Long Term Financial Sustainability Review

Published on 30 October 2025

Yarriambiack Shire Councils Long Term Financial Sustainability Review

On 29 October 2025, the Yarriambiack Shire Councillors approved the Council’s Long Term Financial Plan, financial health check, and sustainability review, making them ready to proceed with a deliberative engagement process involving the community.

Yarriambiack Shire's ongoing financial sustainability challenges have long been recognised.  The issue was first highlighted in the Merv & Rohan Whelan Local Government Financial Sustainability: Abridged Report (2010) and has continued to be addressed, most recently in 2025, with the Municipal Association Victoria presenting a Financial Sustainability Report for Victorian Small Councils.

In June 2025, Tammy Smith, Chief Executive Officer of Yarriambiack Shire Council, with the support of Chief Financial Officer Anita McFarlane, initiated an independent long-term financial assessment of the organisation.

It was acknowledged that government funding was decreasing, service delivery costs were rising at a rate far exceeding the consumer price index, and rate capping was not keeping pace with employee expenses. Therefore, a comprehensive review of Council's operational model was necessary to ensure effective functioning both now and in the future.

Mrs Smith noted, “that we are currently entering a period that will require careful decision-making regarding the services we offer and our methods of delivery, both now and in the future”.

“The Long Term Financial Plan and Health Check for 2026–2036 is now available on Council’s website through the Have Your Say portal.  Additionally, a video presentation is being produced and will be available for viewing on Council’s website and Facebook page”, stated Mrs Smith.

“We have also made available hard copies of the documents for collection at our Library and via our Community Engagement Van”.

“We invite your feedback, as we are seeking community input prior to making final recommendations to Council for implementation in the 2026/27 budget year. Community input is crucial to informing our future direction”, continued Mrs Smith.

Community feedback can be provided via the Website, or by sending an email to info@yarriambiack.vic.gov.au , or a letter, addressed to Tammy Smith, Chief Executive Officer, PO Box 243 Warracknabeal 3393.

Submissions close 11.59pm, Friday 19 December 2025.

END OF RELEASE

Tammy Smith

Chief Executive Officer

DRAFT-Long-Term-Financial-Plan-2026-2036.pdf(PDF, 3MB)

A summary of the Long Term Financial Sustainability Review is provided below:

An independent long term financial sustainability review was undertaken and provided a detailed comparison of 13 other small rural shire Councils across 17 different indicators.

Overall, Yarriambiack Shire’s financial health was assessed as C–C+ which is quite a low rating (with A being highest).  Most Small Rural Shire Councils are under financial pressure, but the Yarriambiack Shire Council’s base position is not as comparatively strong as others.

Impact of Rate Capping: Rate Capping was introduced by the Victorian State Government in 2016/17 and has applied for the past ten financial years.  The rate cap is announced in December of each year to be applied in the following financial year.

In its infancy, the rate cap was aligned to the forecast Consumer Price Index (CPI) established by the Department of Treasury and Finance. As CPI increased, however, the State Government moved away from this model and set the cap well below CPI even though the costs for Local Government to deliver services were rising above CPI.

CPI is not an index that applies well to Local Government.  It is based on a basket of goods that are not central to what Local Government procures.  An index that is based on the Wages Price Index and the Construction Costs Index would be a more appropriate indication of local government costs.

Over the past four years, our Council has seen a significant increase in the cost of delivering infrastructure projects. In many cases, this has been as much as 30%.

Given these cost pressures, the rate cap is now a key factor in the diminishing financial sustainability of most Councils, including Yarriambiack.

Impact of Cost Shifting:  The State and Federal Governments continue to push costs onto Local Government, with Yarriambiack experiencing the;

• The introduction of glass collection, as well as the forthcoming requirement for food and organic garden waste (FOGO) services, has resulted in increased responsibilities for waste management. These initiatives are associated with significant financial implications for our small rural Council.
• Building Services responsibilities and Victorian Building Authority requirements are being transferred to Councils, including areas such as Swimming Pool and Barrier Compliance, without additional resources provided.
• There is an increasing shortfall in funding required to provide essential library services, which play a vital role in promoting social health, wellbeing, and inclusion within our community.

