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Finance and Council Controlled Organisations
Committee
13 March 2017
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Financial
Review
For The Seven months
ended 31 January 2017
This report provides a detailed commentary on the
Council’s financial results for the period ended 31 January 2017 and the
financial position at that date.
net surplus/(Deficit)
(including waipori)
The net deficit (including
Waipori) for the period to January 2017 was
$12.999 million or $6.188 million unfavourable to budget.
The unfavourable variance
against budget was due to the following:
· $1.977 million - lower than expected grants revenue mainly as a
result of Transport undertaking less subsidised roading work than expected
(both operational and capital).
· $1.897 million – fees and levies expenditure was higher than
expected due to: unbudgeted building assessments including structural and
seismic engineering; early timing of software licence fee costs in BIS;
unbudgeted fees associated to the district plan (2GP); contract review and
audit costs in Parks; resource consent processing and costs associated with
appeals and compliance; and additional Building Services expenditure to assist
with the building consent processing backlog.
· $2.656 million – higher depreciation costs as a result of the
revaluation of Water and Waste assets effective from 1 July 2016.
· $1.169 million – Waipori Fund, resulting from fair value
write-downs a number of investment portfolios.
These unfavourable variances
were partially offset by:
· $1.317 million – higher than expected other operating
revenue. This favourable variance was mainly due to: Three Waters revenue
being $507k up on budget with water sales being higher than expected. Property
revenue was favourable $212k, largely due to better than expected occupancy
rates for housing. Regulatory Services revenue was favourable $167k due to
increased building consent activity and animal control infringement fees.
Parks & Recreation income was also up due to unbudgeted income from the
Waikouaiti forest harvest.
· $547k – materials supplies and services expenditure was less
than expected largely due to BIS expenditure on external contracted
services being less than budgeted and the timing of key projects under
the Grow Dunedin Partnership.
REVENUE
The total revenue for the period was $144.264 million
or $174k less than budget.
The major variances were as follows:
Other Operating Revenue
Actual $37.893 million, Budget $36.576 million,
Favourable variance $1.317 million
Three Waters revenue was favourable $507k primarily due to
higher than expected water sales, in part impacted by the timing of meter
readings, and trade waste and recoverable revenue.
Solid Waste revenue was favourable $305k due to higher than
budgeted income from general landfill fees and refuse bags sales.
Property revenue was favourable $212k mainly due to housing
occupancy rates being greater than budgeted as well as decreased vacancy times
between tenancies.
Parks revenue was favourable $131k due to income from
forestry harvesting at Waikouaiti.
Regulatory Services revenue was favourable $167k in part due
to building consent and inspection fees were greater than budgeted reflecting
increased activity in this area to get consent processing back within statutory
deadlines.
Grants
Actual $7.677 million, Budget $9.654 million,
Unfavourable variance $1.977 million
Transport grants and subsidy revenue was unfavourable by
$2.225 million due to less than expected NZTA funded work (both operating &
capital) taking place year to date.
Expenditure
The total expenditure for the period was
$158.285 million or $4.845 million greater than budget.
The major variances were as follows:
Asset Operations and Maintenance Costs
Actual $25.033 million, Budget $25.165 million,
Favourable variance $132k
Transport costs were favourable $1.145 million due in part
to delayed timing of general maintenance and sealed pavement maintenance while
the new contractor increases their resources to meet contracted obligations.
Environmental maintenance was also favourable and will remain so throughout the
year as Parks and Recreation now undertakes this work.
Solid Waste costs were favourable $221k due to reduced
refuse collection and landfill contract contingency and variable costs.
These favourable variances were partially offset by:
Parks costs were unfavourable $962k due mainly to the
increase in green space maintenance contract costs and the unbudgeted
management contract associated with the University Oval.
Property costs were unfavourable $267k mainly due to
deferred maintenance issues for a number of properties now being addressed.
Aquatic Services were unfavourable $155k due to unbudgeted
interior maintenance costs, including the cost of asbestos removal.
Materials Supplies and Services
Actual $5.098 million, Budget $5.645 million, Favourable
variance $547k
Enterprise Dunedin costs were favourable $416k due to the
delayed timing of a number projects and campaigns.
BIS external support costs were under budget $503k.
Corporate policy expenditure is tracking behind budget $177k
due to unspent funding for climate change and sustainability.
Dunedin 2GP costs were unfavourable $243k, with an
offsetting favourable variance in staff costs relating to this project.
Property costs are unfavourable $234k due to unbudgeted
disposal costs associated with the Union St property at Logan Park, as well as
an unbudgeted increase in the service level agreement payment to DVML for the
management of the Dunedin Centre/Town Hall.
Energy Costs
Actual $4.185 million, Budget $3.857 million,
Unfavourable variance $328k
Transportation energy
costs were unfavourable $102k. This was in part due to the way the costs
for state highway lights and signals are now accounted for. As a result
there was a corresponding favourable variance in Transportation within the
Asset Ops and Maintenance costs.
