ANNUAL REPORT Local Government Finance Authority of South Australia 2018 Member Councils Contents As at 30 June 2018 City of Adelaide City of Mount Gambier Board of Trustees 2 Notes to and Forming Part of the 30 Adelaide Hills Council District Council of Mount Remarkable Financial Statements Chairman’s Review 3 Note Index 30 Adelaide Plains Council Rural City of Murray Bridge Economic Conditions 4 Objectives of the Local Government 31 Alexandrina Council Naracoorte Lucindale Council Lending Activities 5 Finance Authority of South Australia The Barossa Council Northern Areas Council State Local Government Statement of Accounting Policies 31 Barunga West Council City of Norwood, Payneham & St Peters Infrastructure Partnership (SLGIP) 6 Other Income 36 Investment Activity 6 Administration Expenses 36 Berri Barmera Council City of Onkaparinga Information Technology 7 Other Expenses 36 City of Burnside District Council of Orroroo Carrieton Compliance 7 Cash and Liquid Assets 36 Campbelltown City Council District Council of Peterborough The Board 8 Accrued Interest Receivable 37 The Staff 9 Investment Securities 37 District Council of Ceduna City of Playford Marketing and Sponsorship 10 Other Assets 37 City of Charles Sturt City of Port Adelaide Enfield Net Loans and Advances 37 Clare & Gilbert Valleys Council Port Augusta City Council The Authority Profile 12 Property, Plant & Equipment 37 District Council of Cleve City of Port Lincoln The Authority 12 Deposits from Councils and 38 Members 12 Local Government Bodies District Council of Coober Pedy Port Pirie Regional Council Guarantee 12 Accrued Interest Payable 38 Coorong District Council City of Prospect Income Tax Equivalents 12 Borrowings 38 Copper Coast Council Renmark Paringa Council Bonus 13 Derivatives 38 State Wide Coverage 13 Provisions 39 District Council of Elliston District Council of Robe Other Liabilities 39 The Flinders Ranges Council Municipal Council of Roxby Downs Profit Before Income Tax Equivalents 14 Superannuation Commitments 39 District Council of Franklin Harbour City of Salisbury Notes to Statement of Cash Flows 40 Town of Gawler Southern Mallee District Council Case Studies 15 Key Management Personnel 41 Copper Coast Sport and Leisure Centre 16 Employee Remuneration 42 Goyder Regional Council District Council of Streaky Bay Northern Adelaide Waste Contingent Assets and Liabilities 43 District Council of Grant Tatiara District Council Management Authority (NAWMA) 20 Financial Risk Management 44 City of Holdfast Bay City of Tea Tree Gully State Local Government Transactions with South Australian 48 Infrastructure Partnership (SLGIP) 22 Government Kangaroo Island Council District Council of Tumby Bay Fair Value of Financial Instruments 48 District Council of Karoonda East Murray The City of Unley Financial Report 25 District Council of Kimba City of Victor Harbor Statement of Comprehensive Income 26 Certification of the Financial Statements 51 Kingston District Council Wakefield Regional Council Statement of Financial Position 27 Statement of Changes in Equity 28 Independent Auditor’s Report 52 Light Regional Council Corporation of the Town of Walkerville Statement of Cash Flows 29 District Council of Lower Eyre Peninsula Wattle Range Council District Council of Loxton Waikerie City of West Torrens Corporation of the City of Marion City of Whyalla Mid Murray Council Wudinna District Council City of Mitcham District Council of Yankalilla Mount Barker District Council Yorke Peninsula Council LGFA Annual Report 2018 1 Board of Trustees Mr John Comrie Ms Heather Watts Chairman Director Commercial Operations JAC Comrie Pty Ltd Department of Treasury and Finance LGA Nominee South Australian Government Financing Authority (SAFA) Appointee of the Treasurer Heather was appointed on 23 October 2017 Mr Craig Fowler's term expired on 22 October 2017 Chairman’s Review Cr John Frogley Ms Susan McCormick Deputy Chairman Deputy Director Councillor State Recovery Office Now into my second year as Councils and prescribed bodies continued City of Norwood, Payneham Appointee of the Chairman, I am very pleased to use increasing levels of floating rate debt & St Peters Minister for Finance to report that the LGFA to give them flexibility to actively manage Susan’s position ceased upon her LGFA Elected Member resignation in December 2017 continues to perform well in their cash flows, although there was still a serving the local government healthy demand for principal and interest Awaiting appointment of new Appointee sector and that further (credit foncier), fixed term funds to support progress has been made. infrastructure projects. The Board has taken a Our financial performance this year was Mr Matt Pinnegar Ms Annette Martin keen interest in corporate excellent. An operating profit of $6.28 Chief Executive Officer Manager Financial Services governance with policies million was achieved against a budget of Local Government Association reviewed and strengthened. $5.24 million. This is