An interesting bit for the caring Kangaroo Island ratepayer. For the sake of commenting and summarising:

As long as Council runs an operational deficit, more precisely a deficit without taking into account depreciation costs and interests paid on its large debt, and because of the mathematics of compounding, it is in principle neither wise financially nor useful to the community for Council to sell its real-estate assets. It would be like hosing a dam to replenish it without first repairing the leaking wall.
But this is just a general statement, and it could be that there are a number of so-called Council “assets” which will in all likelihood never generate any operational revenue but which entail operational costs to Council, either directly or indirectly — one can think e.g. of the many so-called Council “reserves” on which Council does not practice duty of care with regards to fire risks, opening itself to potential legal compensation costs. Once sold, these rather useless and/or costly properties would start generating revenues in the form of rates being paid to Council…
From his own words, it appears that the CEO is aware that selling Council land is not the panacea to Council’s financial troubles.
— Webmaster

Cr Walkom – Questions on Notice 8 August 2012

Answers by Andrew C Boardman, Kangaroo Island Council CEO

F.            Expenditure Reduction options Report:

At the December 2011 meeting Council resolved: “That the CEO provides a broad based overview of expenditure reduction options in conjunction with best medium and worse case scenarios for projected revenue increases. The overview should identify indicative reductions and revenue increases and how they might be achieved to target that our key financial indicators will be within those of a sustainable Council within 7 years and within 10 years as a maximum.”
With Council having Community land currently on the market to fund refurbishment of asset requirements and currently considering further land sales to fund capital projects, what is the current status of this report?

Answer F :

Having delivered the financial year 2011-’12 and completed the budget and annual business plan for 2012-’13 we are now closer to being able to understand where there is ability to reduce costs and where there is the ability to grow revenue. As Council are aware there is significant work being undertaken in conjunction with our Auditors to evaluate how we may reduce our depreciation costs significantly for the year 2011-’12 and ongoing. With depreciation representing 35% of our operational expenditure it is the single largest component cost and one where we believe there is excellent opportunity for cost reduction. Operational efficiency gains / cost reduction is “bread and butter” work for the Senior Management Team and our ability to maintain services whilst freezing overall expenditure for 2012-’13 budget year is a reflection of this. The budget consultation process highlighted our need for additional capacity in key areas to assist in converting observations and ideas for cost cutting and efficiency gain into hard $$ and successful recruitment in all but two positions has now started to allow us to work harder on the planning and organising that is a keystone to efficiency and cost reduction initiatives.
Within the budget we have made provision for $120,000 towards evaluating identified cost reduction and income generation initiatives and work has commenced on some of these already.
The report is anticipated to come together over the next quarter in conjunction with work on the long term financial plan.

Note to clarify Councillor Walkom’s statement with regards to Community Land sales

It is clear that the sale of Community Land as a means of generating cash is not the solution to long term sustainability. A Council prior to the current one made a decision in conjunction with the Community to offer for sale land that is contingent on the proceeds being used to replace / significantly refurbish / expand Community infrastructure such as the American River Hall and / or possibly provide match funding towards large capital outlay projects such as the proposed Emu Bay Boat Ramp and Safe Haven Facilities. These are not typical capital works from the perspective of this Council and it is not being suggested (by prior Councils or this one) that these sales or future sales would be used for basic refurbishment activities that should form part of a responsible asset management program.
Whilst much of Council land does not cost Council money to own there is much that does not generate any revenue opportunities either and a review of the Council and Community Land register will form part of our sustainability strategies moving forward. There would be a case for disposal of land that has little strategic value for Council and the proceeds used to reduce Council debt (thus reducing interest payments on an ongoing basis). There is also the case that Council may wish to consider sales to co-fund strategic capital investment on certain land portions that would drive recurrent revenues to support Council’s financial operation.