Last week we released our Annual report for the Financial year 2019/2020
Key messages I think are worth highlighting include;
1. Record capital investment
· Record $2.6 billion capital investment delivered, up $520 million on prior year (up 25%)
· Included $1.1 billion for transport infrastructure and $750 million for water infrastructure
· In 2018 we adopted our 10-year Budget with a substantial planned increase in capital investment enabled by the Regional Fuel Tax and the new water quality targeted rate. The accelerated rate of infrastructure investment shows that plan coming to fruition
2. Debt higher to support the investment, but within prudent limits
· Net debt increased by $1.3 billion to $9.9 billion
· That debt figure needs to be seen relative to our total assets of $56 billion (note debt to asset ratio of 18%)
· We remained with our prudential debt limits, with debt to revenue at 264% compared to our 270% policy limit
· Both of our credit rating agencies have reaffirmed our ratings with stable outlook:
o S&P Global rating of AA reaffirmed September 2020
o Moody’s Investor Services rating of Aa2 reaffirmed April 2020
3. Good year-end result despite COVID-19
· 36% of our revenue came from rates while 64% comes from other revenue sources. This has amplified the financial impact of COVID-19 on council group’s revenues as these other revenue sources (especially public transport and other user charges) reduced.
· $23 million efficiency target was achieved through:
o organisational design changes to remove duplication and reduce back-office support costs
o process improvements and digitisation, particularly in the regulatory area
o tight controls on recruitment, professional service fees and discretionary spending (such as travel and training)
· Costs directly controllable by management (i.e. excluding items such as depreciation and interest) was within $5 million (0.2%) of budget for the group and offset by non-rates revenue being higher than budget
· This result was after accounting for a $79 million net negative impact of COVID-19 on group revenue during the period
· This was the result of strong performance against budget in the first half of the year
4. Staff numbers increased to deliver more services and investments
FTEs for Auckland Council ( not including CCO’s) reduced by 78 to 6,470 (161 below target) on top of contingent workers
· FTEs for the CCOs increased largely to support the bigger capital programme and deliver projects for Auckland, for example:
o Auckland Transport taking on 108 additional FTEs to support the $1.1 billion transport capital programme which includes projects such as the downtown ferry terminal and ferry basin redevelopment, Puhunui Interchange, Eastern Busway, Hurstmere Road projects
o Watercare taking on additional staff to progress the Central Interceptor project - an increase in activity at main sites as well as increase in active construction sites required increase in the Project Management team.
· FTEs for the CCOs also increased due to Watercare acquiring a company called Lutra Limited as well as Watercare contracting with the Waikato District Council to provide water and wastewater services. Both these generate revenue for Watercare which offsets their costs. Another notable contribution to the increase was RFA also converting casual staff to permanent staff (technical roles at Auckland Live), and filling vacancies in ICT, security, maintenance and museum staff.
5. COVID-19 had a mixed impact on our performance metrics
· COVID-19 disruption reduced PT boardings by 18 million (an 18% reduction compared with the previous year) and saw library visits fall by more than 2 million (a 23% reduction compared with the previous year.
· Borrowing of e-book and other digital items from our libraries increased to over 3 million issues and (with over 9,000 digital items issued per day during Alert Level 4, around 1,000 more than during a normal average day).
· 71% of Aucklanders now feel ready for an emergency, up from 64% in the previous year.
· We supported the community through Covid-19, delivering food and essentials parcels to over 25,000 households, checking in with 15,000 older Aucklanders to see if they needed assistance, and postponing rates for those in financial hardship.
6. This result puts us in strong position for the year ahead
· We are dedicated to delivering the $120 million of savings and costs reductions in our Emergency Budget for 2020/2021. We have now achieved $78 million or 65% of this target.
· Given the current high levels of uncertainty we are closely monitoring our financial position on a monthly basis via the Finance and Performance Committee. So far group revenue is tracking in line with the Emergency Budget despite the recent lockdown and restrictions in Auckland
· Auckland Council will continue to become a leaner and more adaptable organisation. Part of being adaptable means increasing or reducing staffing in response to:
o changing customer demand (and non-rates revenue)
o the profile for our capital investment (for example shovel ready)
o consenting volumes - which continue to stay strong (which is also a positive growth indicator).
· Recent reporting (as at the end of September 2020) shows that FTEs for Auckland Council had fallen by a further 129 to 6,341 as of 30 September as a result of attrition, restructuring and operational changes.
· Auckland Council estimates FTE will be around 6,000 by the end of the financial year also as a result of attrition, restructuring activity and operating model changes.