36)

• Senior managers should be tasked with finding specified efficiencies with respect to the 2024-25 budget (Recommendation 60)

In the words of Professor Drew, “there is no one simple solution – this predicament has developed over many decades and is the result of a number of complex problems. The situation therefore calls for decisive action whereby all remedies warrant serious consideration in view of the circumstances.”5

Even with these measures, given the quantum of funds required to be invested into existing roads and other infrastructure assets, Council has little choice but to proceed with increased general rates to maintain and restore assets to the level expected by the community. Further detail on this is contained in section 5.

5 Professor Joseph Drew, page 5, The Advantages and Disadvantages of Amalgamation and Federation Council’s Financial Sustainability Journey - Recommendations

5 SCENARIOS

Under the NSW Integrated Planning and Reporting framework, the development process for the LTFP should include financial modelling of different scenarios (e.g., planned/optimistic/conservative). The use of scenarios provides the Council with an idea of how much flexibility is in the Plan and how much latitude it has with various projects and scenarios.

The scenarios modelled are important when discussing the financial implications of the Community Strategic Plan with residents and will also assist councillors in developing suitable actions for the Delivery Program.

For the purpose of this LTFP 2026-2035, the following three scenarios have been prepared:

Planned (Recommended)

Scenario:

Assumes the Council will have to foot the bill for major projects like bridge renewals and treatment plant upgrades without securing external funding.

Favourable Scenario:

Council successfully secures external funding

Unfavourable Scenario:

The "stress test" models if the Council fails to find productivity improvements and fails securing external funding.

This recommended scenario provides a $677 million operating program and a $274 million capital program over the 10 years. It contains the Special Rate Variation increase of 11.80% in 2026/27 and provides $656 million operating income over the 10 years.

The Strategy: Focuses on staying afloat by finding internal efficiencies.

The Catch: It’s a lean model. Without grant funding, the pace of renewal is steady but not complete.

Council will have exhausted its unrestricted cash by 2032/33 (Year 7).

The Benefit: It takes the pressure off the ratepayers and allows the Council to fix more things, faster.

The Reality: It relies on external factors that the Council can't strictly control.

Council will have exhausted its unrestricted cash by 2032/33 (Year 7)

This recommended scenario provides a $689 million operating program and a $274 million capital program over the 10 years. It contains the Special Rate Variation increase of 11.80% in 2026/27 and provides $655 million operating income over the 10 years.

The Consequence: This leads to a "significant reduction in asset renewal," which is fancy talk for "potholes might stay open longer."

The Purpose: It serves as a stark reminder that the SRV alone isn't a magic wand; internal reform is still required.

Council will have exhausted its unrestricted cash by 2031/32 (Year 6).

5.1 Planned (recommended) Scenario

This scenario has been modelled with a $59.1 million annual operating program and $21.1 million capital program for 2026/27 and a $274.0 million total capital program over the 10 years. Council will be seeking borrowings to construct the new Corowa Sewage Treatment Plant and a new Mulwala Water Treatment Plant.

Council will have exhausted its unrestricted cash by 2032/33 (Year 7). Borrowings to progress the Corowa Sewage Treatment Plant will need to be revisited and potentially increased and accessed earlier to maintain a positive cash position for the Sewer Fund. This will be dependent on financier approval.

Further work is still required on service levels and cost containment strategies to reduce the quantum of the General Fund operating deficit.

The following table summarises the result of key financial sustainability indicators over the ten years of the LTFP:

Operating Performance > 0 Not

Achieved except for minor deficits in years 7 & 8

Building and Infrastructure Renewal Ratio > 100% Not achieved Achieved when averaged over the ten years Achieved when averaged over the ten years

This is the recommended scenario for Federation Council for the period commencing 1 July 2026

5.2 Favourable Scenario

This scenario adopts an optimistic outcome, assuming that Council is successfully in securing external grant funding for the Athole bridge renewal, construction of the Howlong Water reservoir and renewal of the Corowa Sewage Treatment Plant This may allow these capital projects to be brought forward.

