Work bungle hits council

Infrastructure at Marsden City, has left an $8.7 million hole in Whangarei District Council finances. Photo / Ron Burgin

Bungled infrastructure at Bream Bay's Marsden City development will have an $8.7 million impact on the district council's bottom line. The sum, revealed in Whangarei District Council's 2014/15 annual report, is on top of the $5.4 million repair bill the council is fighting to recoup from those who designed, built and signed off storm and wastewater systems that are now "slumping" as a result of acidic soils.

However, the mayor said the $8.7 million was a "non-cash adjustment" - it took into account the depreciation of assets vested free to council - and that overall the annual report revealed financial management that was "bang on".

WDC's operational spend was $124.3 million during the 2014/15 financial year, against a budgeted spend of $125.7 million. This was against actual revenue of $118.6 million, meaning council ran at a $5.6 million deficit. It had allowed for a $5.9 million deficit in its budget, giving a $300,000 favourable variance.

At a glance, the books looked much gloomier, with a total deficit of $19.8 million. Mayor Sheryl Mai stressed this was down to a series of "unrealised" adjustments done to comply with local government accounting standards. The $19.8 million took into account the $8.7 million downgrade of Marsden City infrastructure, estimated to be worth $11.2 million when it was vested to council by the developers who paid for it. The original lifespan of the piping was 80-100 years, since downgraded to 18 years, which reflects the decrease in value. The final deficit also had to take into account $7 million of unfavourable interest rate "swaps", an arrangement where council's fixed interest rate on its debt took into account what money would have "saved" over a specific period had it gone with a floating rate.

Ms Mai said again "this would not be realised in real terms".

"In terms of the actual cash we've spent we're bang on budget, which I think reflects the discipline we've had in holding our staff to account ... Still, it doesn't sit well to have the final report showing a deficit," she said.

WDC's forecast debt for the year was a maximum of $159.9 million, though the end of year position was $144.4 million. Much of this leeway would be required this year to fund projects that had been carried forward - a topic councillor Phil Halse picked up on, saying WDC needed to make more effort to complete work in the year it was planned for.