Annual Plan - The "Nitty Gritty!"
Wednesday, June 26, 2019 at 3:47PM
Bill Barclay

For years, I have watched as the finance gurus within Council undertake their chores, and come up with results that few around the table have a clue about, let alone ask any questions.

It was interesting that in this latest iteration, that a substantially revised Prospective Statement of Financial Position was presented at the Meeting to replace the one contained  in the prospective financial  statements as tabled within the Annual Plan. - always a 'red flag' without an adequate explanation, and I don't consider the one provided yesterday to be in that category. 

What concerns me is that $6.5m 'Investments' disappeared from 'Current Assets,' apparently partly offset at the bottom of the page with an increase of some $7m in 'Borrowings' in the current year, and $11m over the term of the Long Term PLan. This appears a rather arbitrary change of this scale and nature, and how did the 'Investments' get in there in the first place? Surely not a 'balancing item' - the bane of auditors.

Another major change appeared with a $24m further increase in 'Property, plant & equipment' over the term of the LTP, following on the $42m increase in 2019/20 already approved. The CEO warned that borrowings will be approaching the Council's current (ordained) limits by the end of 2019/20. There are some very ambitious capirtal items in the offing that will clearly clean out the coffers.

So prepare yourself for a substantial rate increase bid in the 2020/21, particularly if some of the Eastern infrastructure plans, and the Thames Recreation Centre come to fruition. Expect $40m minimum for the latter (c.f. Napier CC, and forget the wildly optimistic estimates bruited about to date!). And the estimates to date cpnveniently ignore the liikely legal challenge to the fanciful aquatic centre plans.

Remember that Council assets can only be funded by rates, or borrowing, so if CEO Rob Williams is on the mark. a major hike in rates next year (following the election!)  is inevitable. Candidates need to be put under the hammer on this.

Another (but no means the only bugbear I have with projections, and Annual Accounts for that matter) is the cunning way in which we are prevented from establishing the year on year increase in staffing costs. This is done by the simple expedient of combining Staff Costs with Suppliers  - some $63m - not insignificant, even if stable. Other councils do exactly the same, but that does not excuse the practice - separating the two would only represents an extra line, and contribute to transparency.

 

 

 

Article originally appeared on BillBarcBlog (http://billbarclay.co.nz/).
See website for complete article licensing information.