Global meltdown impacts on financial performance
Far North Mayor Wayne Brown and Chief Executive David Edmunds are warning of possible further financial restraints to contain debt and reduce overheads in the wake of a year dominated by the international financial crisis.
In the council's Annual Report for the 2008/09 financial year Mayor Brown says the "global financial meltdown" has impacted severely on the council's financial performance.
"There was a dramatic reduction in Development Contributions from the sector which was previously a major contributor to our annual income. Income from this source, which is a barometer for the state of the local economy, was down 90% on projections at the beginning of the year," he says.
"This meant we had to increase the focus on maximizing services and reducing operating costs (excluding emergency works) with the result the council's overall financial position is not as bad as it might have been.
"We have had to trim the cloth to match available funds. This has meant reductions in staff levels, less use of consultants and a freeze on wage and salary increases. It has also meant we have had to clinically review a number of long-standing policies to reflect the changing times and the need to restrain expenditure.
"The pressure will continue to be applied to untangle bureaucracy which slows service delivery and to maintain a business-like approach in all the activities in which we are involved," Mayor Brown says
Mr Brown says the council's public debt has increased from $80 million to $108 million over the year.
"Increases of this level are frankly unacceptable if we want to avoid crippling debt levels in future. While changes have already been made to address this we have to remain vigilant, to think beyond the square, and look to innovative ways we can reduce the demand on rates.
"We also really need more income other than rates to satisfy the endless list of public wants, especially with large tracts of conservation estate and Maori-owned land that doesn't contribute," he says.
Chief Executive David Edmunds in his first Annual Report since his appointment says the council completed the financial year ending June 30 with an operating surplus of $6 million, well down on the $19 million surplus projected 12 months earlier.
While on the surface this appears to have been a good result ($6 million operating surplus) in a difficult economic climate, the fact is the council has been relying heavily on either borrowed capital or increases in operating account deficits," he says.
Mr Edmunds says the operating deficit for the water and wastewater accounts reached $5 million for the year under review. Wastewater alone carries an accumulated external debt of over $30 million, projected to rise to $88 million over the next 20 years.
While there are reasons for this situation, "more practical and cost-effective initiatives have to be explored to provide long-term solutions," he says.
"To avoid any further encumbrance on future generations, we have already made policy changes which will enable the council to live within its means.
"Capital expenditure is being cut back. Instead of borrowing against projected income such as Development Contributions, the cash will generally be in hand before expenditure commitments are made," he says.
Over the year under review, some 29 kilometres of new sealing, 17 kilometres of road improvements, 69 kilometres of reseals, 3 kilometres of new footpaths and two substantial mainstreet refurbishment programmes had all been completed. At the same time, some $14.5 million had been invested in improved water and wastewater facilities.
"Although there have been encouraging signs of a strengthening economy in more recent months, this level of activity on infrastructural development may not be maintained in the short term," he says.