Liquidity risk is the risk that Council will encounter difficulty raising liquid funds to meet commitments as they fall due. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Council aims to maintain flexibility in funding by keeping committed credit lines available.
Council manages its borrowings in accordance with its funding and financial policies, which include a Treasury Management policy. These policies have been adopted as part of the Council’s Long Term Plan.
Council has a maximum amount that can be drawn down against its overdraft facility of $100,000 (2019: $100,000).
There are no restrictions on the use of this facility.
Council has an undrawn loan facility of $12 million with Westpac, and $30 million with ASB.
Council is exposed to liquidity risk as a guarantor of all of the NZ LGFA’s borrowings. This guarantee becomes callable in the event of the LGFA failing to pay its borrowings when they fall due. Further information is included in the contingencies note.
NOTE 34: CAPITAL MANAGEMENT
Council’s capital is its equity (or ratepayers’ funds), which comprise retained earnings and reserves. Equity is represented by net assets.
The Local Government Act 2002 requires Council to manage its revenues, expenses, assets, liabilities, investments, and general financial dealings prudently and in a manner that promotes the current and future interests of the community.
Ratepayers’ funds are largely managed as a by-product of managing revenues, expenses, assets, liabilities, investments, and general financial dealings.
The objective of managing these items is to achieve intergenerational equity, which is a principle promoted in the Act and applied by Council. Intergenerational equity requires today’s ratepayers to meet the costs of utilising Council’s assets and not expecting them to meet the full cost of long term assets that will benefit ratepayers in future generations. Additionally, the Council has in place asset/activity management plans for major classes of assets detailing renewal and maintenance programmes, to ensure ratepayers in future generations are not required to meet the costs of deferred renewals and maintenance.
The Act requires Council to make adequate and effective provision in its Long Term Plan and in its Annual Plan (where applicable) to meet the expenditure needs identified in those plans. The Act sets out the factors that Council is required to consider when determining the most appropriate sources of funding for each of its activities. The sources and levels of funding are set out in the funding and financial policies in the Council’s Long Term Plan.
NOTES TO FINANCIAL STATEMENTS
NOTE 34: CAPITAL MANAGEMENT (CONT.) Council has the following Council created reserves:
• Reserves for different areas of benefit;
• Self-insurance reserves; and
• Trust and bequest reserves.
Reserves for different areas of benefit are used where there is a discrete set of rate or levy payers as distinct from the general rate. Any surplus or deficit relating to these separate areas of benefit is applied to the specific reserves.
Self-insurance reserves are built up annually from general rates and are made available for specific unforeseen events. The release of these funds generally can only be approved by Council.
Trust and bequest reserves are set up where Council has been donated funds that are restricted for particular purposes. Interest is added to trust and bequest reserves where applicable and deductions are made where funds have been used for the purpose they were donated.
NOTE 35: URBAN PORTIONS OF THE STATE HIGHWAY NETWORK
The ownership of urban portions of the state highway network is unclear, although there is legal opinion indicating that the ownership rests with local authorities. The NZ Transport Agency maintains these highways in their entirety without any costs accruing to local authorities.
As a consequence, even if ownership resides with local authorities, in practice, NZ Transport Agency controls the economic resources. Pending clarification of ownership and further consideration of the accounting issues which may arise, Council has not recognised the urban portion of the state highway network as an asset in these financial statements. The estimated distance of highway involved is 16.7 kilometres.
NOTES TO FINANCIAL STATEMENTS
NOTE 37: EVENTS AFTER THE REPORTING DATE
After the reporting date, Council entered into stimulus funding agreements with Government, totalling $21.3 million.
The most significant of which are:
• On 23 October 2020 the Council signed an agreement with Department of Internal Affairs. The purpose of the agreement is to improve the environmental performance of drinking and waste water systems and support
economic recovery through job creation. The Department will provide $9.78 million to the Council. Council expect it will be spent by 31 March 2022.
• On 20 November 2020 the Council signed an agreement with the Ministry of Business and Innovation. The purpose of the agreement is Investment towards a more productive, sustainable and inclusive economy, enabling our regions to grow and support a modern and connected New Zealand. The result will be a refurbished Motueka stop bank. The Department will provide $7.5 million to the Council. Council expect it will be spent by 30 September 2023.
