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Auckland Council lifts leaky homes provision 10%

Thursday 28th February 2019

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Auckland Council has lifted its provision to cover leaky building claims by nearly 10 percent, its first-half financial report shows.

The provision was increased by $31 million to $350 million at Dec. 31.

“The increase comprises of $63 million revised cost estimates to remediate multi-unit buildings, which have escalated due to more certainty around the costs of remediation, and the inability to share costs with other parties to the claim following their liquidation,” the report says.

“This is partly offset by $35 million of claims settled in the period.”

The report says provisions are recognised only when the council has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required and the amount can be estimated reliably.

On Wednesday, Steve Evans, the head of Fletcher Building’s residential division, told a conference on residential construction that the law should be changed to remove local councils from much of the post-consenting process and to privatise quality assurance.

That would remove local authorities from being “the last man standing” in claims such as the leaky buildings situation, Evans said.

Auckland Council reported a 6 percent increase in its net surplus to $1.04 billion for the six months with revenue rising by $258 million, including an $80 million increase in rates, a $32 million increase in fees and user charges and a $78 million increase in the regional fuel tax.

Spending excluding losses rose by $97 million, including $31 million in higher depreciation, a $25 million increase in Auckland Transport costs due to continued growth in public transport and $23 million growth in spending on such things as water quality and the growth in building consents “as Auckland builds become more complex due to intensification.”

Net debt rose $63 million to $8.29 billion.

“The performance demonstrates the underlying strength in our financial management and our continued focus on delivering the group’s 10-year budget,” says chief financial officer Matthew Walker in a statement.

“Our challenge has, and always will be, to balance the costs of delivering and maintaining services against the infrastructure investment demands of a growing city,” Walker says.

“We believe our continued commitment to providing cost effective services, as well as our prudent approach to the management of debt, is reflected in these results.”

Auckland Council’s 'AA' credit rating from Standard & Poor’s Corp and 'Aa2' from Moody’s Investors Service were reaffirmed in September and October respectively with a stable outlook on both.


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