The surplus was because of accounting requirements, not over-rating the people of Otago, as Cr Bryan Scott had implied in a question to the council's auditor, Mr Scott said at an additional council meeting yesterday.
The council's 2013-14 annual report was presented, and received the auditor's approval, at the meeting.
In its budgeted surplus of $3.157 million, the council was using about $2.2 million of the targeted rates collected to help pay off the council's loan for its contribution to Forsyth Barr Stadium.
Debt was not listed as an expense in the income statement, he said.
The surplus also included $1.7 million of revenue from targeted rates for flood protection work on the Water of Leith, but capital expenditure again was not listed as an expense in the income statement.
The difference between the budgeted surplus and the actual surplus included a $1 million irrigation grant, which had been expected to be paid but was not; grant income was greater than budgeted for, by $850,000 because of a dispute with the New Zealand Transport Agency having been resolved; and $700,000 was revenue because of the revaluation of properties.
Chairman Stephen Woodhead said it had been a good year for the council with the implementation of its 6A water quality policy under way and its work on water quantity, the regional policy statement, Leith flood protection scheme and air quality all started.
''We do have a very strong balance sheet, with Port Otago, but it has not happened by mistake.''
The financial statements showed the council's total equity was $520 million, compared with $506 million last financial year, because of the revaluation of the council's investment in Port Otago Ltd of about $9 million and the surplus, he said.
The annual report showed the council made one severance payment of $56,250.
It also showed the council had one staff paid in the top bracket of $200,000 to $279,000. Chief executive Peter Bodeker's remuneration package was $283,858, of which $260,480 was salary, for his first full year in the job.
In the previous year, the top bracket was $180,000 to $279,000, which four staff fell into.
This year, seven staff were paid between $120,000 and $199,999, the second-highest bracket. Sixteen were paid between $100,000 and $119,999, compared with 14 the previous year.
Councillors were paid between $30,862 for the newest councillor, Gary Kelliher, and $41,297 for Doug Brown.
Changes in payments reflected the added responsibilities of chairing committees assigned after last year's local body election.
Mr Woodhead received $117,043, down from $120,068 last year, while newly appointed deputy chairwoman Cr Gretchen Robertson received $58,911 up from $48,580 the year before.
Cr David Shepherd, who gave up the deputy chairmanship, received $51,616, compared with $61,186 the year before.
