Advice to Local Government

Council advice 2024-25

Under the Local Government Advice Scheme established through the Local Government Act 1999, the Commission has released advice for the third tranche of 17 of the State’s 68 councils. Under the Scheme, the Commission is an advisory body, providing advice to all councils across a four-year cycle. The aim of the Scheme is to provide independent, risk-based advice to assist councils when making long-term financial and investment decisions for the benefit of ratepayers.

Councils are long-term businesses with ongoing service provision obligations and long-lived assets. From an overall community perspective, it is important that council rates are set at levels as low as sustainably possible, while:

providing the standard and breadth of services that ratepayers value, and
ensuring that councils have robust, long-term asset management, financing and operational plans that allow them to manage their assets efficiently and effectively over the long term, so as to sustain the delivery of those services and minimise their lifetime cost.

In that context, the advice relates to the appropriateness of councils’ long-term financial plans, infrastructure and asset management plans and revenue sources as outlined in funding plans. It is an advisory scheme, identifying both risks and areas of good practice for councils to consider, with decision-making remaining in the hands of the councils.

Having reviewed, in accordance with the statutory scheme, available material in relation to the third tranche of 17 councils, the Commission has several observations across the sector as a whole, noting that not all observations apply to all councils.

In the Commission’s view, councils that are performing well generally have in place robust and effective behaviours, strategies and practices in relation to:

governance
understanding their asset base and renewal needs
alignment of Long-Term Financial Plans and Infrastructure and Asset Management Plans
clear and transparent planning input assumptions that are reviewed annually
cost control and strategic approach to revenue
balancing the use of cash and debt, and
community consultation.

Effective asset management continues to challenge some councils. Issues that the Commission has observed include:

insufficient understanding of current asset values, condition and remaining useful lives to drive effective asset management planning
inadequate alignment between Infrastructure and Asset Management Plans and Long-Term Financial Plans
inadequate maintenance, renewal and replacement practices to optimise asset life and costs
asset registers not comprehensive or current, and
allowing significant backlogs of asset renewal and replacement to build up, sometimes while prioritising the development of new or upgraded assets, while the renewal and replacement of existing assets is under-funded. This can lead to councils over-extending themselves financially and finding themselves unable to maintain assets and services for their communities.

The Commission has seen some instances of:

councils potentially not fully complying with the requirements of the Local Government Act 1999 in their financial management practices
multiple years of forecast deficits, without a plan to return to financial sustainability
insufficient transparency around forecast rate increases and the underlying assumptions
inadequate planning for cost controls, and
over-accumulating cash reserves without a clear reason. The Commission advises obtaining ratepayers’ opinion on the policy for cash reserves, in conjunction with expert advice on appropriate minimum cash balances. The Commission also supports the judicious use of debt for new infrastructure, to spread the cost more equitably across the community over time.

The Commission has observed that councils strive to deliver financially sustainable services for ratepayers and communities, while operating in diverse and challenging geographic and social contexts.
Current financial sustainability status

When viewing the current status of the 17 councils, the Commission has formed the view that six are currently sustainable, five are mostly sustainable, and six councils are potentially unsustainable, marginally unsustainable or unsustainable as follows:

Sustainable	Mostly sustainable	Unsustainable/ Marginally/ Potentially unsustainable
Campbelltown City Council	City of Adelaide	Alexandrina Council
City of Charles Sturt	City of Mount Gambier	District Council of Tumby Bay
City of Unley	Coorong District Council	Renmark Paringa
District Council of Elliston	District Council of Loxton Waikerie	The Flinders Ranges Council
Mount Barker District Council	Port Pirie Regional Council	Town of Gawler
Tatiara District Council		Wudinna District Council

Forecast financial sustainability projection

When viewing the forecast of the 17 councils’ financial sustainability projections (through the next 10-year period), the Commission has formed the view that four are likely to be sustainable in this period, six are likely to be mostly sustainable, and seven councils are likely to be potentially unsustainable or unsustainable as follows:

Sustainable	Mostly sustainable	Unsustainable/ Marginally/ Potentially unsustainable
Campbelltown City Council	City of Charles Sturt	Alexandrina Council
City of Unley	City of Mount Gambier	City of Adelaide
District Council of Elliston	Coorong District Council	District Council of Loxton Waikerie
Tatiara District Council	Mount Barker District Council	District Council of Tumby Bay
	Port Pirie Regional Council	Renmark Paringa
	Town of Gawler	The Flinders Ranges Council
		Wudinna District Council

The Commission thanks each of the 17 councils for meeting with Commission staff, and for providing relevant information to assist the Commission in preparing the advice.

The Commission’s advice is generally based on information available to the Commission as at 1 February 2025.

For further information on the advice, including the advice provided to each council, please refer to the Commission’s advice to Local Government.

The approach to the scheme is detailed in the Commission’s Framework and Approach – Final.