Sharechat Logo

Auckland Council's ability to boost operating surpluses

Wednesday 18th April 2012

Text too small?

Auckland Council’s ability to lift operating surpluses as planned, by hiking rates and cutting costs over the next five years, will be critical to super city as it prepares for a decade of ramp up debt to fund transport and water projects, Moody’s Investors Service says.

The ratings company has assigned an Aa2 credit rating to the council, its third-highest, with a stable outlook. That reflects the local authority’s “policy flexibility” to raise rates and lack of restraints to slashing costs including downsizing its workforce, Moody’s said in a report.

“Given the $22 billion, 10-year capital improvement plan, it will be critical for the council to achieve higher operating surpluses, both to constrain debt accumulation and to support the costs of the increased borrowing,” Moody’s said. “The council projects that its cash deficits will remain high and average about 24 percent of revenues annual over the next five years.”

The council is projecting improved operating performance, with its gross operating balance averaging about 16 percent of revenue over the next five years, according to the Moody’s report. The improvements are predicated on a 4.9 percent average increase in property rates and efficiency gains from the amalgamation.

The council came into being in November 2010, from the merger of seven smaller councils and Auckland Regional Council.

In its first eight months it generated a “modest” gross operating balance of $100 million on an annualised basis including council-controlled organisations. On a cash basis, however, it recorded a deficit equivalent to 27 percent of revenue on higher-than-expected amalgamation costs and increased capital spending.

In February, Standard & Poor’s removed Auckland Council from CreditWatch negative and affirmed its AA rating with a stable outlook. That’s equivalent to the Moody’s rating.

Auckland accounts for 33 percent of New Zealand’s gross domestic product and GDP per capita at $44,906 last year about matches the national level.

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: Blue-chip stocks Meridian, A2 lead market lower
NZ dollar rises on Brexit hopes, rate cut reassessment
Three not failing, just needs a new owner - MediaWorks CEO
Major investors back new CBL class action targeting directors
Rip Curl purchase a done deal on Kathmandu proxies alone
Comvita chair Neil Craig eyes the exit once he finds a new CEO
Mercury raises guidance on increased storage, high spot prices
Eroad reports strong 3Q sales growth, eyes ASX listing
MediaWorks puts TV business on the block
NZ dollar benefits as preliminary Brexit deal improves risk appetite

IRG See IRG research reports