This scenario results in Council having no unrestricted cash by 2032/33 (Year 7)

The following table summarises the result of the key financial sustainability indicators over the ten years of the LTFP for Favourable scenario: Ratio

Operating Performance > 0 Not achieved Achieved Achieved

Own Source Revenue > 60% Achieved Achieved Achieved

Unrestricted Current > 1.5x Under review Achieved Achieved

Debt Service Cover > 2x Achieved Under review Under review

Building and Infrastructure Renewal Ratio > 100% Not achieved Achieved when averaged over the ten years Achieved when averaged over the ten years

5.3 Unfavourable Scenario

This model adopts a conservative fiscal baseline, assuming that no external grant funding is secured for the bridge renewal or the water and sewer infrastructure upgrades and renewals. In addition to the absence of additional funding, this scenario shows the consequences of not implementing any cost containment strategies or productivity improvements.

Council will have exhausted its unrestricted cash by 2031/32 (Year 6). Borrowings to progress the Corowa Sewage Treatment Plant and the Mulwala Water Treatment Plant will need to be revisited and potentially increased and accessed earlier to maintain a positive cash position for both the Water and Sewer Funds. This will be dependent on financier approval.

The following table summarises the result of the key financial sustainability indicators over the ten years of the LTFP for Unfavourable scenario:

Building and Infrastructure Renewal Ratio > 100% Not achieved Achieved when averaged over the ten years Achieved when averaged over the ten years

6 SENSITIVITY/ASSUMPTIONS

The following is an overview of key assumptions which have been in the preparation of the Operatiional Plan, Delivery Program and Long Term Financial Plan:

6.1 Levels of Service

Current levels of service for infrastructure assets (roads, footpaths, bridges, halls, etc) are assumed to be unsatisfactory. This conclusion is drawn from community feedback received in relation to infrastructure assets and professional assessment of the assets and their current and future asset management needs. Council is seeking to address this through the approved Special Rate Variation and this is planned for in this LTFP

Current levels of service for other services have been used as a baseline for the costing to financial projections. These service levels will be reviewed over the coming four years.

6.2 Asset Renewal Predictions

This LTFP has been informed by asset renewal predictions using broad assumptions at a program level.

A comprehensive ten-year plant and fleet program has been developed to inform the LTFP. Renewal of other assets has been taken from the Strategic Asset Management Plan. Condition and capacity assessments are improving, providing increased confidence in predictions of when individual assets will require renewal or upgrade. Asset management process improvements continue to be made, providing more detailed assessment and predictions of asset renewals at an asset level.

6.3

Indexation Rates

A range of indexation has been applied to the income, expenditures and capital works planning. The following table details the minimum indexation rates applied in the LTFP.

6.4 Workforce Levels

Workforce levels have been budgeted based on the organisational structure that was adopted in September 2019 and minor amendments that have been made since that time. A Workforce Management Strategy was adopted in June 2022 and is currently being reviewed. This is directing capacity and capability enhancement over the coming years, with a key focus on organisational culture

The approved permanent Special Rate Variation is intended to provide increased investment in Council’s extensive asset network. Over time there will be an increase in capital investment. As these progresses, analysis will be undertaken to deliver this increased capital investment in the most efficient and effective manner. This may result in changes to workforce levels. Any changes will be included in updates to this plan.

6.5 Roads to Recovery Funding and Own Source of Funds Expenditure:

Council is required to maintain at least $1.982 million expenditure on roads per year, funded from own source funds such as rates and charges, to meet the requirements of the Roads to Recovery (RTR) funding agreement.

This Federal Government RTR program provides Council with an average amount of around $1.65 million in annual funding, primarily for use on Council Local Roads and Streets.

6.6 Rate Income:

The level of rate income modelled in this plan is based on an 11.8% increase to general rates in 2026/27 (based on the SRV approval), followed by 3.50% annual increases for the remainder of the LTFP.

