Rotorua council finances supported by rating

The continued retention of its Fitch AA-credit rating has buoyed the Rotorua Lakes Council.

At its first full meeting today since October 12's local body elections, the council's financial management report shows a surplus of $8.1million – an increase of $9.1m over last year.

The result passed muster at today's council meeting.

Rotorua mayor Steve Chadwick says the result is an 'outstanding end of year provision”.

'Most of us heard that debt is out of control.

The council's chief finance officer Thomas Collé says if the council's debt was out of control, it would have shown on the graph of the presentation of his report.

Instead, 'it clearly shows we're in where we planned to be. It's definitely not out of control”.

The council earned more than $138.1m in income in 2018/19 including $29.2m in subsidies and grants, and invested $56.8m in capital projects that renewed its assets ($19.2m), increased their level of service ($35m) or expanded them due to growth in our district ($1.9m).

'This capital expenditure was $24.5m lower than our planned budget of $77.6m and was largely driven by a few key projects such as the Aquatic Centre, Kuirau Park and the Sir Howard Performing Arts centre that were deferred as investigation works and additional planning were carried out,” the report says.

'In addition, in order to prevent undue disturbance to residents and visitors, some water and drainage works were also deferred in order to coincide with expected NZTA road works i.e. Te Ngae Road.

'In conjunction with the increase in investment into the region, the council has continued to deliver business as usual amongst some challenging circumstances.

'These in turn have impacted on the end of year operating expenditure but were partially offset by higher rates revenue from growth in the region, higher water charges due to the dry summer and lower remissions.

The council also imposed saving initiatives.

See below for further insight into the operating challenges:

· Electricity usage and pricing deteriorated further during the year to be about $1.6m over budget at year end. The council has for a number of years purchased electricity at the spot price rather than hedging and this has meant carrying an element of risk as to fluctuations in electricity pricing. Over the past 10 years, this policy has returned savings to council meaning it has remained prudent to continue to favour this approach.

· Maintenance costs were above budget because of additional works required to repair an aging infrastructure, exacerbated by the geo-thermal conditions of the region as well as … costs required to restore and move various Museum artefacts in preparation for the upcoming renovation work

· About one-third of council's assets are revalued each year. Changes in valuations effect the depreciation used in our budgets and are included into the year following. Revaluations undertaken in 2017 were delayed, some until the end of 2018, which has resulted in an almost $7,000,000 increase in depreciation vs budget. Depreciation is used to fund our asset network renewal expenditure and audited financial year depreciation is used to budget for future renewal works

· Parking revenues were down materially, in excess of $1m because of the delay in implementation of new technology and resolution of by-law statutes.

· An additional $233,000 was spent on increasing security within the inner city as CCTV installation was increased and additional manned security patrols put in place.

These factors were mitigated by:

· Income, more than $3m ahead of budget driven by higher rates, development contributions, full receipt of budgeted subsidies and fees and charges for services rendered e.g. subdivisions, consenting etc. Rates revenue was ahead of budget largely due to growth in the region and higher water usage following an uncharacteristically dry summer. Subsidies were driven by external funding largely due to receipts received by Ministry of Health and Bay of Plenty Regional Council for the Rotoiti/Rotoma sewage scheme works but also donations received for arts and culture facilities.

· A number of cost efficiency actions set in place earlier in the year to target operational savings. These targeted savings have been focussed onto non-critical programmes of work and where some discretion can be applied, to delivery timing.

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