05 April 2017
Report no: FPC2017/2/104
Purpose of Report
1.††† The purpose of the report is to present the Committee with Councilís financial performance to 28 February 2017 and the 2016/17 forecast year-end financial position.
That the Committee notes the year to date financial performance and the forecast year-end position.
2.††† The report provides information comparing year to date actual and year-end forecasts against budgets set by Council in its 2016/17 Annual Plan.
3.††† Year to date revenue and operating costs (excluding gains/losses) are under budget giving a favourable operating variance of $4.3M.† At year end a $4.7M favourable variance is being forecast.
4.††† A significant portion of this variance relates to under spending on CFT projects and the Development Stimulus Package which are slightly offset by reduced subsidies due to delays in roading projects.††
5.††† Capital expenditure is under budget to date by $21.5M with only $27.9M spent to date of an annual budget of $92.1M.† A favourable year end variance of $24.4M is forecast.
6.††† Debt at year end is expected to be under budget by $29.5M.
Operating Position: (excluding Gains/Losses)
Year to Date
7.††† There is a Year to Date operating deficit of -$1.0M compared to a budgeted deficit of $5.3M giving a favourable variance of $4.3M.
8.††† Revenue is -$2.6M under budget due to capital subsidies (-$3.5M), and to a lesser extent operating subsidies (-$0.4M), principally due to the cycleway projects being behind their budgeted schedule.
9.††† Operating costs are under budget by $6.9M mainly due to delays with the Stokes Valley Community Hub project ($2.5M), roading maintenance ($1.0M), the Development Stimulus Package payments ($0.6M), plus reduced interest ($1.0M), and depreciation expense ($0.9M).† These are partially offset by costs arising from the November earthquake and flood events which to date amount to $0.5M.
Year End Forecast
10.† At year end there is expected to be a forecast deficit of -$9.9M compared to the budgeted deficit of -$14.6M, giving a favourable variance of $4.7M.
11.† Revenue is forecast to be under budget by -$1.0M due to reduced capital subsidies of -$2.5M because of the deferral of some roading projects including the cycleway projects.
12.† Operating costs are forecast to be under budget by $5.7M mainly due to an underspend in the operating grant payments to CFT for Fraser Park Sportsville of $5.4M, and savings in Interest costs of $1.4M due to underspend on capital projects plus lower than budgeted interest rates.† The Development Stimulus Package payments are expected to be $0.5M underspent.
13.† Councilís Parks and Reserves Division are forecasting a $0.4M overspend due to unbudgeted costs for remediation work to address soil contamination at the former Summit Road Depot, some of which has been recovered via associated landfill fees.††
14.† Unbudgeted costs arising from the November 2016 earthquake and flood events are expected to be about $1.0M (originally estimated to be $1.2M).† Some of these costs have been offset by other operating savings.
15.† Operating carryovers will be required for Capital subsidies of $2.8M, CFT grants of $5.5M, and $0.5M for Development Stimulus Package.
Revaluation of Financial Instruments:
16.† Year to Date, the revaluation of† interest rate swaps has resulted in an unrealised gain of $5.6M due to higher market floating interest rates relative to interest rates fixed by Council.
Year to Date
17.† There is a favourable variance of $21.5M against a budget of $49.5M.†
18.† This is mainly due to delays in the following projects; $2.8M for Huia Pool; $2.9M for the Civic Events Centre project; and $9.6M for Roading and Traffic (including cycleways) projects.
Year End Forecast
19.† At year end there is a forecast favourable variance of $24.4M against a budget of $92.1M.
20.† This is mainly due to delays in some major projects including; $6.2M for Roading projects including cycleway / shared path projects and Civic Precinct parking; $1.3M for Stokes Valley Community Hub; $0.7M for Avalon Park; $1.2M for Riddiford Gardens; and $13.3M for the Civic Events Centre project.† All of these projects will require carryovers.
21.† At this stage a total of $24.3M will need to be carried over to 2017/18.
22.† Most other projects at this stage are expected to be completed on time and within budget by year end.
23.† Asset Sales at this stage are forecast to be $2.0M for the year which is $1.0M above budget due to; a Council approved plan change for an area north of Avalon Park which will enable a sale this financial year; and the inclusion of two sales not completed in 2015/16.
24.† Net Debt as at 28 February 2017 is $29.2M† below budget which reflects the Year to Date favourable variances in operating and capital expenditure offset by an unfavourable variance in asset sales.†
25.† Forecast year end Net Debt is expected to be under budget by $29.5M mainly as a result of the forecast underspend in capital and the favourable variances in operating costs and asset sales.
26.† All limits within the Treasury Risk Management Policy have been fully complied with.
27.† The Treasury Compliance Report as at 28 February 2017 is attached as Appendix 2 to the report.†
Annual Leave Liability
28.† There has been a slight increase in the annual leave liability during February which is expected following a large amount of leave taken over the Christmas / New Year holiday period.†
29.† Leave liability for both January and February were lower than for the same months last year.
30.† There is no requirement to consult.
31.† There are no legal considerations.
32.† The financial considerations are covered in the report.
33.† In making this recommendation, officers have given careful consideration to the purpose of local government in section 10 of the Local Government Act 2002. Officers believe that this recommendation falls within the purpose of the local government in that it provides it provides Councillors with the necessary information to effectively undertake their governance role.
Financial Report February 2017 FINAL
Treasury Compliance Report February 2017
Author: Brent Kibblewhite
Chief Financial Officer
Approved By: Tony Stallinger