The remaining variance
was across a number of operating units reflecting higher than expected
consumption – both gas and electricity.
Premises Costs
Actual $8.571 million, Budget $8.047 million,
Unfavourable variance $524k
Property costs were
unfavourable by $577k. This variance included: unbudgeted costs for
properties yet to be sold; additional costs associated with the Municipal Lane
toilet now operating on a 24 hour basis; and higher than expected building
warrant of fitness costs due to the level of remedial work identified by
consultants to bring some buildings up to required standards.
Fees and Levies
Actual $6.627 million, Budget $4.730 million,
Unfavourable variance $1.897 million
BIS costs were
unfavourable $118k due to the early timing of software licence fee expenditure.
Property expenditure was unfavourable $887k. This related to
costs associated with compiling condition and hazard assessments across the
operating building portfolio including in the Civic Centre, Ice Stadium and
Edgar Centre. Some of the work involved structural and seismic
engineering work.
Regulatory Services were
unfavourable $288k mainly due to higher consultancy costs for building consents
work being processed by third parties.
Resource Consents costs
were unfavourable $168k mainly due to unbudgeted litigation costs on a number
of appeals, prosecutions and other compliance matters, as well as planning
costs associated with processing resource consent applications.
Depreciation
Actual $35.566 million, Budget $32.910 million,
Unfavourable variance $2.656 million
Depreciation was unfavourable $2.656 million, reflecting the
increase in the value of Three Waters infrastructure assets as a result of the
revaluation effective from 1 July 2016.
WAIPORI FUND NET OPERATING
RESULT
Actual $1.022 million,
Budget $2.191 million, Unfavourable variance $1.169 million
The Waipori
Fund net operating result was unfavourable for the period mainly due to
unrealised losses across a number of investment portfolios.
Statement of Financial
Position
A Statement of Financial Position is provided as Attachment
C.
The value of fixed assets was greater than budget as at 31
January 2017, mainly due to a higher than expected revaluation increase applied
to infrastructure assets (in particular Three Waters assets).
Statement of Cashflows
A Statement of Cashflows is provided as Attachment D.
Net cashflow from operations was less than budget primarily
due to the timing of rate receipts.
Cash outflows from investing were less than budgeted mainly
due to capital expenditure being less than budgeted.
Capital Expenditure
A summary of the capital expenditure programme by Activity
is provided as Attachment E.
Total capital expenditure for the period to 31 January 2017
was $14.259 million or 49.2% of the year to date budget of $28.980
million.
Community and Planning
Group capital expenditure was $593k favourable
This variance was due to delayed progress with the Citywide
Amenities upgrade work.
Property capital expenditure was $1.841 million
favourable
Procurement plans and tender approvals are being prepared
for a number of Property capital projects.
The Ice Stadium upgrade project was underway with the
completion expected in March 2017.
Parks and Recreation capital expenditure was $397k
favourable
The likelihood of the $400k budget for the Mosgiel Aquatic
Centre ($200k YTD) to be spent this financial year is uncertain. Other
Aquatic upgrades are also still to be completed.
Transport capital expenditure was $2.411 million
favourable
A number of renewal projects were late in starting
(carriageway, footpath resurfacing, kerb & channel and gravel road
re-metalling) pending finalisation of contractual details. Most work is
now well underway with completion scheduled on or before 30 June.
Minor Safety improvements were favourable $348k. The
Safety team programme is going to tender, with an estimated value is $1.481
million.
Structure
component replacement capital was favourable $747k. Seawall renewals are
favourable $389k. The programme is being prepared by consultants, but
physical works will be deferred until the 2017/18 financial year.
Retaining wall renewals favourable variance of $197k was due to delayed
timing. This budget is expected to be over spent by year-end. Bridge
Structure expenditure was favourable $160k with the Sutton Mt Ross Rd Bridge
strengthening estimated to cost $550k, and an additional $500k for other
bridges anticipated
The
Peninsula road widening project was favourable $723k with only project
management and design costs expected to be incurred in 2016/17 with the
year-end variance expected to be favourable $8.840 million.
Slip repairs
works were unfavourable $636k due to unbudgeted permanent reinstatement works
related to June 2015 weather event.
The Cycle Network was unfavourable
$506k. The Portobello Rd section was completed in September 2016, with
landscaping works completed in November. Full year expenditure is expected to
be unfavourable $131k.
Water and Waste Services capital expenditure was
$8.760 million favourable
This favourable variance was due to some projects awaiting
necessary approvals including completion of design and consenting components.
Key projects underway include:
· Ross
Creek Reservoir reinforcement where work has commenced with contract awarded to
Downers at below engineers estimate.
· Highcliff/Every/Jeffrey
St works are now well advanced by the contractor.
· Waste
water treatment switchboard replacement at Mosgiel is nearing completion and
Green Island work is currently out for tender.
