Weekly Opinion & Analysis, Monday 18 February 2008

Charts showing the operating deficit ratio (“OD”) and broad liabilities ratio (“BL”) combinations for all rated councils underpinning FiscalStar's latest ratings have been published.

Charts for each State (including the NT) as well as a combined chart are provided.

The charts can be downloaded by right-clicking on the link below:

State charts  (317Kb)

These FiscalStar charts summarise a range of complex considerations. The charts aim to encourage councils to focus on measurement issues associated with the key OD and BL ratios. The appropriate measurement of these ratios currently is the main source of contention regarding FiscalStar’s assessments.

The OD and BL ratios used by FiscalStar for each rated council are provided in the published financial sustainability league tables. The latest tables were published on Friday, 8 February 2008.

Each of the published charts shows the OD and BL ratios used by FiscalStar standardised to eliminate to effect of differences in non-OD and non-BL characteristics among all the councils included in the chart.

In fact, the Criteria Chart used by FiscalStar differs slightly from council to council depending on a council’s key non-OD and non-BL characteristics, and so by how far council-specific parameter values in these respects diverge from standard (i.e., average) values. Specifically, the precise placement of the zones in the case of each council depends upon the following key non-OD and non-BL characteristics:

• its relative revenue discretion, as measured by the relationship between (i) revenue from rates & charges and (ii) annual operating revenue 
• its asset intensity, as measured by the relationship between (i) the renewals (or replacement) value of its infrastructure assets and (ii) annual operating revenue
• the relative importance of long-term debt, as measured by the ratio between (i) a council’s debt and (ii) its overall BL ratio which includes the present infrastructure backlog as well as debt
• its spare cash balances as a % of annual operating revenue
• its cross-subsidy potential, as measured by the relationship between (i) any revenue from water & sewerage operations – being a source of dividends – and (ii) annual operating revenue from all other operations.