6.7 Water and Sewer Fees and Charges

A number of major upgrades in the Water and Sewerage service areas (Howlong Reservoir construction, Corowa Sewage Treatment Plant renewal, Mulwala Water Treatment Plant and expansion of the Howlong Sewage Treatment Plant) are expected to be planned, designed and costed (and in some case commenced) over the period of the LTFP. In addition to these works, further asset assessments are likely to reveal major replacements or upgrades of other aspects of the network, such as additional reservoirs, ring mains, and pump and valve replacements.

An increase of 8% has been applied to the sewer fees and charges for all across the 10 years of the LTFP and this is likely to be increased as more asset data is obtained and project detail is further refined and clarified.

Water Access fees have been increased to $260.80 for 20mm meter size to align charges with Best Practice Water Supply and Sewerage guidelines with an appropriate split between the revenue generated from access charges to consumption charges (recommended 25/75, currently at 23/77). Usage fees have been increased to $2.20 per kl for water consumption up to 350 kl and at $3.25 per kl thereafter, with 5% annual increases across the 10 years of the LTFP.

6.8

Fees and Charges

Federation Council applies a range of fees and charges for services provided to the community. These are reviewed annually and set as part of Council’s Revenue Policy. Regulatory fees have been increased in accordance with legislation. However, non-legislated fees and charges increase at minimum by rate peg of 4.10% for first year followed by 3.50% thereafter.

Further work is anticipated on fees and charges as per recommendations 1 and 2 from the Independent Review led by Professor Joseph Drew, which in summary recommended Council moves to cost recovery for non-mandated services, or if not acceptable, clearly articulating to the community where merit-based subsidies are in place.

6.9 Grants Provided for Operational Purposes

Financial Assistance Grants are received from the Commonwealth Government and are a major source of Council’s revenue.

The amount of Financial Assistance Grants provided to Council each year has varied over the past 10 years with variations ranging from no increments to an increase equivalent to CPI. Further lobbying is occurring both state and nationally to gain an increase in this funding.

Currently, Federation Council is also reliant on the Federal Government to maintain the Roads to Recovery Program for an average amount of $1.65 million. This amount has also been noted as operational revenues though it can only be utilised for Capital Works associated with transport services. A conservative grant index (CPI) of 1.5% has been applied to recurrent grants anticipated across the 10-year LTFP except for grants tied up with Council staffing, e.g. Library, road safety and mobile preschool with 3.5% indexation applied.

6.10 Capital Grants

Capital grants of a competitive nature have been included at the cost of the project, or the anticipated portion. Projects relying upon capital grants (competitive) will only continue if the funding expected is received, or otherwise prioritised by Council.

6.11 Expenditure - Maintenance Costs (Materials and services)

Maintenance budgets have been reviewed by respective management areas. Considering the current inflation, indexation is set at 3.5% across the 10-year of the LTFP.

6.12

Expenditure - Wages Increase (inclusive of employee benefits and on-costs)

The labour indexation applied to wages over the LTFP is 3.5% as contained within the Local Government Award that took effect from 1 July 2023.

6.13 Expenditure – Non-Capital (Depreciation and Amortisation)

Federation Council will continue to undertake a revaluation program on all Council assets as required for financial reporting purposes

Depreciation costs used in the LTFP relate to existing assets and any proposed capital works. The results of future asset revaluations may result in depreciation estimates being revised over time.

Depreciation estimates remain static through the duration of the LTFP. Depreciation will increase when new assets are purchased or constructed. There are minimal new assets proposed over the next ten years. The key focus in this plan is to renew existing assets. There will also be change when revaluations are undertaken. Given the level of uncertainty, future annual estimates have not been made.

6.14 Expenditure – Other Operating Expenses

Council other expenses is made of contribution or levies to other levels of governments, i.e. emergency service levy. Indexation of 3.5% has been applied throughout the LTFP.

6.15 Borrowings

Council is forecast to have borrowings of approximately $11.15 million by 30 June 2026 and the interest expense has been projected based on the interest rates applicable for each loan.

