$60m DCC surplus from large projects

Athol Stephens
Athol Stephens
The Dunedin City Council ended the last financial year with a $60 million net surplus - $20 million more than expected.

The result is a reflection of funds flowing to major city projects, and a "snapshot in time".

The council's capital expenditure for the year was $188.9 million, 103% of its budget.

That figure could have an effect on the council's credit rating with credit agency Standard & Poor's, which noted last year when affirming the council's AA- rating and stable outlook "large shortfalls" in capital spending were expected, meaning debt would be delayed, as would pressure on rates.

But council finance and corporate support general manager Athol Stephens said while expenditure was over 100%, he did not expect Standard & Poor's to review its rating when representatives visited the city in October.

"I'm almost certain they won't review their position," he said.

This year's figures compare with a $4.7 million surplus at the end of the last financial year, and capital expenditure of $106 million, 70% of the budget.

Overall, Mr Stephens said he was happy with the results, with minimal variances in the financial result in important areas showing the budget was progressing as planned.

The $60 million surplus, up from a budgeted $40 million, was mainly the result of "a whole lot of contributions" to major projects, for instance payments from the Otago Regional Council and the Community Trust of Otago for the Forsyth Barr Stadium.

The financial result was a "snapshot in time" as the money came in for those projects before being spent.

The council was still waiting for some of the stadium funding to come in, but there was a schedule of payments in place, and payments were in accordance with the schedule.

Mr Stephens also said yesterday the council had bought two properties from its endowment fund.

The council has been working to increase the dividend from the fund for ratepayers, and had bought the YMCA building in Moray Pl for $2.9 million, and an Auckland building for $5.3 million.

Those purchases were not planned, and had pushed up capital expenditure.

Loans for the year stood at $85.6 million, compared to a full year budget of $97.9 million, most related to the stadium.

The amount was lower than budget because the money was not needed, Mr Stephens said.

A $13 million unfavourable variance in the council's budget for "vesting of the Chinese Garden" was a technical matter, with the council required under accounting standards to note the value of the garden as revenue, even though it was a "public good" asset without a meaningful value.

Mr Stephens said the Standard & Poor's mention of capital spending was more an "observation" the council did not usually complete its budgeted capital spending in a year, than a warning.

"I don't think they were saying [completing the budgeted capital spending] was a bad thing to do.

"It has an effect on debt, [but] I don't know they will reconsider their position."

That decision would be made in the context of whether the council had "ideas for spending money, or for scaling back".

Looking at the council's financial position, he described variances in the council's budget as "chicken feed".

- david.loughrey@odt.co.nz

 

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