Rotorua Lakes Council appears satisfied with its performance over a six-months period to December last year.
In its report to last month’s operation and monitoring committee chaired by Charles Sturt, the council says overall the performance for the six-month period represents an operating result where higher revenues are offset by unfavourable costs.
“Actual YTD (year-to-date) performance is ahead of budget and Council continues to monitor and manage business activities in order to remediate potential expenditure risk to delivery of the annual plan,” the report says.
Revenue, particularly water and general rates, continues to perform well against budget driven by what the council terms “rates capture”.
The council’s roll out of parking technology should see an uplift in fee revenue towards the later part of this financial year.
But the report notes the current shortfall in parking/prosecution fees is partially offset by the continued demand for services, for example health inspection certificates.
Subsidies and Grants revenues include a $200,000 donation for the museum received in October and outreach work is ongoing to source additional external funding.
Operating expenses are $132,508 below budget driven largely by capitalisation of design work on the Lakefront project (Geotech reports and associated consultants and contractor payments) in September and October; receipt of partial funding for the April 2018 flood costs received in October; favourable advertising spend of $249,612 due to business saving initiatives on printing costs and due to a slow-down in anticipated events held by the Events Centre.
These “favourable” cost drivers were partially offset by unforeseen maintenance and repair work ($532,453) on the Aquatic centre, Museum, Library and the Rotorua Youth Centre facilities network, follow on costs for emergency management as a result of the extraordinary April flood event and legal costs driven largely by the Environment Court for the landfill case.
Staff expenses, while marginally below budget, were broadly in line with budget following an uplift of Salaries in November with previous “savings” eroded as vacancies are filled, the report continues.
Electricity pricing remains unfavourable, $802,843 over budget at the end of December driven by the severe spike in spot prices from October following unfavourable supply/demand variables.
Concerns remain around the future direction of spot prices this year particularly as rainfall and wind levels are below normal levels.
The expected shutdown of the offshore Pohokura gas pipeline in March will continue to add pressure to the spot price.
Options remain under consultation to mitigate against this risk, including forward hedging and fixed price variable volume contracts but will themselves come at an additional cost and further analysis is underway.
Capital expenditure to achieve the council’s long-term vision was $24.4m as at the end of December, partially offset by $7.9m of capital subsidies.
Current project expenditure is 31 per cent of the FY budget of $77.6m and while costs were still expected to increase significantly in the second half of the year it’s anticipated that due to timing some of the total project spend for the 2018/2019 year will defer to 2019/2020.