Council $10.5b in debt
Auckland Council’s interim financial report has found the ‘‘uncertainty and disruption’’ caused by both Covid-19 and an unfavourable economy is continuing to put pressure on its finances.
The report, which covered the six months to the end of December, showed the organisation’s debt increased by $106 million to $10.5 billion. Its capital investment in infrastructure and community assets was also down – decreasing by 24 per cent, coming to $917m. At the same time, operating revenue was up 7 per cent to $3.8b. The surplus after income tax was $1.9b, an increase of 21 per cent.
The council blamed lower public transport use, restrictions on movement, closures of its facilities and venues for hire, and reduced earnings from investments in the airport as having the most impact on cash revenue.
‘‘The council has balanced its financial priorities in uncertain conditions but will continue to be challenged by the ongoing effects of the Covid-19 pandemic and adverse economic trends, such as rising inflation and interest rates,’’ it said.
Fewer people visiting council facilities because of social distancing, supply chain challenges and difficulties in finding suitably qualified staff had all disrupted its capital programmes, the council said.
The council has a credit rating of AA from S&P Global Ratings and Aa2 from Moody’s, both with a ‘‘stable’’ outlook.
Mayor Phil Goff said revenue ripped out of council’s budget by Covid-19 during the past two years had a ‘‘big impact on the city’’.
‘‘The challenge in front of us is not easy. We will first meet our need to manage our finances responsibly.’’
The council had met these challenges through strong financial management, finding savings and efficiencies of more than $90m a year, becoming a leaner organisation and selling surplus assets, Goff said.
Council chief executive Jim Stabback said the latest financial results were a ‘‘poignant backdrop’’ for its next annual budget, which opened for public consultation on Monday.
Councillors agreed the budget needed to achieve faster and further action on climate change, resilient and flexible response to ‘‘immediate budget pressures’’ and efficient waste minimisation.
It would also use ‘‘a range of levers’’ including Government funding, delaying capital spending and using debt ‘‘where prudent’’ to address the forecast operating shortfall of $85m.
The budget would likely bring a targeted rate for climate action, as well as boost total rates bills for an average value home by about 6 per cent.
Finance and Performance Committee chairwoman Desley Simpson said the interim report was a reminder to continue to carefully provide enough headroom to deal with these ‘‘highly uncertain times’’, while investing in Auckland’s future.
The decisions made in the budget were about making the best ‘‘financial choices’’ that would ensure Auckland had the infrastructure, services and facilities it needed to be a ‘‘worldclass, international city’’, Simpson said.