18 August 2014
Significant debt reduction achieved
Palmerston North City Council has maintained an operating budget surplus for the 2013/14 financial year ended 30 June
and paid down more debt than planned.
The Council finished the year with a controllable surplus of $4,762,000 however $520,000 of that has been carried
forward into the 2014/15 financial year.
Chief executive officer Paddy Clifford says the variance has occurred because of a reduced call for some expenditure,
particularly maintenance related with no adverse weather events, the delay of some planned expenditure (for both
external and internal reasons), a reduced need for professional service costs, and some grants not being incurred.
We had expected some of our major projects to have either been fully or at least partially incurred thereby reducing the
favourable variance reported on at the third quarter of the 2013/14 financial year. “However,” says Mr Clifford, “this
only occurred to a limited extent.’
An additional $9,113,000 was available for debt reduction on top of the budgeted $3,632,000.
“This is very pleasing. However, it’s important to note that debt levels will increase as those projects, particularly
capital, which have been carried forward are incurred in the new financial year.”
Chief financial officer Grant Elliott says the 2013/14 financial year has been good for Council.
"Council's debt level is significantly lower and reduced debt means reduced interest costs. This, alongside the reduced
call for some budgeted expenditure, particularly maintenance related, lower grants and professional service mean Council
is on a sounder financial footing as we enter a new financial year."
"While many of the reasons for the surplus are external I do want to highlight the fact that Council management and
officers are focused on expenditure reduction and I am proud of their efforts which are having an impact while still
delivering the services required.”
Financial accountant Keith Allan told Councillors at today's Finance and Performance Committee meeting that Capital
Expenditure programmes valued at $23.9m have been incurred against the overall capital programme budget for the year of
$38.6m.
The carry forward includes: Papaioea social housing project; Supporting infrastructure for the Lido Pool hydro slide
project; Wildbase Recovery; seismic strengthening of Council owned buildings; Turitea Valley/ Pacific Drive new water
supply; Longburn wastewater connection; Ashhurst wastewater treatment (possible pond lining); waste minimisation
community facility to assist diverting waste from landfill; major upgrade of Main Street Bus Terminal; and, the Manawatū
River Shared Pathway (Ashhurst to Riverside Drive).
Keith Allan says the amount available from operations for debt reduction was reduced by debt incurred to fund new
capital expenditure to give a net $3.4m reduction compared with a budgeted increase of $16.1m.
It is important to note that when these projects are carried out debt levels will increase as they are intergenerational
programmes that are partly funded by debt and paid off over time – rather than being paid for by the current generation
of ratepayers.
Copies of the Financial Report can be found in the Finance and Performance Committee Agenda at pncc.govt.nz.