September earthquake and council changes affect local authorities' operating deficit

Local authorities recorded a seasonally adjusted operating deficit of $82 million in the December 2010 quarter, Statistics New Zealand said today. Deficits have now occurred in each quarter for the last three years.

The deficit this quarter is $15 million larger than in the September 2010 quarter when a deficit of $66 million was recorded. The increased deficit partly reflects expenditure impact from the new Auckland Council and the September earthquake in Canterbury.

"As a result of these two events, the deficit in the December 2010 quarter is larger than it would have been otherwise. The impact is seen more strongly in local authorities' expenditure than in their income," national accounts manager Rachael Milicich said. 

From 1 November 2010, eight councils amalgamated into Auckland Council. The eight councils were Auckland Regional Council, Auckland City Council, Franklin District Council, Manukau City Council, North Shore City Council, Papakura District Council, Rodney District Council, and Waitakere City Council. 

The deficit in the December 2010 quarter was the result of total operating income of $1.8 billion (driven by rises in investment income and rates) and total operating expenditure of $1.9 billion (driven by purchases and other operating expenditure, and employee costs that included severance payments).

Seasonally adjusted operating income for local authorities increased $72 million, to reach $1.8 billion in the December 2010 quarter. The main contributions to the increase came from investment income (up $48 million), rates (up $29 million), and current grants, subsidies, and donations income (up $20 million). Partly offsetting these rises were falls in regulatory income and petrol tax (down $17 million), and sales and other operating income (down $8 million). Investment income arises from interest and dividends. It is not unusual for dividend payments to be irregular in both size and frequency.

Seasonally adjusted operating expenditure increased $88 million in the December 2010 quarter, to reach $1.9 billion. Contributions to the increase came from purchases and other operating expenditure (up $63 million), employee costs (up $11 million), depreciation and amortisation (up $10 million), and interest expenditure (up $5 million).

Geoff Bascand 16 March 2011

Government Statistician