· Portobello
Storm-water Screen was fully operational and a tender is out for the final
controls section of this project.
Significant strategic reviews on
stormwater assets, and options for flooding issues complimented by overall
condition assessments and modelling of networks, have progressed and were in
consultation with ORC to ensure cross council collaboration.
Debt
Refer to Attachments F and
G.
Attachment F provides a summary
of the debt servicing ratios for the year to date.
All three targets are within
policy.
It is anticipated that no new
loans will be required in the 2016/17 financial year.
Debtors and rates outstanding
Sundry debtors outstanding as at 31 January 2017 totalled
$22.022 million. This included long term debt of $459k, and debt associated
with Warm Dunedin of $2.790 million.
Debtors outstanding for more than four months (excluding
long term debt and Warm Dunedin) totalled $396k, compared with last
year’s total of $502k as at 31 January 2016.
Rates arrears relating to prior year rates totalled
$648k. This was higher than the $597k total as at January 2016. Of
this total $114k was being recovered under formal arrangements with Council,
while the balance was being actively pursued.
Comments from group
activities
Attachment H, the Summary of Operating Variances, shows, by
Group Activity, the overall net surplus or deficit variance for the seven
months ended 31 January 2017. It also shows the variances by revenue and
expenditure type.
Community and Planning Group - $705k Favourable
Group staff costs were favourable $130k due to staff
vacancies as well as the costs relating to Council’s 2GP project being
transferred to Corporate Services.
Overall operating expenses were also favourable $399k due to
the transfer of 2GP costs, and delayed timing of some project & grants
expenditure including costs associated with the Section17A review project.
Enterprise Dunedin Group - $396k Favourable
This favourable variance
related to the timing of key projects under the Grow Dunedin Partnership.
These projects include Project China, Study Dunedin, Film Development and Sexy
Summer Jobs.
Property - $2.277 million Unfavourable
Property operating costs were unfavourable $2.180 million.
Fees and levies expenditure was higher than expected ($887k) due to costs
associated with compiling condition and hazard assessments across the operating
building portfolio including the Civic Centre, Ice Stadium and Edgar
Centre. Some of the work involved structural and seismic engineering
work.
Repairs & maintenance expenses were unfavourable $267k
mainly due to deferred maintenance issues for a number of properties now being
addressed.
Premises costs were greater than budget $577k reflecting in
part unbudgeted costs associated with properties held for resale and additional
resources required to provide toilet facilities under a 24 hour
operation. Identified remedial work on some properties has also increased
costs in this area.
Partially offsetting these unfavourable variances, external
revenue was $214k better than budget due to housing occupancy rates being
higher than expected, as well as reduced vacancy time between tenancy changes.
Parks and Recreation Group - $1.823 million
Unfavourable
Parks and Recreation external revenue was favourable $267k
primarily due to revenue from tree felling at Waikouaiti and greater than
budgeted development contributions revenue. Revenue from burial services
continued to be below budget and was unfavourable $98k.
Operating costs were unfavourable $1.654 million mainly due
to:
· Unbudgeted
interior maintenance and asbestos removal costs at Moana Pool.
· Increased
costs of green space contracts and associated contract review and auditing
costs.
· Ocean
Beach holding pattern costs.
· Unbudgeted
costs associated with the new contract to manage the University Oval.
Transport Group - $1.340 million Unfavourable
External revenue was unfavourable $1.934 million due to less
than expected NZTA capital and operating work taking place resulting in grants
revenue being down on budget. In addition revenue from corridor access ways was
less than budgeted.
Operating expenditure was favourable $913k primarily due to
favourable expenditure (including some NZTA subsidised work) in the new
maintenance contract while the contractor increases their resources to meet
contracted obligations.
WWS Solid Waste – $1.139 million Favourable
Landfill internal revenue was favourable due to higher than
expected sludge and general waste volumes. Refuse bag sales were also
favourable.
Staff costs were favourable $112k due to a number of
vacancies in the unit that will be filled in the coming months.
Operating costs were favourable $291k due mainly to reduced
refuse collection costs, including rural skip days. Landfill contract
contingency and variable costs are tracking below budget. This has been
partially offset by increased costs associated with the collection of illegally
dumped rubbish, recycling and litter collection.
WWS Three Waters – $1.499 million Unfavourable
Staff costs were unfavourable $119k due to temporary
positions that have been created pending the restructure of the business unit
to provide additional resource to match workload.
Internal expenditure was
unfavourable $401k due to higher than anticipated volumes of sludge from Tahuna
being disposed of at the Green Island landfill during the first half of the
year when the Tahuna incinerator was not fully operational– see
favourable revenue in Solid Waste above.
Depreciation was unfavourable $2.021 million, reflecting the
increase in depreciable value of infrastructure assets, particularly wastewater
assets, as a result of the revaluation effective
1 July 2016.
These unfavourable variances were partially offset by
favourable revenue $618k primarily due to higher than expected water sales in
part impacted by the timing of meter readings.
