|
|
 |
MANGAWHAI'S NO.1 NEWSPAPER
|
|
|
Financial turnaround no surpriseTwo weeks ago, I advised in this column of the start of the Annual Plan process for the Council for the year beginning 1 July 2014. I advised that Commissioners are recommending an average rate increase of 2.3 percent, and that Council is now in a financially sustainable position. I added that:
* Property owners can have confidence that the high degree of volatility of rate changes experienced over the past two years has ended. * Council’s debt is dropping. It is now under $78 million. * Council is running its operations at break-even or slightly better, as well-run Councils should. We expect to make a small operating surplus this year. (You may recall that Council made an operating deficit of over $10 million in 2012.) Kaipara District Council has gone a long way to addressing its financial issues. It is pleasing to see the turnaround happen relatively quickly, but this should not come as a surprise. When organisations face financial challenges, acting quickly is important. While the Commissioners have guided the turnaround, the executive of the Council, led by Chief Executive Steve Ruru, have implemented the measures necessary. They deserve credit for doing so, both in sorting through financial information systems that were not good, and reorganising Council’s approach to major contract management. The steps taken have included: Moving from large operating deficits to small operating surpluses. * On the income side, revenue collected from rates has increased from $18 million in 2010 to a forecasted $27 million next year. This movement of 50 percent over five years has set rates at levels that cover core Council services at the levels currently supplied. Prior to addressing rates, Council was funding its operations partly by rates, and partly by borrowing. * On the expenditure side, expenditure is being tightly controlled. New contracts have been let that require much greater accountability. Expertise has been added inside Council to manage Council contracts like roading and parks effectively. We have held discretionary expenditure, like grants to community organisations, to a minimum. Asset and Debt management. * Council has a large investment in assets. We have over half a billion dollars worth of infrastructure to maintain, including roads, bridges, parks and pipes. The asset management plans for these that we inherited were not robust. We have been developing new asset management plans for each of them. This is work in progress, but by the time a new Council is elected in October 2015, we expect to have these plans well advanced. From this work we are getting a good understanding of the condition of our assets, including the pipes underground, and the investment required to maintain them. * Some of Council assets are funded by debt. Just how much debt a Council should carry is a matter of debate. Lower debt means lower interest. On 2012 figures, interest as a percentage of rates in Kaipara is 19.5%. This is the same level as that of Councils like Taupo, Hamilton, and Western Bay of Plenty. Whangarei is at 12.15%, and Far North at 9.2%. Our neighbouring Council debt levels are forecasted to rise (Far North), or rise and then flatten out (Whangarei), while Kaipara’s is forecasted to decrease. I hope that this helps to explain the current financial picture of your Council. The Kaipara District Council is an organisation that has been tested financially due to poor decision-making in the past. That history cannot be reversed, but neither will that history impede our longer term future. |
|
FOLLOW US  
|
CONTACT US
|