Strategic work is currently underway to determine future needs of Council’s water and sewer services, particularly the renewal of the Corowa Sewage Treatment Plant and the Mulwala Water Treatment Plant. There are some government grant programs to assist councils in renewing water and sewer infrastructure. Borrowing provision have been made in all scenarios at a fixed 6.00% interest rate per annum with 240 months facility term in the second half of the LTFP.

6.16 Reserves

There are numerous restrictions on Council’s cash that are required to be maintained. Funds collected from the provision of water supply services, sewerage services and domestic kerbside collection are only able to be expended on the respective service being supplied. There are also restrictions where grant funding is received for a specific purpose and may only be expended on that purpose. These are referred to as external restrictions.

Council also has internal restrictions set aside to meet future obligations, such as employee leave entitlements, quarry rehabilitation costs, landfill rehabilitation costs or the repayment of borrowings related to specific activities.

7 PRODUCTIVITY IMPROVEMENTS AND COST CONTAINMENT STRATEGIES

Council is committed to delivering services in an efficient and effective manner. To achieve this Council has a continuing focus on identifying and implementing opportunities to improve productivity and contain costs.

The following table overleaf provides a summary of productivity improvements and cost containment initiatives currently underway and estimated savings.

(Excluding gain/loss on disposal of assets)

Initiatives are also being progressed in the following areas:

• Disposal of underutilised assets

• Implementation of initiatives to reduce risk and avoid costs

• Improvement in asset management practices

8 CAPITAL WORKS PLAN

Capital works are asset acquisitions or building and engineering works that construct an asset. Capital works projects would typically include purchase of plant and fleet, construction of new infrastructure and upgrade of existing infrastructure

Capital expenditure is undertaken to;

• Renew or replace - existing asset or a component of an asset that has reached the end of its useful life. With the exception of land, assets have limited useful lives and decline in value due to wear and tear – for example, reseal an existing sealed road or replace a roof on a building such as a public hall.

• New - to construct an asset that did not previously exist.

• Upgrade (growth or enhancement) - to increase the capacity of existing assets beyond their original design capacity or service potential – for example, widen a bridge or extend a building.

• Disposal or decommission - to remove an asset from service that is no longer required.

Council’s Capital Works Plan has been extensively reviewed as an outcome of the service planning process and development of Asset Management Plans.

The priority over this ten-year period is to renew existing assets, rather than to create new assets.

A comprehensive ten-year plant and fleet program has been developed to inform the LTFP. Renewal of other assets has been taken from Council’s Strategic Asset Management Plan. Condition and capacity assessments are improving, providing increased confidence in predictions of when individual assets will require renewal or upgrade. Asset management process improvements continue to be made, providing more detailed assessment and predictions of asset renewals at an asset level.

In developing the Capital Works Plan for the LTFP, Council has applied a disciplined approach to the selection and prioritisation of projects.

Generally, only projects that have reached a stage of initiation have been included in the LTFP. Projects that are either at concept or planning phase require further definition before they can be included in the LTFP. This may require further prioritisation to remove or reduce the scope of projects currently included in the LTFP to enable further projects to the included.

Key water and sewer upgrades planned for in the ten-year period include:

• Howlong water reservoir construction (2026/27 – 2027/28)

• Corowa sewage treatment plant renewal (2031/32 – 2032/33)

• Mulwala water treatment plant renewal (2031/32 – 2035/36)

• Howlong sewage treatment plant augmentation (2032/33)

This timing is based on the current information available and will be updated when the water and sewer strategic planning project is completed in 2026.

The ten-year Capital Works Plan for 2026/27 for the planned scenario is contained overleaf.

9 MONITORING KEY PERFORMANCE INDICATORS

Key financial performance measures to guide long term financial planning and improve Council’s financial position have been established. The table below provides a summary of the targets with the immediate focus on measures to address short term financial sustainability

Operating performance

Own source operating revenue

Unrestricted current ratio

Shows if Council is earning enough money to cover its day-to-day running costs. A positive result means Council is not spending more than earned.

