Summary of our year

Overview of our performance –
the numbers

The Council performed strongly financially over the past year by achieving a budgeted net surplus and achieving a near break-even underlying result, within 0.1% of total budgeted operating expenditure. Our financial position remains healthy. Council debt is equivalent to less than one year’s revenue and we have investments that provide returns exceeding debt servicing costs. Accordingly, we have maintained our AA credit rating with Standard & Poor’s, the highest for a public sector entity.

$(0.6)
million
Underlying result for 2017/18, 0.1% of operating expenditure

The underlying deficit is the reported net surplus ($32.2 million,) excluding non-funded ($15.3 million) and capital ($48.5 million) transactions and other adjustments ($0.4 million) that do not affect the Council’s rating requirements. (Council budgets are set to have a nil underlying net result).

$6.48

 

The operational cost of delivering all Council services per resident per day

Our services include managing and maintaining facilities like libraries, swimming pools, sportsfields, community centres and parks, as well as keeping our roads and footpaths at a high standard, making sure we all have safe water to drink, and supporting arts, cultural and sporting events.

$503
million
Cost of running the city for the year 2017/18

Our total operating expenses for the year were $503.2 million (compared to $494.5 million in 2016/17), which represents the cost of running the city during the year.

$172.9
million
Capital spend for 2017/18

We spent $172.9 million on building new assets for the city. This was lower than our planned $182.5 million. This was as a result of the re-phasing of some projects over a longer period of time.

$476
million
Borrowing position for 2017/18

This is an increase of $57.2 million from last year, which equates to $2,239 per person in Wellington. We use borrowing to spread the cost of new facilities or infrastructure over the multiple generations that will benefit from that facility or infrastructure. We believe this is the fairest way to do things.

$1:$1.10

 

Debt servicing costs to investment returns

For every $1 the Council incurs on paying interest on debt, it receives $1.10 from its investments.

$7.2
billion
Assets

The Council provides a broad range of services to the city through a range of infrastructure networks and facilities (Council assets). These have been built up over many generations and equate to around $34,000 net worth of value for every person in the city.

AA

 

Credit rating

The Council is in good financial health – it has an AA credit rating with Standard & Poor’s.

Key influences on our overall financial performance and position were:

Our underlying operating result

The underlying operating result provides a comparison with the rates requirement we budgeted for in our Annual Plan to achieve a balanced budget. It shows how closely our annual revenue matches how much we spend in any given year. A balanced budget helps ensure that we are not passing the costs of running the city today onto future generations and imposing future costs on current generations. On the other hand, we also need to ensure that the current generation pay their fair share and to not pass on current costs to future generations. Our goal is therefore to have an underlying surplus or deficit close to zero.

This year we got very close to a breakeven result, with an underlying deficit of $0.6 million, within 0.1% of our planned balanced budget.

To get from net surplus to underlying result, the following is excluded:

These items are excluded because they generally don’t affect rates and were excluded from our Annual Plan balanced budget calculation. Table 10 summarises the capital and non-funded adjustments made to the net surplus to arrive at the underlying result.

Table 10: Summary of the underlying result
Underlying result Actual
$M
Budget
$M
Variance
$M
Reported net surplus 32.2 32.4 (0.2)
Add items or budgeted differences not required to be rates funded 15.3 12.0 3.3
Exclude government funding for capital projects (48.5) (48.4) (0.1)
Other adjustments 0.4 4.0 (3.6)
Underlying deficit (0.6) 0.0 (0.6)

Figure 9 shows the Council’s performance over the past 5 years. Zero on the graph represents a balanced budget. For 2017/18 we achieved our lowest underlying result in recent years and this reflects the careful stewardship of revenue and expenditure against budget.

Figure 9 shows the Council’s performance over the past 5 years. Zero on the graph represents a balanced budget. 2018 shows underlying result of -$0.6million with net surplus of $32.2million

*Refer to Table 10 for explanation of movement from reported net surplus to underlying deficit.

 

Where our money comes from

Rates are our main source of funding (55% of $535 million) with revenue from operating activities (including user fees) the next largest source (29%). We also receive revenue from other external sources (mainly government) to fund capital expenditure, revenue from interest, and dividends. Figure 10 shows the overall sources of revenue for the past 3 years.

Figure 10 the overall sources of revenue for the past 3 years. 2018 shows $296.4million from rates, $43million from external sources, $24.4million from investments, $153.4million from operating activities and $18.2million from other revenue

Figure 11 shows the sources of the Council’s revenue for the year. The majority of the Council’s $296 million of rates revenue received during the year was from general rates. Other sources were sewerage and stormwater targeted rates, with the fresh water provision making up most of the balance.

