Debt declines as projects go unfinished
‘‘Debt levels will rise in future’’ Chief financial officer Grant Elliott
Every man, woman and child in Palmerston North would have to find $1119 if the city council decided to repay all its loans.
The council’s total debt has fallen to its lowest level in four years, sitting at $95.7 million, according to the council’s draft annual report.
The debt was forecast to have increased to $114.7m by the end of the financial year.
The council’s debt is more than its annual rates income of $83.5m, but less than its total income of $110m. . The debt breaks down to $2934 for every rateable property in the city, or $1119 for every resident.
The report showed the council ended the year with a surplus of nearly $2.6m.
That helped it to put more than $6.5m toward paying debt, as well as the $5.2m it had budgeted to repay – a total of $11.8m.
In turn, the repayments eased the burden of interest costs, down by $1.6m against the budget.
Acting chief executive Ray Swadel said the council’s healthy finances could be attributed, in part, to increased revenue from regulatory services, higher than expected subsidies from the New Zealand Transport Agency, and other external and central government funding.
But the reduced debt was largely because of delays in spending on capital projects.
Out of a $52.3m capital budget, only $30.9m was spent, although that was ahead of the $23m spent in 2014/15.
Some of the projects were waiting for approvals or money from outside the council before they could go ahead.
Projects lagging behind timetable included the Junior Road Safety Park, Papaioea social housing project, Wildbase Recovery (which has just been given the green light to call for tenders), the James Line upgrade, and sections of the Manawatu River sharedpathway development.
Chief financial officer Grant Elliott said while debt was lower than budgeted, that could be a temporary thing.
‘‘When these capital projects are carried out, debt levels will rise.’’
He said by borrowing for projects, the cost was paid over time, rather than by billing the current generation of ratepayers for facilities available well into the future.
Cr Ross Linklater said he was disappointed the council had not accomplished as much of its capital programme as hoped.
‘‘But the level of net debt is the lowest for some time, along with the interest bill, and that surplus has been put to good use.’’
The council pays for renewal of existing capital assets from operating revenue, not borrowing.