20 August 2012
Operating surplus for 2011-12 financial year welcomed
The Palmerston North City Council has recorded an unaudited operating surplus of around $900,000 for the financial year
to 30 June 2012.
Chief executive Paddy Clifford welcomed the result which he put down to a number of factors including Council officers
continued focus on reducing costs and withdrawal of some projects.
During the year Council reduced existing debt by $5.6 million which was over $3.4 million more than budgeted for.
“Like home owners across the country, Council has heard the comments from both economists and Central Government calling
on New Zealanders to reduce debt. I’m very pleased to report that Council has done this with respect to existing debt.”
Chief financial officer Grant Elliott said the surplus is an achievement in what is now the new economic norm – A
prolonged period of subdued economic growth.
“The operating budget is the money the City Council uses to conduct its day-to-day business and is the only budget
Council has complete control over. Council staff are to be applauded for their prudence in conducting work within
overall budget while managing falling revenue and withdrawal of projects.”
In presenting the Council’s 12 month performance review to the Finance and Performance Committee, financial accountant
Keith Allan said while Council has stayed within operating budget, the effects of the subdued economic climate, and
capital project deferments meant revenue shortfalls.
“Building development contribution activity in the private sector has been on a par with what we’ve anticipated,” said
Mr Allan. “However subdivision activity has been reduced with minimal infrastructure transfers to Council as non-cash
vested assets. Capital subsidies from NZTA were also lower than expected due to the lower capital expenditure with
projects not approved or withdrawn. This has resulted in lower non-operating revenue for the Council of around $7.9
Council manages interest rates over the long-term with amounts incurred allowed in the 10 Year Plan. Accounting
standards require these be valued against market rates. The significant movement in interest rates has seen a non-cash
valuation write-down of $5.4m.
This lower non-operating revenue and valuation adjustment, both primarily non-cash, has largely resulted in Council
recording a Net Result of a $10.7 million loss against a budgeted surplus of $1.9 million.
“With the deferral and withdrawal of some capital projects, such as the second bridge, velodrome and bus terminal and
others, a $26 million under-spend resulted in the capital programme. This means that the current level of debt is well
below that budgeted.
It’s important to note that essential maintenance and renewal capital was only just below what was budgeted,” said Mr
Allan. “And, that work on half of the deferred capital projects is planned in the first year of the 2012 - 2022 Ten Year