Financial game play City of Melbourne quarterly budget delivers more questions then answers

The City of Melbourne quarterly report has some worrying trends and raises more questions then answers. Question that the Council appear to have not considered.

The report shows a significant decline in budget expectations in Parking revenue and a massive increase in employment costs.

Parking (Fees) Income - (1000's)
The City Council in its report has dismissed the below budget expectations as a result of the recent increase in on street parking fees (which were increased twice (52%) over the last six months. The Council's report claims this is a backlash from consumers who are no longer using on-street parking.

3.3 Parking Fees ($1.823m) Unfav

Parking Fees are $1.823m unfavourable and $1.946m relates to lower use of on-street parking. Transition issues with the new contracts for coin collection and meter maintenance together with fee increases for on-street parking from $2.40 to $3.00 per hour (This was the second increase in six months from $2.40 to $3.50 per hour) in the CBD and $3.80 to $6.80 per day in outer areas, increasingly high fuel costs, and the loss of revenue on the day of the demonstration against the Federal Government’s IR legislation contributed to this unfavourable variance. Slightly offsetting this reduction in on-street parking revenue is the favourable variance of $0.150m reported for off-street parking. The City Square car park occupancy rate is higher than budget because of lower hourly fees and the Lion King show.

More information is required to justify and quantify the above.

If there has been a significant decrease in consumer on-street parking as a result of the recent increase in fees then where have they gone?

Question we would like answers to include

• What extent of change in the percentage of parking space vacancy rates sector by sector that backup this claim?
• What is the extent of customer shift from on-street parking to off-street parking and what percentage of that was related to City Council managed and non Council manged off-street parking facilities?
• Was there an increase in public transport patronage during this period?
• If not could it indicate a shift in consumer choice away from the City to alternative suburban shopping centres?
• If the letter is the case then what impact is that having on Melbourne business/retail community?
• Clearly the out going costs of parking are a consideration in consumers making a choice where to shop and stop.
• Could the City Council's policies be having a negative impact on the economic viability of the City?
• What percentage of the loss was due to Council's inefficiency in transition of implementing the change over to the new fee increases?
• Could money have gone missing in the process, misappropriated in the transition period?

The City Council runs a serious risk of creating a gated community without the gate. A city where only the rich, trendy and well heeled can afford to visit the city centre. How long until businesses, concerned about the increasing overheads and quality of Councils service decide enough is enough and move to other less expensive locations as the ANZ bank were/are considering? How long can Myers continue to survive in the City Centre before it too goes the same way as other major retail outlets while increased costs to the consumer continue to drive customers away from the City and into the lower cost, easier access, suburban shopping complexes? How long can you keep milking (taxing) the cash cow before the cow stops giving milk?

The general statements provided in the quarterly reports are insufficient. The Council must provide more information and statistical data to explain in more detail the reasons behind this below budget outcome.

Employment (Costs) Expenditure - (1000's)
The Council report also shows an alarming increase in the cost of employment that goes well beyond the issue of a 1% variance in the anticipated outcome of negotiated salary increases (from a budget of 4% to actual cost of 5%)

Questions

• Is the 5% increase across the board?
• Does the 5% increase in staffing costs automatically apply to contract employment fees and other benefits paid for by the Council to senior management, the very same people that negotiated the rate of pay increase?
• Who many extra staff have been engaged during this period and how does the 1 % variance equate into what appears to be a budgeted $6 Million to just under $8 Million during the quarter?
• What efforts if any has Council made to reduce employment costs and the associated burden on Council expenditure?

More question then answers.

Were these and other questions raised by the elected Council when considering this report? We certainly expect more information in the next quarterly results.