NOTE 36: SIGNIFICANT VARIANCES COMPARED TO THE ANNUAL PLAN
VARIANCES ACTUAL COMPARED TO BUDGET IMPACT ON
SURPLUS REASONS FOR VARIANCES INCLUDE:
Vested assets ($7.3 million) Growth activity in the district created demand for more subdivisions, and therefore an increase in roading and three waters assets vesting to Council.
Operating subsidies and grants ($2.1 million) Additional NZTA operating subsidies for sealed pavement and environmental maintenance due to growth.
Capital subsidies and grants ($1.4 million) NZTA funding was $1.4m below budget due to work that was identified in our annual carryover process needing to be delayed until 2020/2021, including the Champion Road Safe Cycle Crossing.
Maintenance ($3.3 million) More sealed pavement and environmental maintenance carried out than budgeted.
Depreciation expense ($1.5 million) Capital work on major projects being delayed, including the Champion Road Roundabout and Underpass.
Share of Joint Operations surplus/deficit ($5.8 million)
Not included in budget.
Unrealised gain on revaluation of forestry, and net surplus on forestry ($4 million)
Movements are explained in note 18.
Fair value loss on derivatives ($4.3 million) After taking out interest rate swaps, the rate decreased which reduced the fair value of the swaps.
Present value adjustment for loan ($3.3 million)
Accounting adjustment for interest free loan. Where a loan is not on an arms length commercial basis, the ‘below-market’
element of the transaction needs to be separately accounted for. This decreases the book value of the loan and creates income, that will be spread over the term of the loan.
Other ($0.4 million)
NOTES TO FINANCIAL STATEMENTS
2018/2019 TOTAL
$
2019/2020 SALARY
$
2019/2020 ALLOWANCES
$
2019/2020 TOTAL COST
$
2019/2020 DIRECTOR FEES
$
2019/2020 TOTAL
$
83,769 King T B, Mayor from 2019/20 122,738 297 123,035 34,676 157,711
45,913 Bryant S – Deputy Mayor 62,918 6,160 69,078 – 69,078
COUNCILLORS
38,262 Maling K, Standing Committte Chair 51,028 2,135 53,163 – 53,163
38,262 Wensley D, Standing Committee Chair 51,028 493 51,521 – 51,521
61,281 Greening M 44,699 440 45,139 24,423 69,562
38,262 McNamara D 44,699 4,035 48,734 – 48,734
38,262 Ogilvie D 44,699 8,288 52,987 – 52,987
38,262 Tuffnell T 44,699 497 45,196 – 45,196
38,262 Turley A 44,699 2,095 46,794 – 46,794
– Hill C 33,052 8,783 41,835 – 41,835
– Butler C 33,052 3,785 36,837 – 36,837
– Mackenzie C 33,052 3,785 36,837 – 36,837
– Walker T 33,052 2,675 35,727 – 35,727
– Dowler B 5,529 442 5,971 – 5,971
PREVIOUS COUNCILLORS
38,262 Hawkes P 11,646 – 11,646 – 11,646
45,913 Canton P 13,975 1,153 15,128 – 15,128
38,262 Brown S 11,646 6,109 17,755 – 17,755
– Hutt C 16,491 845 17,336 – 17,336
38,262 Sangster P 11,646 7,034 18,680 – 18,680
138,720 Kempthorne R, Mayor 43,839 – 43,839 – 43,839
719,954 Total councillors 758,187 59,051 817,238 59,099 876,337
NOTE 38: ELECTED REPRESENTATIVES
In accordance with Schedule 10, Part 3, section 32 of the Local Government Act 2002, the total remuneration and value of other non-financial benefits received by, or payable to the Mayor and Councillors for the year were as follows:
The Mayor T B King has full private use of a vehicle to undertake his civic duties. The Remuneration Authority values this full private use at $3,158 (2019: $3,181).
Mayor T B King is a Director of Port Nelson Limited and received director fees from Port Nelson of $34,676 during the year (2019: $34,030).
Councillor M Greening is a Director of Nelson Airport Limited and received director fees from Nelson Airport of $24,423 during the year (2019: $23,019).