Measures how much of Council’s Revenue budget comes from own activities (like rates and fees) versus government grants. It shows how self-reliant Council is.

Checks if Council has enough "ready cash" to pay its immediate bills. It’s like a household checking if they have enough in the bank for this month’s rent and groceries.

Debt service cover ratio Shows Council’s ability to pay back loans. It ensures Council don't take on more debt than Council can comfortably afford to repay.

Total continuing operating revenue excluding capital grants and contributions less operating expenses / Total continuing operating revenue excluding capital grants and contributions

Total continuing operating revenue excluding all grants and contributions / Total continuing operating revenue1 inclusive of all grants and contributions

Current assets less all external restrictions / Current liabilities less specific purpose liabilities

Operating results before capital excluding interest and depreciation/impairment/amortis ation / Principal repayments (from the Statement of Cash Flows) + borrowing costs (from the Income Statement)

Rates and annual charges outstanding percentage

Cash expense ratio

Measures how much of the rates payable to Council are still unpaid. Keeping this low ensures Council has the cash flow needed to provide services.

Estimates how many months Council could keep running if all income suddenly stopped. It’s essentially Council "emergency rainy day fund."

Unrestricted cash

Capital expenditure ratio

Shows the actual amount of cash available for any use, after Council set aside money that is "locked away" for specific projects. Recommended at 2-3 months of expected cashflows.

Compares how much Council is spending on new infrastructure and buildings against how fast our old ones are wearing out.

Rates and annual charges outstanding / Rates and annual charges collectable

(Current year’s cash and cash equivalents + term deposits / Payments from cash flow of operating and financing activities) x 12

Unrestricted cash less creditors plus government debtors

Buildings and infrastructure renewals ratio

Infrastructure backlog ratio

Asset maintenance ratio

Focuses specifically on whether Council is spending enough to repair and replace existing assets (like roads and halls) as they age.

Shows the "gap" between the current state of Council assets and the standard the community expects. It identifies how far behind Council is on repairs.

Asset renewals / Depreciation, amortisation and impairment

Estimated cost to bring assets to a satisfactory standard / Net carrying amount of infrastructure assets

Measures if Council is doing the physical maintenance work required each year to keep Council assets in good working order. Actual asset maintenance / Required asset maintenance

To ensure a comprehensive evaluation of Council’s financial health, performance ratios for the 2026/27 Budget and beyond are analysed by individual service funds rather than as a single total. This detailed approach allows Council to identify specific areas of concern and develop targeted strategies to progress towards meeting recommended financial targets.

The Waste Fund is excluded from this detailed analysis as it solely covers domestic kerbside collection via an external regional contract. Since this service is outsourced, the fund holds no physical assets or liabilities; its financial activity is limited to processing monthly service provider invoices.

This detailed review is currently underway and will be added to the LTFP when completed.

9.1 Council wide measures

The following indicators are based on the consolidated financial results for the planned scenario.

Operating Performance Ratio

Operating Revenue (excl Capital Grants & Contributions) minus Operating Expenses over Operating Revenue (excl Capital Grants & Contributions)

Figure 1 reports that Council operates with a deficit for the entire duration of the LTFP. This is due to operating revenue not being adequate to fund the cost of providing services at current levels. It is important to note that is primarily due to the operating performance in the General Fund, which maintains a moderate deficit for the ten years as reported in section 9.2. This contrasts with the operating performance of the Water and Sewer Funds where surpluses are required to build reserves to fund significant asset infrastructure renewal and upgrade.

Figure 1 – Operating Performance Ratio

This ratio improves over the first five years due to the Special Rate Variation, water and sewerage service income and the implementation of productivity improvements and cost containment strategies.