Figure 11 shows the sources of the Council’s $296million rates revenue for the year. They are as follows: General and targeted rates - Base Sector 34% $101.2million. General and targets rates - Commercial, industrial and business sector 28% $81.5million. Sewerage and stormwater 19% $57.7million. Water (including water by meter) 14% $41.4million. Downtown and other targeted rates 5% $14.6million

In 2017/18, the Council received higher cash revenues than budgeted from:

The Council also received higher non-cash revenues than budgeted for vested assets ($8.1 million) and an increase in investment property valuations, which is recognised as revenue ($6.9 million).

Where the money goesTop

The following graph summarises the difference between the actual and budgeted net expenditure for each strategy area. They show how the Council has prioritised its spending to support the operational and strategic direction that has been set during the Annual Plan process. Net expenditure is calculated by offsetting activity expenditure, with user charges and other direct activity income. This is the amount that is funded by rates and other corporate revenue such as dividends and rental income.

Details of the financial performance against budget for each activity can be found in the “Our performance in detail” section on pages 37 to 144.

Figure 12 illustrates the difference between the actual and budgeted net expenditure for each strategy area. They show how the Council has prioritised its spending to support the operational and strategic direction that has been set during the annual plan process. Net expenditure is calculated by offsetting activity expenditure, with user charges and other direct activity revenue. This is the amount that is funded by rates and other corporate revenue such as dividends and rental revenue.

Figure 12 Figure 12 illustrates the difference between the actual and budgeted net expenditure for each strategy area in $millions. Strategic area actual and budget in millions: Governance - Actual: $17.0, Budget: $18.4. Environment - Actual: $140.1, Budget: $146.7. Economic Development - Actual: $23.0, Budget: $27.8. Cultural Wellbeing - Actual: $20.5, Budget: $20.0. Social and Recreation - Actual: $61.2, Budget: $61.4. Urban Development - Actual: $15.8, Budget: $16.3. Transport - Actual: $32.5, Budget: $31.2.

Summary of capital expenditureTop

We have a comprehensive renewal and upgrade programme for our assets and have completed $172.9 million of capital expenditure during the 2017/18 year. This equates to 95% of the annual budget or 80% once utilisation of budgets brought forward from prior years is included. Delays in a number of projects occurred during the year due to changes in design, negotiations or consultation and consents requirements. Budgets to complete these projects have been included in Our 10-Year Plan 2018-2028.

Figure 13 shows budget versus actual capital expenditure for each activity area.

Figure 13 shows budget versus actual capital expenditure for each activity area. Strategic area actual and budget in $millions. Governance - Actual: $0.0, Budget: $0.008. Environment - Actual: $45.4, Budget: $46. Economic Development - Actual: $0.6, Budget: $5. Cultural Wellbeing - Actual: $0.4, Budget: $1.3. Social and Recreation - Actual: $40.3, Budget: $46.3. Urban Development - Actual: $19.5, Budget: $29.6. Transport - Actual: $55.5, Budget: $62.8.

Table 11: Capital expenditure by activity area ($000)
  2015/16 2016/17   2017/18 Actual  Budget Brought forward  2017/18 Budget Variance
Strategic area
               
Governance - -   8 8 - -
Environment 36,901 40,982   45,428 455 45,491 5181
Economic development 1,669 886   599 - 5,016 4,4172
Cultural wellbeing 1,968 1,286   443 - 1,258 8153
Social and recreation 26,269 30,186   40,253 21,647 24,684 6,0794
Urban development 7,621 9,784   19,504 8,886 20,773 10,155
Transport 36,534 34,318   55,465 2,624 60,247 7,4066
Total strategic areas
               
  110,962 117,442   161,699 33,620 157,470 29,391

Variance explanations to finances – why our actual spend differs from what was budgeted

1 Under budget due to lower personnel costs and professional fees.

2 Under budget due to delays in the Wellington Venues renewals programme ($1.640m) and the deferred decision on the Movie Museum project ($2.777m) component of the combined Convention Centre project.

3 Under budget due to the deferred decision on the Movie Museum component of the Convention Centre project.

4 Under budget due to timing of work in the completion of the Basin Reserve Master Plan; with the Johnsonville Library development project and with several of the community centre upgrades - Aro Valley, Kilbirnie, Newtown and Strathmore. As well as with the public conveniences and pavilions work programme (Alex Moore Park, Ben Burn Park and Island Bay).

5 Under budget due to timing of work undertaken with the Town Hall and St James earthquake strengthening projects.

6 Under budget due to timing of work undertaken for the cycling programme and the completion of the LED street light transition project, which has been delayed until 2018/19.


​In addition to the above, the Council spent $11.2 million of a budgeted $25 million on corporate Council projects, which include buildings, equipment replacement and IT projects. The unspent portion relates to deferred building projects.