In 2012, the State Government was focused on local government amalgamations. Mel-mantle was on the cards via merging Fremantle with East Fremantle and Melville. Given the significantly higher population in Melville, the Fremantle Council was concerned that our reserve funds would be spent by a future council outside of Freo, largely made up of Melville representatives.
So, we created a number of new reserve funds, so that Fremantle’s cash reserves would be spent on the future needs of Fremantle residents. New reserves included: a Cantonment Hill fund, the Town Hall restoration fund, the Stan Reilly reserve, an Esplanade Skate Park (Playspaces) fund, the Leisure Centre Upgrade fund, and a Kings Square Improvements fund. This was in addition to the existing parking, heritage, Fremantle markets, parks and reserves, sustainability and investment reserves.
At the time, the reserves totaled around $27.5m. Of course, local government amalgamations were later abandoned, and we got on with renewing the centre of Fremantle. For example, since 2014 the council invested almost $10m in heritage renewal.
Heritage (2016/17) $4.3m approx
- Completion of $2.8m exterior restoration works for the Fremantle Town Hall and $77k to repair and repaint walls in the Fremantle Town Hall atrium.
- $700k for Stage 2 upgrades of the Old Fremantle Boys’ School.
- $680k for refurbishment of the Naval Stores building.
- $130k on conservation works at Fremantle Arts Centre to repair entrance walls and windows and to replace doors and floors.
Heritage (2015/16) $4.3million approx
- 1.25% of rates to heritage conservation reserve
- $1.7m to support the proposed stage one and two works for the Old Fremantle Boys School on Princess May Park.
- $550,000 for further restoration of the Fremantle Markets
- $500,000 to continue upgrade works on the Evan Davies building in South Terrace.
- 400,000 for restoration of the Union Stores building
- 188,000 for conservation works for Gil Fraser Pavilion at Fremantle Oval.
- $480,000 for improvements to Victoria Pavilion
- $350,000 for restoration of the Cantonment Hill Signal Station.
Heritage (2014/15) $0.7 million approx.
- $490k for maintenance work at Victoria Pavilion (Fremantle Oval)
- $200k for Old Fire Station upgrades
We were able to purchase Jones Street property, the last large parcel of land in O’Connor, as a potential future depot site, so that when the time came to redevelop the Montreal St site as part of the Knutsford precinct, we had somewhere to shift the essential depot facilities for our city. This has not yet been required, so we are holding the land, which has been paid off in full and attracts no interest costs for the city. The City is in the fortunate position to play the long term game, and despite a decline in land value across Perth over the past few years, we are able to hold onto the land (at no cost) for future use or to sell when the market is higher, should we not need some or all of it. A responsible local government looks to the future needs of our community and invests accordingly, and that is what we’ve done.
We spent around $3 million on improvements to Cantonment hill, including the new playground on Tuckfield st and making the Naval Stores usable, including new public toilets for people using the area.
We used some of the parking reserve fund to build new car parks on Point Street, the 155 bay Cappuccino Strip on South Tce, improvements to the North Fremantle car park and the Fremantle Park car park will be constructed later this year. We have actually created more parking than we have sold (excluding Kings Square, and of course the Queensgate car park is still a public car park, with a $10m upgrade thanks to Sirona).
The Sustainability Reserve has been used to implement our Energy Efficiency Strategy, which will is reducing ongoing operational costs for energy consumption by the city, including local sporting clubs.
Around $50m is being invested in the construction of the new civic and community building in Kings Square and improvements, including a new children’s playground, in Kings Square. This significant investment will revitalize our city centre, be a catalyst for urban renewal throughout the area and bring more people into the city and making it a more safe and vibrant public space.
The Kings Square development includes commercial lettable space including ground floor retail and a whole floor of A Grade office space, secure tenants are being confirmed right now, and once built, this will bring additional revenue to the City that was not projected as part of the Kings Square business case. The $20m loan for the project will be locked in at a fixed interest rate which could be as low as 2.7% for 20 years, barely above CPI, and we have budgeted to be able to pay it off in 10 years, without rate increases at or around CPI. The construction contract with Pindan is a fixed-price contract, so it cannot blow out.
