Council finances on track

A clean bill of financial health for the Timaru District Council comes with warning signs ahead.

A report by Fitch Ratings, a global leader in credit ratings, was released on Thursday with the TDC receiving an AA- rating for the third consecutive time. The rating is an assessment of an entity’s ability to pay its financial obligations and Fitch Ratings praised Timaru’s ‘‘small yet diversified local economy, the council’s stable fiscal performance and conservative debt metrics’’.

However, it also expects the TDC to experience a weaker performance for the current financial year as increased operating and capital expenditure outweighs consistent revenue from rates and operational subsidies and grants.

There was also a broader concern that despite having one of the country’s lowest regional unemployment rates, local economic growth still lags behind the national GDP growth rate.

It calculated an operating margin of 32.5 per cent for the 2018 financial year, down from 34.6 per cent the previous year, but ‘‘still above the local peer average’’.

‘‘We believe the council’s financial forecasts, as outlined in its 2018-28 Long Term Plan (LTP), are achievable, these include a measured level of capital expenditure to upgrade key water infrastructure assets and to develop local community assets, such as the refurbishment of Timaru’s Theatre Royal,’’ the report says.

The report notes the council forecasts $406m in capital expenditure over the course of its 2018-28 LTP, which is 30.8 per cent more than the previous LTP in 2015.

‘‘Timaru believes it possesses a robust knowledge of infrastructure assets ... the council also believes it is necessary to fund significant renewal projects via increased debt over the long term plan to distribute the overall burden on both current and future ratepayers in an equitable manner.’’

Fitch has also viewed positively the recent reorganisation of council’s internal management structure to improve operational efficiency with refocused management of finance and projects.

Timaru District mayor Damon Odey was pleased that the council has continued to be assessed independently as a well-run and fiscally robust organisation.

‘‘The Fitch Ratings process involves them taking an intensive look at many different parts of the organisation, and I think the community can take comfort that they continue to view us as a strong and stable organisation,’’ Odey said.

‘‘With the rating also comes clear guidelines about what the council can do to ensure it maintains its good rating, which can be used to inform investment and lending decisions for the future. Receiving a rating such as this is thanks to the work of the elected members, council management and all staff. They have proven that a collaborative approach to working provides the best outcomes for our district.’’