Own Source Revenue

Total Continuing operating revenue minus all grants & contributions over Total Continuing operating revenue inclusive of Capital Grant

Figure 2 indicates that Council’s own source revenue as a percentage of the total revenue is maintained above the benchmark over the 10-year period of the LTFP. This reflects stability as the Special Rate Variation is implemented and with additional income received in the Water and Sewer Funds

Building and Infrastructure Asset Renewal Ratio

Asset renewals (building & infrastructure) over Depreciation, amortisation & impairment (building & infrastructure).

Figure 3 indicates that Council only meets the benchmark when significant Water and Sewer renewal works take place from 2032

Figure 2 – Own Source Revenue Ratio

Figure 3 – Building and Infrastructure Asset Renewal Ratio

Cost of debt service (interest expenses & principal repayments) over Total continuing operating revenue (excluding capital grants & contrib.).

Figure 4 indicates the ratio starts to increase when Council takes up borrowings to support the renewal of water and sewer treatment plants. If Council is able to secure grant funding to partially cover the costs of renewal under existing NSW Government funding programs, the need for these borrowings will be reassessed. Throughout the ten years of the LTFP, the ratio is maintained within the 0% to 20% acceptable range

9.2 General Fund measures

The following indicators are based on General Fund financial results for the planned scenario.

Operating Performance Ratio

Operating Revenue (excl Capital Grants & Contributions) minus Operating Expenses over Operating Revenue (excl Capital Grants & Contributions)

Figure 5 – Operating Performance Ratio (General Fund)

Figure 5 reports that Council operates with a General Fund deficit for the entire duration of the LTFP. This is due to operating revenue not being adequate to fund the cost of providing services at current levels.

The key for sustainability is whether Council can produce sufficient cash over the long term to replace assets when required. This is more accurately reflected in the Statement of Cashflows, where the cash required for asset renewals is based upon the asset management planning and the Capital Works Plan. At this point in time Council does not produce sufficient cash and asset renewal is undertaken within Council’s financial capacity rather than recommended levels.

Figure 4 – Debt Service Ratio

Own Source Revenue

Total Continuing operating revenue minus all grants & contributions over Total Continuing operating revenue inclusive of Capital Grant

Figure 6 – Own Source Revenue Ratio (General Fund)

Figure 6 indicates that Council’s own source revenue as a percentage of the total revenue is maintained above the benchmark over the 10-year period of the LTFP. This reflects stability as the final year of the Special Rate Variation is implemented in 2026/27.

Building

and

Infrastructure Asset Renewal Ratio

Asset renewals (buildings & infrastructure) over Depreciation, amortisation & impairment (building & infrastructure)

Figure 7 - Building and Infrastructure Asset Renewal Ratio (General Fund)

Figure 7 indicates that Council does not meet the benchmark through the ten years of the LTFP. This reflects the asset renewal proposal that was funded through the SRV, covering approx. 79% of recommended asset renewal requirements Funding asset renewal as recommended in the Strategic Asset Management Plan would have required a more significant increase to general rates in 2025/26 and 2026/27 (circa 140%)

Debt Service Ratio

Cost of debt service (interest expenses & principal repayments) over Total continuing operating revenue (excluding capital grants & contrib.).

Figure 8 –Debt Service Ratio (General Fund)

Figure 8 indicates the ratio reflects the continued paydown of existing borrowings, with no new General Fund borrowings currently proposed within the next ten years. Throughout the ten years of the LTFP, the ratio is maintained within the 0% to 20% acceptable range.

10 FINANCIAL STATEMENTS

The pages following contain the 10-year financial statements for the following:

Planned (Recommended) Scenario Statements

• 2026/27 to 2035/36 – Consolidated & Individual Funds Income Statements

• 2026/27 to 2035/36 – Consolidated & Individual Funds Balance Sheets

• 2026/27 to 2035/36 – Consolidated & Individual Funds Cash Flow Statements

• 2026/27 to 2035/36 – Council Reserves

• 2026/27 to 2035/36 – Capital Works Statement

Favourable Scenario Statements

• 2026/27 to 2035/36 – Consolidated & Individual Funds Income Statements

• 2026/27 to 2035/36 – Consolidated & Individual Funds Balance Sheets

• 2026/27 to 2035/36 – Consolidated & Individual Funds Cash Flow Statements

• 2026/27 to 2035/36 – Council Reserves

• 2026/27 to 2035/36 – Capital Works Statement

Unfavourable Scenario Statements

• 2026/27 to 2035/36 – Consolidated & Individual Funds Income Statements

• 2026/27 to 2035/36 – Consolidated & Individual Funds Balance Sheets

• 2026/27 to 2035/36 – Consolidated & Individual Funds Cash Flow Statements

• 2026/27 to 2035/36 – Council Reserves

• 2026/27 to 2035/36 – Capital Works Statement

PLANNED SCENARIO FINANCIAL STATEMENTS - GENERAL FUND INCOME STATEMENT

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 General Fund - Income Statement Projections

Operating Result from Continuing Operations Surplus/(Deficit)

Net Operating Result for the year before Grantsand Contributionsprovided for Capital Purposes Surplus/(Deficit)

PLANNED SCENARIO FINANCIAL STATEMENTS - WATER FUND INCOME STATEMENT

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Water - Income Statement Projections

Net Operating Result for the year before Grantsand Contributionsprovided for Capital Purposes Surplus/(Deficit)

PLANNED SCENARIO FINANCIAL STATEMENTS - SEWERAGE FUND INCOME STATEMENT

PLANNED SCENARIO FINANCIAL STATEMENTS - WASTE FUND INCOME STATEMENT

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Waste - Income Statement Projections

PLANNED SCENARIO FINANCIAL STATEMENTS - CONSOLIDATED BALANCE SHEET

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Balance Sheet Projections

PLANNED SCENARIO FINANCIAL STATEMENTS - GENERAL FUND BALANCE SHEET

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 General Fund - Balance Sheet Projections

PLANNED SCENARIO FINANCIAL STATEMENTS - WATER FUND BALANCE SHEET

PLANNED SCENARIO FINANCIAL STATEMENTS - SEWERAGE FUND BALANCE SHEET

Council Long TermFinancial

2026/27 - 2035/36 Sewerage - Balance Sheet Projections

PLANNED SCENARIO FINANCIAL STATEMENTS - WASTE FUND BALANCE SHEET

PLANNED SCENARIO FINANCIAL STATEMENTS - CONSOLIDATED CASH FLOW STATEMENT

PLANNED SCENARIO FINANCIAL STATEMENTS – GENERAL FUND CASH FLOW STATEMENT

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 General Fund - Cash FlowStatement Projections

PLANNED SCENARIO FINANCIAL STATEMENTS – WATER FUND CASH FLOW STATEMENT

PLANNED SCENARIO FINANCIAL STATEMENTS – SEWERAGE FUND CASH FLOW STATEMENT

PLANNED SCENARIO FINANCIAL STATEMENTS – WASTE FUND CASH FLOW STATEMENT

PLANNED SCENARIO FINANCIAL STATEMENTS – COUNCIL RESERVES

PLANNED SCENARIO FINANCIAL STATEMENTS – CAPITAL WORKS STATEMENT PROJECTION

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Capital Works Statement Projections

FAVOURABLE SCENARIO FINANCIAL STATEMENTS - GENERAL FUND INCOME STATEMENT

Council Long TermFinancial Plan 2026/27 - 2035/36 General Fund - Income Statement Projections

Operating Result from Continuing Operations Surplus/(Deficit)

Net Operating Result for the year before Grantsand Contributionsprovided for Capital Purposes Surplus/(Deficit)

FAVOURABLE SCENARIO FINANCIAL STATEMENTS - WATER FUND INCOME STATEMENT

Council Long TermFinancial Plan 2026/27 - 2035/36 Water - Income Statement Projections

Net Operating Result for the year before Grantsand Contributionsprovided for Capital Purposes Surplus/(Deficit)

