QLDC reports deficit - Loss of $6.1m

The Queenstown Lakes District Council is in the unique position of reporting an operating deficit, QLDC finance general manager and deputy chief executive Stewart Burns said.
The information is contained in the council’s annual report due to be adopted next week. The annual report has to reflect the council’s performance during the 2008/2009 financial year to June, 2009.

“The key influence is the economic climate which has seen a drop in council investment property values by $16.9m during the year. It’s not a realised loss – because we have not actually sold the properties and we have no immediate plans to do so.” Mr Burns said.

The council was, however, obliged to include this ‘loss’ in our result for the year, which meant it was showing an annual deficit of $6.1 million.

This followed a 2008 value reduction of $6.8 million for investment property, which represented a dip in value of around 23% in the past two years. The investment property included the Lakeview site, the Commonage and Scurr Heights land. Not all councils held investment properties but of those that did, in general the recession had impacted on bottom-line reporting.

“The requirement for all councils to have these assets revalued at each balance date means our ‘bottom-line’ can be significantly affected by swings in the market. Just as the value has gone down in the last two years, this follows a period of sustained gains which have contributed to significant surpluses in previous years,” Mr Burns said.

In deference to the financial climate no development was planned for any of the council’s investment properties for the immediate future.

“We will continue to monitor the market,” Mr Burns said.

The effect of these ‘unrealised’ losses on the council’s bottom-line for the year was significant. Had they been excluded, council would be reporting a surplus of $11.4 million.

Other factors influencing the financial results for 2008/09 were:

Development contribution $8.1 million below budget (note this was $11.1 million below budget in the previous year).
Vested assets $3.1 million above budget (land transferred to council from DOC).

The council would be asked to adopt the Annual Report next Tuesday.

ENDS

For further information please contact Stewart Burns 03 441 0499.