At present, there is $35m in the investment reserves. After Kings Square is complete, there will be $8m remaining.
Asset sales of commercial properties (except for Kings Square)
We did a detailed assessment of the return on investment from the City’s whole commercial portfolio. We decided to sell anything that did not achieve a commercial return, to be able to realise the value of the asset to invest in more strategic assets. The commercial property portfolio has varied throughout the years, as properties are bought and sold to achieve strategic aims. For example the Tagliaferri Council purchased the Point street car park and adjacent theatre in order to sell it for redevelopment. The Hilton Doubletree project is approved for the site. The value of the Council’s commercial portfolio has changed from $60m to $32m in recent years as the urban renewal of the CBD gets underway.
A responsible council invests in our needs for the future – we did this by selling underperforming assets and buying others that are needed for strategic purposes. The council is not in the business of undertaking commercial redevelopment. Instead, we sell the properties with appropriate planning controls and caveats on the sale to achieve strategic aims that support the city’s revitalisation.
There has been some discussion about the City’s FHI score in recent years. This year we scored 46, last year it was 87. The City of Fremantle’s FHI score was 79 for the 2014-15 financial year. It fell to 42 in 2015-16 before recovering to 87 in 2016-17. Next year, it is likely to be around 58. However, the FHI is not a particularly useful metric, as you can see by the way it bounces around from year to year.
The FHI score relies on an operating surplus or deficit, which includes depreciation of assets. We have always run a balanced cash budget with a small surplus. The Fremantle Council is committed to operating a balanced budget and not over-rating our residents and ratepayers. However, the FHI methodology encourages councils to get more rates than required in order to get a better score. We have chosen not to do this to ratepayers.
Rates increases in Fremantle over the last four years have been no more than 4%. Prior to that, particularly under the Tagliaferri / Dowson Council, rates increases were much more, up to 12% – as this graph shows:
Rate in the dollar, Fremantle rates are equal to East Fremantle and Melville, and slightly lower than Cockburn – however what ratepayers actually pay is influenced by the Gross Rental Value (GRV) calculated by Landgate. Since land values and rents are higher in Fremantle, the rates end up being a little higher.
Some candidates are promising to make parking free (or free for 2 hours) and reduce the cost of parking fines. While this may be a popular statement, it will have a significant impact on the Council’s budget. Almost 15% of the City’s revenue comes from parking fees, so then the question will be how they make up that loss of revenue? Will they increase rates significantly again? Or will they cut services?
Of course this is where something like a participatory budget would be useful. A participatory budget process is when the community is asked to have their say on how the budget should be balanced. First, the scope of the decision-making is established – in Fremantle’s case, we are considering using a participatory process to help finalise the Ten Year Budget, by having community input into the future capital project priorities. Usually this is hotly debated by Councillors, based on advice from the staff. We work out how much we can afford for capital projects, or consider raising revenue to help pay for more sooner.
In a participatory process, members from the community – often selected at random – are invited to participate in information sessions, so they can make informed decisions on behalf of the community. The City of Geraldton undertook a participatory budget process in 2013/14. One of the key outcomes from such a process is an improvement in the level of understanding about how the Council operates and makes decisions. It improved the level of participation and trust between the council and the community. I think an engaged, intelligent and knowledgeable community like Fremantle would benefit greatly from undertaking such a democratic process.
Check and Balances
Good financial governance is about having the appropriate checks and balances in place, and making strategic decisions in the best interests of the whole city. This is something I take very seriously. As a participant on the Audit and Risk Committee, we go over the finances in great detail four times a year. External advisors examine the books regularly and the Auditor General did a review of Fremantle’s finances last year and gave the city a good bill of financial health, only raising a few minor procedural issues that have since been addressed. Oversight of the City’s finances is a significant job for councillors and the external checks and balances help us to ensure everything is on track.