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Thursday
Sep272012

Annual Report

The Annual Report was adopted yesterday amongst a great deal of back-slapping and self congratulation - in fact, no fewer that five valedictions in praise of staff, including one effusive offering by David Hammond, were delivered yesterday. It was interesting to note much skiting about the Audit Office representative on the Audit Committee having waved the Report and claimed that it was the benchmark that he used with other councils. Wow, what an achievement - the only problem is that he did exactly the same with the last Audit Committee - he certainly knows how to stroke egos - and there are plenty on this Council.

One comment by CFO Steve Baker is worthy of note, and that related to the fact that additional staff costs related to the reorganisation are beginning to kick in - I wondered when that penny would drop.

Other interesting comments:

- Borrowing (external) has not moved - holding steady at this time at around $50m.

- Costs are under budget at this point

- Capex was down from $3w3m to $23m on budget

- Depreciation down $10m as the result of cancelled projects.

- Reliance on rates revenue is increasing as Development Contributions continue their slide.

- Property re-valuation gain up from budget $17m to $31m - an illusory gain if ever there was one.

The situation with DC's would be a joke if not so serious, and reflects the absolute determination of staff (including, I am sorry to say - Steve Baker) to follow the idiotic advice firstly of the University of Waikato, and then BERL in regard to growth rates. It is six years since I (and others) warned staff that the predictions were unrealistic and that they should adopt pragmatic, rather than academic based 'pie in the sky' figures.

Six years later Mr Baker had the audacity to suggest that the 2011/12 $3m (80%) shortfall was instructive, and that they may now have to consider a negative figure - that way we pay the developer. I think he was joking, but you can never be sure. It is unbelievable that the shortfall has remained almost constant over the entire period.

Another issue that raised its head yesterday concerned the hedging arrangements that Council entered into on the advice of its financial advisors three years ago during the term of the previous Council. Steve Baker still maintains that it was a good idea at the time when interest rates were expected to shoot up. When they headed in the other direction, those who had hedged were left carrying the can - in our case, the liability (book only until the music stops!) has gone from $2.2m to $4.8m in one year - it could continue to rise exponentially if interest rates continue in their current slough.

Board Chair Johnstone displayed consummate wisdom after the event by asking whether CFO Steve Baker may consider our financial advisors "too conservative". One could say - imagine what would have happened if we had not hedged, and interest rates had gone through the roof. The fact remains that there  is a continuing cost, and the inevitable long term reckoning must be a concern - there is no indication that the World will come out of the current recession in accordance with past experience.

Debtors have increased from $2.7m to $3m without explanation, but worryingly all in the 61+ days out sector - there is clearly a long term situation there that needs to be revealed - not hidden behind confidentiality walls. Whitianga Waterways was a substantial long term debtor at one point (some disputation involved) - we are left to speculate as to whether that is still the case.

I will report on other matters that emerged in the Report next week when I am able to secure a copy - the drafts were all withdrawn as usual at the meeting "to avoid confusion", and my shorthand is deficient!

 

 

 

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