‘No instant fix’ as Derby-West Kimberley shire works to reduce huge surplus shortfall

A Kimberley shire requiring a 46 per cent rate rise to meet the lowest acceptable operating surplus ratio says the move is not possible, and would damage local businesses. The Shire of Derby-West Kimberley was, in 2018-19, ranked the 14th least financially healthy local government area in WA. The position of the Shire was cause for concern for the auditor, who ordered the executive to prepare a report for Local Government Minister John Carey detailing what action had been taken or was intended to be taken. Shire chief executive Amanda O’Halloran said there had already been improvements in the Shire’s ratio, but an instant fix would not be possible. “In order to meet the lowest acceptable ratio, as set by the department, council would have had to increase its own resource revenue in 2019-20 by $5.5 million (a 46 per cent increase) which is not possible given the size of the shire,” she said. “Nevertheless, council is monitoring opportunities to increase the Shire’s own resources income and reduce costs, but it is likely that the adverse ratio trend will continue.” Ms O’Halloran said community demand for services, ever-increasing compliance requirements, the relatively small rate base, and regular calls to reduce or not increase rates, had made it hard to rein in the ratio. A positive ratio is a key indicator of a local government’s financial performance, showing the executive has the ability to deliver asset management and community services in a financially sustainable way. A negative ratio indicates the percentage increase in total own-source revenue, mainly comprising rates, which would be required to achieve a break-even operating result. The Shire’s ratio has now been below DLGSC’s standard, between 0.01 and 0.15, for the past three years. Shire of Derby-West Kimberley president Geoff Haerewa said the situation arose from the “tsunami” of businesses leaving the area in late 2014. “A number of mines left and the detention centre closed,” he said. “We lost a significant portion of our rates income from that. “Unfortunately, the council at the time did not act quick enough in reducing operating costs, so we went from a relatively healthy surplus to a deficit. “Since Ms O’Halloran joined the Shire she has worked to bring the budget and our expenditure back to an appropriate level. It’s not at that level yet, but it’s not something we can solve overnight.” The comments have been made ahead of the Shire budget and rates decision.