Message from the Chief Executive: Interim Report Feb '22

Publish Date : 28 Feb 2022
Jim Stabback 1
New Auckland Council Chief Executive Jim Stabback

Auckland Council’s interim report for the first six months to the end of December confirms many of the pressures forecast in our recovery budget have materialised. The council has managed to balance priorities in these uncertain conditions but will continue to be challenged by the ongoing effects of the COVID-19 pandemic and deteriorating economic trends such as rising inflation and interest rates.

Pandemic-related lockdowns and restrictions have created significant challenges for our region over the last six months. Our organisation touches all corners of the economy, and the results for the six-months to the end of December were impacted by both reductions in some key revenue areas and restriction in our ability to deliver some capital investment, projects and programmes.

The group prides itself on always striving to be a more efficient and responsive organisation working to deliver for the changing needs of our communities. The current economic environment has made balancing these priorities a challenge, but the council has maintained essential services and continued building the infrastructure Auckland needs to become a world class city.

The group’s overall operating result for the six months of $1.5 billion a $103 million improvement on the prior year and just $10 million below the recovery budget. The impact of pandemic restrictions was evident in our capital investment which totaled $917 million for the half year, a decrease of 41 per cent from a year earlier and just 71 per cent of our budgeted capital investment spend of $1,296 million.

On the revenue side, the sobering reality is that many of the Council’s revenue streams were impacted by lockdowns and closures. The largest shortfalls were in fees and service charges which are reliant on public usage, such as transport services, parking fees and events-related services. Grants and subsidies were $59 million lower than the prior year mainly because of the low level of capital subsidies which meant matching government funding was not drawn down on.

The group proactively mitigated this by working with central government to get additional funding to support Auckland’s recovery efforts.

Seeking efficiencies wherever possible remains a priority for the group, and it is encouraging to see we’ve achieved $51.1 million in permanent savings in this report despite significant challenges. Employee benefits went up due to additional overtime for shift work to ensure physical distancing and rising costs and interest rate movements put increased the pressure.

The latest six monthly result also saw the impact of recent interest rate rises, with our overall financing costs $39 million higher than the prior year mainly due to a substantial increase in floating interest rates.

Despite the challenge of lockdown and restrictions on capital investment programmes, our organisation was able to deliver progress on major water, transport and infrastructure programmes as well as community projects.

Investment included innovative and ambitious work like Kaipara Moana Remediation’s South Kaipara Stream stage one project. This trialled a new methodology to assess streambank erosion hotspots at a regional scale, with approximately 1,100 km of permanent streams assessed. This initiative strives for the protection of Kaipara Moana to ensure the waterways and wetlands of the catchment are healthy and enhanced, and the diverse communities of the Kaipara benefit from these efforts.

Though COVID-19 has affected Aucklanders ability to enjoy some of our council services, we’ve still been working in the background to continue upgrading and improving them. The Southeast Asia development at the Zoo is still in progress, with completion dates expected towards end of financial year. Some delays have been experienced due to supply and logistics issues but once complete this will be another impressive deliverable from Auckland Unlimited.

Of course some areas have been more adversely affected than others, with delays resulting from social distancing needs, supply chain challenges or difficulties in finding suitably qualified staff. Some of the key projects that were impacted were the Transform Manukau programme, critical asset renewals, roading maintenance and upgrades such as the Matakana Drive Link and Huapai improvement projects.

Ultimately, this report reflects the council making prudent budgeting decisions to manage what were a testing six months. I am proud to see the group was strategic in funding critical projects to support Auckland’s recovery. Achieving cost reductions in the form of efficiency savings, carefully managing our borrowing, deferring some capital projects, recycling non-strategic assets and partnering with central government have set us up to respond to the uncertainty that lies ahead.

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