Meaning behind the debt dive

Some people might campaign on Tauranga City Council's lower than expected debt contained in the draft annual report this week.

But Finance and Risk Committee chairman John Robson warns the dip is temporary and will be back to forecast levels next year.


The development contributions round, council pays for the infrastructure and is repaid by the developers. File.

The unaudited draft financial information for Tauranga City Council to be included in the Annual Report for the year ended June 2016, is expected to be recommended to the city council at this week's meeting.

'Debt is down, net debt is lower than budget,” says John. 'What you have to see is why.”

Actual debt is $297 million compared with a budget of $355m. It has been achieved by putting back expected spending on capital projects like the Marine Precinct, an unbudgeted $10m in revenue from land sales, and an early $10m in revenue from development contributions.

'It sounds good. Some politician will be parading that as a proof that we got the debt down,” says John.

'We flogged some land, the development contributions are coming in quicker than forecast, and we haven't delivered on capital projects for various reasons. In 2016/17 the debt is going to be back up to where it's forecast.”

The Marine Precinct project was delayed until Stage 1 land sales were finalised, meaning construction of the hard stand and buying the travel lift was deferred until the 2016/17 financial year.

Options are being considered for the harbour crossing and completion of the Southern Pipeline Project pipeline through to Te Maunga in 2016/17.

Total development contributions paid to the council over the year are $27m, which is $10m above budget. Almost 1600 new dwelling permits were issued for the year, which is 86 per cent above the ten-year average.

Also associated with the increase in residential dwellings is an over-budget in both revenue and expenditure in the council operations relating to building activity. This includes provision of land and planning information, building and resource consenting, engineering approvals and compliance monitoring.

'Development contributions are basically repayments of debt,” says John. 'Although you are getting development contributions in faster than expected to repay the debt you have, you are also borrowing more at the other end to facilitate the further expansion of the city further out.

'Council borrows the money. The development contributions are the means by which we recover and repay the debt we borrowed to finance that growth to put the infrastructure in the ground.

'There are two sides to this ledger. What we know – and people must never lose sight of this – is that growth does not for the council at least, pay for growth.

'The machine is getting bigger managing the growth. We are getting more money in for processing consents but we are spending it on more staff to do the processing.

'From the development contributions perspective yes, we are getting the development contributions in faster, but remember that is not money we can build a museum with. It's not money we can build a new council building with.

'It is repaying the debt that we have all incurred to put the infrastructure in the ground to allow that growth to happen.”

Operating revenue associated with building and subdivision activity totalled over $10m for the year, 68 per cent or $4m above budget

Growth if okay for a city if it is well managed, says John. Then the benefits should outweigh the costs.

'If it's not well managed then growth can be a disaster for a city. And we don't have to look far to see a city that's grown and it has problems and some of those problems are coming to Tauranga.”

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6 comments

Election Time

Posted on 27-07-2016 07:55 | By tabatha

John has come out from under his umbrella and made some cautious statement. Very quiet really for all the promises he made. Have not really seen or heard anything really positive from his promises he made.


John Robson

Posted on 27-07-2016 09:03 | By waiknot

John Robson calls it like it is. He will get my vote.


John

Posted on 27-07-2016 11:59 | By Crash test dummies

Sensible comments, I feel that they are being tabled to warn and perhaps caution some candidates from crowing to much.


Go figure

Posted on 27-07-2016 13:22 | By Gigilo

Is this good or bad? Simple question forget dollars. Developers and builders are making a fortune. If the people who are charged with managing the growth of this city are not up to it bring in people that can. When you can see looming problems it is job the have a solution, period.


Im in the team

Posted on 27-07-2016 17:42 | By betelgeuse

Johns at the coal face right now.Its great hes telling us all about it but if he has qualms why isnt he on the "committeee to fix it" Simply is this expected,good or bad or sit on you hands and no nothing.Lots of verbage if you ask me


spending out of control

Posted on 30-07-2016 16:40 | By papakiwi

The slipway haulage lift has been purchased, they haven't commented ont he widening of the Turrett rd link to welcome bay which will be in excess of $80million if the council have their way, and then they have their grandiose plans to redevole downtown with new council offices etc which is another $100/2220M dollarsBy the end of 2020 we will see Council debt in excess of $500M dollars and growing at a fast pace. Council staff, councilors and Mayor just do not know how to stop spendingIf a roundabout can blow out by $1.5 million then there is not any hope for other projects


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