The Hauraki District Council service centre and library in Ngatea.
The Hauraki District Council service centre and library in Ngatea.
Hauraki District Council’s annual report has been described as a “warning shot to everyone” as inflation, interest rates and depreciation have had a significant impact on the council’s financial position.
HDC was presented with a 2023/2024 annual report showing a $17,208,000 deficit against a budgeted surplus of $514,000 in 2024.
“The actual cost of business has gone up 35% in the past two years, all IT software went up 100%; our power bill went up $650,000 across 12 months.”
The overall major negative variances for income and expenditure showed depreciation, interest, fees and charges and other expenses made up the majority of unfavourable differences.
Rates revenue was $800,000 more than budgeted, half of that was attributed to penalty income. Fees and charges were $600,000 below budget as were development and financial contributions ($350,000).
Waste management and regulatory income charges were a combined $900,000 under budget, while subsidies and grants were $2.6m higher than budgeted, the majority ($1.2m) attributed to cycleways.
Interest revenue was higher than that budgeted by $700,000. The majority of that is related to interest on funds invested from early renewal of borrowings.
Other revenue was $4.3m lower than budgeted, primarily due to $4.1m of section sales that were budgeted for but not occurring during the year as the land development was not completed before the balance date.
Speaking to the meeting, group manager business support Duncan Peddie said assets had to be revalued earlier than anticipated because of high inflation over the past few years.
Hauraki District Council mayor Toby Adams. Photo / Mike Scott
Personnel costs were higher than budgeted by $500,000 – $210,000 of that for water and wastewater treatment operators who did significantly more overtime than forecast, mostly due to reactive repairs.
Depreciation costs were also higher than that budgeted — by $4.2m. This was primarily related to movements in asset valuations that were higher than anticipated due to increased inflation and out-of-cycle revaluations.
The biggest variances were roading ($1.1m) and water ($1m). Interest expense was $2.4m more than budgeted while other expenses amounted to $9.35m.
Councillor Ray Broad said the report was “a bitter pill to swallow”.
“It is something we will have to look at to get our next annual plan in order, it is just a warning shot to everyone, the books are a bit grim; we can do better.”
Adams said it should be noted the results were reflective of the past two years.
Hauraki Plains Ward councillors Ray Broad and Phillip Buckthought. Photos / Hauraki District Council
He said costs were “going through the roof” and some of this was out of the council’s control.
Adams said the bulk of costs had gone into infrastructure but warned councillors they might have to make some “hard calls and keep it down”.
The bulk of the $9.35m in other expenses was made up of $2.5m assets written off, $1m in business units, $1m in water, $900,000 in cycleways grants, $700,000 in wastewater and $700,000 in waste management.
Councillor Phillip Buckthought said going forward, the council had to do better.
“We should have a much better finger on the pulse as to what costs should be. We need to be all over this.”
Opening debt was $62m, or $8m higher than the $54m forecast while closing debt was $100m, or $27m more than the $73m forecast.
The biggest variance was a $17m shift in increased operating expenditure - overall the average debt was $18m more than forecast, which increased borrowing costs by $1m - $700,000 of that was offset by interest income, primarily driven by pre-borrowings.
The remaining $1.4m of increased interest cost related to higher interest rates (5.7% rather than the 4.05% forecast).