• The State Government has announced in recent years the Best Start/ Best Life program which includes 15 hours a week of free kindergarten for 3-year-olds and increasing four-year-old kindergarten services from 15 hours a week to 30 hours.  These services are largely provided within facilities owned by YSC. No funding is available for the ongoing operational and management costs of these facilities.
• According to Municipal Association of Victoria figures, between 2014 and 2018, Councils across Victoria invested $478 million in early years infrastructure which was three times the amount invested by the State.  This is despite there being no obligation under the legislation for local government to provide early years infrastructure.  Yarriambiack Shire previously allocated more than $400,000 from its own revenue sources to address the facility requirements for early years services in Warracknabeal.
• The State Government has required all Local Governments to designate a Municipal Emergency Management Officer and a Municipal Recovery Manager as senior Council officers. These positions are not supported by State funding.

Inquiry Held into Local Government Funding and Services: In November 2024, the State Government Legislative Council Economy and Infrastructure Committee released its findings on an Inquiry held into Local Government Funding and Services.  These findings were produced following the Committee meeting and hearing from many of Victoria’s Councils. Whilst there were over 40 findings in the report the following were the most noteworthy.

Local government in Victoria:

Finding 1: The costs of infrastructure and service delivery have risen at a pace that outstrips the growth in grant funding.

Finding 3: Local councils are facing increased budget pressures due to cost shifting by state and federal governments.  Without substantial changes, the financial sustainability of council operations is at risk, with some services already being reduced or discontinued entirely.

Finding 19: Victorian councils face a trend of deteriorating financial sustainability across all council types, a trend precited to continue over the next five to ten years, due at least in part to cost shifting.

Finding 20: Rate capping and cost shifting has significantly constrained councils’ revenue, and is a key threat to ongoing financial sustainability.

Recommendation 1: That the Committee send a request to the Victorian Auditor-General to investigate and report on the financial impacts of cost-shifting from state and federal governments onto all Victorian councils.

The Yarriambiack Financial Health Check

The health check identified in summary that:

• Council has limited opportunity to sell assets to increase cash funds and reduce operating and maintenance costs into the future.
• Council has a low level of cash funds which is a concern should there be any adverse events that impact on the Council moving forward. 

• Most councils have a working capital ratio around 252% ($2.52 for every $1 owed), with anything above 150% deemed sufficient. Yarriambiack's 134% ratio is adequate but tight, especially without the advanced Victorian Grants Commission payment.
• Council is unable to meet its asset renewal and upgrade requirements into the future, with a $27.5 million dollar renewal gap identified across 10 years.
• Council is in the group average for rates and charges levied per assessment.  Meaning our rates and charges are not excessive in comparison to other Councils.
• Council has no further opportunities to create additional sources of revenue.
• Council’s operating efficiency is above average, indicating it is operating effectively and within its means.
• Council does have higher employee costs, which is offset by lower contractor costs.  Yarriambiack Shire has always valued having employees to undertake works, providing local jobs for local people. The advantage of employee costs is that they allow the Council to guarantee access to an appropriately skilled workforce at a set price to ensure services can be provided. The disadvantage is that employee costs are a fixed cost that needs to be paid, and it is difficult to upsize and downsize depending on current needs easily.

• The Council's waste services are not yet breaking even, despite a 10% increase in waste charges in the 2025/26 Annual Budget, which produced a 14% rise in forecast revenue compared to 2024/25. However, a significant $162,000 annual shortfall remains, covered by rate revenue. The largest losses come from transfer station operations, running at nearly $400,000 per year, partly offset by Kerbside charges.

Understanding the Future Financial Outlook

The New Long Term Financial model is based on Council’s future budgets being cash break-even using a reconciled balance sheet approach.

This means that Council remains financially stable over the future years from a cash perspective. However, to achieve this, balancing item is funding available for capital works, and this has implications for the future asset conditions.

Council will also need to consider what services it continues to provide, especially if they are not “core” Council services.  Council has recently transitioned out of the delivery of maternal child health services and is transitioning away from directly delivering early years services. However, it still holds the burden of managing the building assets.

Future Options

The future options available to Council (which are not mutually exclusive) are:

1. Accept the status quo and continue to operate as is, noting that asset conditions will worsen over time.
2. Drive down operational costs and where possible look to increase all other sources of Council controlled income to increase funding for capital. This could mean selling assets to increase cash and reduce operation and maintenance costs.  Lessening the reduction of funding impact for capital works.
3. Advocate for increased levels of both operational and capital grant funding which do not require any matching funding obligations.
4. Review the potential to make an application to increase Council rates above the rate cap.

Acknowledge that Council does not have the funds currently to maintain, upgrade and manage its assets, especially its road network, and buildings, and this is likely to get worse, not better over time, unless intervention and measures are applied. However, we need to acknowledge, even with all measures in place we will still be unable to meet our renewal gap requirements.