Significant reduction in Council debt
19 August 2013
Significant reduction in Council debt
Palmerston North City Council’s 2012/13 financial year will be remembered for the significant amount of debt that was repaid mostly thanks to increased payment of Development Contributions for amounts previously invested in infrastructure assets.
Today, at the Finance and Performance Committee, Councillors were presented with the financial results for the final quarter of 2012/13. The report comes as the Annual Report is being audited in preparation for publication next month.
Palmerston North City Council chief executive Paddy Clifford says given the report is being prepared during the election campaign it is prudent that the unaudited results are included – the audited results will still be presented next month as expected.
The Council finished the year with a surplus of $2.221million over its rates-funded operating cost budget.
An additional $6.7m was available for debt reduction on top of the budgeted $2.9m – meaning the Council reduced a total of $9.6m worth of existing debt compared to a budgeted increase of $11.8m.
Paddy Clifford says this is significant. “We as a Council and as a city are on a sounder financial footing than we were 12 months ago and as a result Council has increased financial headroom in case of emergency and for unexpected projects. The Mayor, Councillors and staff should feel very pleased with their efforts to achieve this end of year result,” said Mr Clifford.
A large portion of the debt repayment relates to higher than budgeted for Development Contributions while a smaller amount is attributable to some capital projects that are no longer required. Another portion is for work that was not completed during the year, such as the redevelopment of the Globe Theatre and the Ashhurst to Palmerston North wastewater pipe project.
“We will draw down a portion to complete planned new and renewal capital items in the new financial year, however in general Council’s debt levels will remain significantly lower than anticipated,” says Mr Clifford.
Chief financial officer, Grant Elliott says services were delivered within budget achieving a surplus from controllable operating activities. “This has been achieved in part by lower interest costs due to reduced debt, a reduced call for some budgeted expenditure, particularly maintenance related with no adverse wet weather events, lower grants and professional service. I’m proud of the efforts of Council staff have gone to achieve this result.”
Expenditure on new capital was $6.2m and was funded by capital revenues of $5.9m and a debt requirement of $0.3m, which was lower than expected.
Grant Elliott says during the year, Council’s “AA” long-term credit rating by international agency Standard and Poor’s Rating Services was re-confirmed.
“Council is focused on ensuring its long-term position is sustainable. We do this by enabling future debt repayment, leaving financial capacity or ‘headroom’ for future generations and through recognising the principles of intergenerational equity.”
“Throughout the year Council staff were reminded of the need to achieve more with less to ensure Council is flexible so it can meet changing requirements of the economy and community. They were also asked to question how we operate and what they were doing to deliver services as efficiently as possible,” says Mr Elliott.
Mr Clifford says the year will also be remembered for: A “one in 70 year” drought and how residents pulled together to conserve water; The successful completion of the Boundary Change project; Continuation of parking issues; And, for the unbudgeted costs of the Wastewater Action Plan which were absorbed within the organisation’s operating costs.