Te Kaunihera o Tāmaki Makaurau/ Auckland Council Group’s Annual Report 2022/2023 issued today shows a resilient council group that has bounced back from the many revenue challenges that arose because of the COVID-19 pandemic, and has withstood the worst natural disaster experienced by the Auckland region in the group’s history.
Mayor Wayne Brown says the report chronicles a tough year in which Auckland Council was able to remain financially prudent in the face of rising costs and high interest rates.
“We were shocked and saddened by the loss of lives and personal suffering caused by the devastating and tragic weather events. At the time we rapidly reallocated resources, both for the initial emergency response and then for our recovery efforts - and the annual report shows the immediate effects on our services and activities.”
“There were many unbudgeted costs relating to the storm events and I am really pleased to see in this report how we swiftly put measures in place to stay on track financially. At the same time, the Auckland Emergency Relief Fund raised $3.7 million – including $1.1 million from Auckland Council – which was distributed to Aucklanders in need, on top of other relief offered by central government and Non-Government Organisations (NGOs).”
Auckland Council Acting Chief Executive Phil Wilson notes that the freedom experienced by Aucklanders after two years in COVID-19 lockdowns, had an extremely positive effect on the council, as seen in our results for the first half of the year. The storm events in January and February set the council back again, with a significant amount of funding and staff having to be diverted to storm response and recovery of the region. The council’s properties also incurred significant damage which required repair and renewal. The annual report clearly shows the impact of the storm events on the council group.
“What is more difficult to determine is the overall and lasting impacts of these challenges on Tāmaki Makaurau and our communities. We continue to grapple with this and remain committed to doing our part to support community recovery; continuously improve our processes and adapt our ways of working.”
The Annual Report details how the group responded to a raft of financial challenges including growing operating costs, a tight labour market, price increases, and interest rates that were significantly higher than forecast.
“We were able to counter this with tight spending controls, including restraint on discretionary spending.”
“We did this while building more infrastructure and continuing to provide day-to-day core council services.”
While many community assets suffered storm damage, the Annual Report details the rebuilding or readjustment of a wide range of community spaces and services, to ensure the delivery of council programmes that Aucklanders value.
The council’s non-financial performance during the year held up well considering the challenging events it faced, however there were some targets not met as a result of the severe weather events, and ongoing staffing challenges, including the redeployment of staff for the storm response and recovery efforts and a slower recovery of facilities usage as a result of the impact of COVID-19.
Key Financials
Auckland Group Chief Financial Officer Peter Gudsell says the annual report shows the council’s results were broadly in line with budget, despite the economic challenges and the costs and disruption from weather events.
“Total group revenue excluding other gains for the year was $6.7 billion, $421 million higher than budget – though this did include some big one-off and non-cash revenues such as assets vested with council and a significant donation of artworks.”
“The council delivered its largest-ever annual capital investment in infrastructure and assets, with $2.7 billion of transport, water, housing and community projects completed or progressed to help meet increasing demands on public services across the region.”
Highlights of this investment were:
$1.3 billion for transport-related assets, including progressing the City Rail Link, roading renewals and the Eastern Busway.
$918 million on clean water, wastewater and stormwater assets, including progressing the Central Interceptor project, expanding the Redoubt Road reservoir, and putting flood prevention and water quality improvements in place at the Opanuku and Lower Waitaro Streams.
$491 million on other assets, such as upgrades to playground and sports facilities, environmental initiatives and renewals of cultural venues; for example, developing Te Kori Scott Point - a sustainable sports park.
The council’s total asset base increased by $2.6 billion to $73 billion. The group uses debt to help finance capital investment, as this helps to spread the cost of assets across the generations that will use them. As a result, total net debt rose to $12.4 billion from $11.1 billion a year earlier. The council has a policy of keeping its debt to revenue ratio below 290 per cent, and its position remained well below that at 253 per cent at year end, which was also down from 257 per cent a year earlier.
“Our prudent debt management was reflected in our credit rating agencies reaffirming our ratings during the year, AA for S&P Global and Aa2 for Moody’s Investor Services, both with a stable outlook.”
The Annual Report details an operating surplus before gains and losses that was a moderate $207 million higher than budget at $1.3 billion. This is a surplus for financial reporting purposes but is of course not a cash surplus as it includes non-cash revenues like receiving the collection of artworks and vested assets.
From a cashflow perspective, the Annual Report notes net cashflow from operating activities of around $1.8 billion. After the $2.7 billion of capital investment there was a cash funding shortfall of $941 million. This shortfall was funded by new cash debt of $795 million and a reduced cash balance of $146 million. This was broadly in line with budget.
Looking ahead
Mayor Brown says the Annual Report shows that looking ahead, we need to be mindful of the costs associated with the recovery from this year’s storm events and making Auckland’s infrastructure more resilient, while caution remains necessary in managing these costs.
“I want to ensure that council’s next 10-year budget creates a sustainable financial footprint for Auckland Council so we can play our part even better to help ensure Auckland is a beautiful, thriving and safe place to live.”
Phil Wilson says the ongoing impacts of this year’s weather events are substantial, and we will continue to work closely with our communities and those most affected.
“While much of this work lies with the Recovery Office we established specifically for the purpose, the council group is committed to working as a whole and in partnership with central government, iwi, the community and private sector as we support the region’s recovery. “
You can read the full Te Kaunihera o Tāmaki Makaurau/ Auckland Council Group’s Annual Report 2022/2023 on the Auckland Council website.