FAVOURABLE SCENARIO FINANCIAL STATEMENTS - SEWERAGE FUND INCOME STATEMENT

- 2035/36 Sewerage - Income Statement Projections

FAVOURABLE SCENARIO FINANCIAL STATEMENTS - WASTE FUND INCOME STATEMENT

FAVOURABLE SCENARIO FINANCIAL STATEMENTS - CONSOLIDATED BALANCE SHEET

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Balance Sheet Projections

FAVOURABLE SCENARIO FINANCIAL STATEMENTS - GENERAL FUND BALANCE SHEET

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 General Fund - Balance Sheet Projections

FAVOURABLE SCENARIO FINANCIAL STATEMENTS - WATER FUND BALANCE SHEET

FAVOURABLE SCENARIO FINANCIAL STATEMENTS - SEWERAGE FUND BALANCE SHEET

FAVOURABLE SCENARIO FINANCIAL STATEMENTS - WASTE FUND BALANCE SHEET

FAVOURABLE SCENARIO FINANCIAL STATEMENTS - CONSOLIDATED CASH FLOW STATEMENT

FAVOURABLE SCENARIO FINANCIAL STATEMENTS – GENERAL FUND CASH FLOW STATEMENT

Fund - Cash FlowStatement Projections

FAVOURABLE SCENARIO FINANCIAL STATEMENTS – WATER FUND CASH FLOW STATEMENT

FAVOURABLE SCENARIO FINANCIAL STATEMENTS – SEWERAGE FUND CASH FLOW STATEMENT

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Sewerage - Cash FlowStatement Projections

FAVOURABLE SCENARIO FINANCIAL STATEMENTS – WASTE FUND CASH FLOW STATEMENT

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Waste - Cash FlowStatement Projections

FAVOURABLE SCENARIO FINANCIAL STATEMENTS – COUNCIL RESERVES

FAVOURABLE SCENARIO FINANCIAL STATEMENTS – CAPITAL WORKS STATEMENT PROJECTION

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Capital Works Statement Projections

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS – GENERAL FUND INCOME STATEMENT

Council Long TermFinancial Plan 2026/27 - 2035/36

Fund - Income Statement Projections

Net Operating Result for the year before Grantsand Contributionsprovided for Capital Purposes Surplus/(Deficit)

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS – WATER FUND INCOME STATEMENT

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Water - Income Statement Projections

Net Operating Result for the year before Grantsand Contributionsprovided for Capital Purposes Surplus/(Deficit)

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS – SEWERAGE FUND INCOME STATEMENT

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Sewerage - Income Statement Projections

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS – WASTE FUND INCOME STATEMENT

2026/27 - 2035/36

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS - CONSOLIDATED BALANCE SHEET

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Balance Sheet Projections

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS - GENERAL FUND BALANCE SHEET

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 General Fund - Balance Sheet Projections

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS - WATER FUND BALANCE SHEET

Council Long TermFinancial Plan 2026/27 - 2035/36 Water - Balance Sheet Projections

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS - SEWERAGE FUND BALANCE SHEET

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Sewerage - Balance Sheet Projections

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS - WASTE FUND BALANCE SHEET

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS - CONSOLIDATED CASH FLOW STATEMENT

Council Long TermFinancial Plan 2026/27 - 2035/36

Investments on Hand - End of Reporting Period

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS – GENERAL FUND CASH FLOW STATEMENT

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS – WATER FUND CASH FLOW STATEMENT

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS – SEWERAGE FUND CASH FLOW STATEMENT

Federation Council Long TermFinancial Plan 2026/27 - 2035/36

Sewerage - Cash FlowStatement Projections

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS – WASTE FUND CASH FLOW STATEMENT

- 2035/36

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS – COUNCIL RESERVES

UNFAVOURABLE SCENARIO FINANCIAL STATEMENTS – CAPITAL WORKS STATEMENT PROJECTION

Federation Council Long TermFinancial Plan 2026/27 - 2035/36 Capital Works Statement Projections