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Financial prudence evident in annual report

Published: 26 September 2015

Despite a year of challenging growth, Auckland Council Group’s latest annual report shows a strong financial performance and investment across Auckland.

The group annual report for the year ended 30 June 2015 was released following its formal adoption by the council’s governing body in late September.

Auckland Council’s Chief Financial Officer Sue Tindal says the group has performed better than budget with an operating surplus of $80 million, gross debt levels below budget at $7.3 billion, capital investment of $1.5 billion with total group assets now over $42 billion, and targets met for cumulative efficiency gains of $183 million.

“Our financial performance reflects a need to invest for Auckland’s future, balanced with financial prudence and best value for money while absorbing Auckland’s substantial population growth of almost 3 per cent,” says Ms Tindal.

Over the past year Auckland grew by an estimated 43,000 people, this was on top of 34,000 in 2014. Since 2010 the total population increase is 132,000 people or 10 per cent higher since Auckland Council was established.

“Population growth has a direct impact on many of our activities, puts more pressure on existing infrastructure and increases demands for more council services,” says Kevin Ramsay, General Manager Finance.

“This resulted in an additional resourcing of 208 full time equivalent (FTE) staff across the entire group for a total of 9678. Resourcing costs were also up by $63 million for a total of $792 million.

“Generally the increases in resourcing and costs were in areas directly delivering services to our customers,”  says Mr Ramsay.

Increased work volumes in consenting areas saw building consents up 6 percent, building inspections up 5 percent, and resource consents up 5.5 per cent requiring 42 additional FTEs to process them.

Auckland Transport oversaw a number of large projects and increases in services being provided with an additional 116 FTEs to support a 10 per cent increase in overall public transport patronage. Rail patronage alone has increased 22 per cent, and the first full year of HOP card operations account for 67 per cent of all public passenger trips.

This is on top of completing a number of large roading projects such as the Auckland Manukau Eastern Transport Initiative (AMETI) and new cycleways. Similarly Watercare had an increase of 58 FTEs primarily within its maintenance service team.

There were also some new or one-off events that required staff resourcing including the FIFA Under-20 World Cup 2015, Cricket World Cup 2015, World Masters Games 2017 and support for the Long-term Plan and Unitary Plan.

“There were people being brought on board just to increase our ability to effectively deliver those services and support our delivery of required infrastructure,” says Kevin Ramsay.

“However our total cash spend on staff and suppliers was within half a per cent of budget and, on a like for like basis, staff numbers are still three per cent (276 FTEs) less than the former council’s prior to amalgamation, despite population growth of 10 per cent over five years.

“The Auckland Council Group continues to examine how it resources to provide services by determining whether employees, contracting resources, or paying suppliers creates the most cost effective method.

“For example, animal management field services were brought in-house requiring an additional 48 FTEs and providing net savings of $800,000 per year.”

Coinciding with Auckland’s growth, 1.5 billion was invested in infrastructure to improve Auckland’s transport network, the three waters networks, and community facilities.

This includes $350 million in roads and footpaths to maintain and improve the existing network, $204 million in new electric trains and a depot, $153 million in water and waste water infrastructure, and $133 million in local and regional parks.

During the year the group maintained credit ratings of AA from Standard & Poor’s and Aa2 from Moody’s Investors Service. These remain among the strongest credit ratings in New Zealand, confirming the group’s strong debt servicing capability.

The annual results provide a solid foundation for the new Long-term Plan 2015-2025. 

“Over the next 10 years our Long-term Plan will build on this platform. The asset base is expected to grow from $42 billion to $60 billion. The group will slow the growth of debt and drive greater efficiencies with the group working towards achieving $309 million per annum in permanent efficiency gains by 2025”, says Ms Tindal.

The Auckland Council Group annual report is available on the Auckland Council website.

 

By the numbers: 
• Operating surplus before gains and losses of $80 million 
• Total group net debt of $6997 million, which is $206 million below budget 
• Assets value of $42.2 billion, increased by $2.3 billion 
• Targets for cumulative efficiency gains of $183 million were met this year