the second highest City of Charles Sturt Mr John Comrie Deputy: Mr Chris Russell profit achieved in our 34 year history and LGFA Elected Member Chairman Strategic Adviser I am pleased to report it is pleasing to report that much of this that the Auditor General’s Department and increase was achieved by active interest rate Galpins (Auditors), who review our Financial risk management in the balance sheet, not Management Compliance Programme, have wider margins. This performance means a given the LGFA a very good report card. win–win for local government. An increased tax equivalent payment will be made The LGFA has again managed to provide available for local government research and our Members with a range of products and development purposes and the bonus paid to Dr Andrew Johnson services that continue to ensure the very members will be increased from $2 million to AK Johnson & Associates best financial outcomes. During the year $2.3 million. LGFA retained earnings will also LGA Nominee we provided 100% of all loans advanced to increase and this strengthens the capacity of councils in South Australia and our share of the organisation to continue to serve local available deposit funds was in excess of 85%. government in future. While pleased with these results, we are keen to improve our deposit raising performance I would like to sincerely thank all Members as every dollar raised from our members, for their support and the Government for its means one less dollar that we need to borrow guarantee and liquidity via SAFA. externally, including, from the State. 2 LGFA Annual Report 2018 3 Chairman’s Review Economic Conditions Lending Activities Economic Conditions Lending Activities to councils and the State will make an annual The global economy improved over the last “The Reserve Bank of Australia The level of loans outstanding as at 30 June contribution to the LGA over ten years to year as the US, most of Asia and the Eurozone (RBA) left the official cash rate on 2018, has increased by around $74 million enable the loan to be repaid). experienced declining unemployment and hold at 1.5% over the past financial from last year. This is mainly attributable to higher economic growth, during a period of the increase in the amount drawn-down Interestingly, new CAD facilities established benign inflation. year. The cash rate has been on under the popular Cash Advance Debenture this year totalled just under $162 million, hold since August 2016 with this (CAD) product of $66 million. which we feel highlights council’s future plans The US Federal Reserve increased the target being its longest period of stability for capital expenditure and the flexibility and federal funds rate by 0.75% over the past year on record. Total loans at balance date were $714 million ease of use of the CAD product. It also hopefully and is currently targeting a range of between (last year $640 million) which comprised suggests that councils are becoming more 1.75 - 2.00%. This change to the federal funds fixed rate loans of $455 million and CAD comfortable with more flexible use of debt. rate caused volatility in short term funding and facilities of $259 million. bond markets around the globe as US fund The Australian economy improved over Long term fixed interest rates have moved managers repatriated funds to take advantage the past year. Australian Gross Domestic The increase in lending levels is pleasing to in a relatively tight range this year with ten of these higher yields. In December, President Product (GDP) rose from 2.0% to 3.1% per note, although the Board believes that many to twenty-year rates still in the mid 4% per Trump delivered one of his campaign promises annum. The unemployment rate fell from councils could benefit their communities by annum range. when the US senate approved major changes 5.6% to 5.4%, however low wage growth and further prudent increased strategic use of to US Tax law. The changes saw tax rates for underemployment pointed out some of the debt having regard to their circumstances corporates and individuals reduced and the structural issues within the employment market. and nature of their responsibilities. This stimulatory effects of cuts saw equity markets Housing prices in Australia’s two largest capital was a finding of the South Australian Local rise around the globe. In March, President cities fell or moderated over the past year with Government Financial Sustainability Inquiry Trump announced trade tariffs on Chinese flow on effects from the bank royal commission in 2005 and is still relevant today. aluminium and steel. This started a round of expected to dampen property markets further. tit for tat tariff announcements between the The Australian Dollar (AUD) ranged between countries with some commentators calling this $0.74 and $0.80 USD over the year in review Total loans at balance date were the start of a trade war between the economic ending the year at the low point of $0.74 USD. $714 million (last year $640 giants.