A half-year update on Environment Waikato’s financial position for 2007-08 shows the council heading for a higher annual surplus than originally expected, mainly because of planned spending not going ahead due to staff shortages.
This lower-than-forecast spending is more than offsetting an anticipated $2 million shortfall in investment fund income caused by recent volatility in international financial markets.
The updated operating surplus forecast for the year, as at the end of December 2007, is now $2.06 million (equal to 2.25 per cent of budgeted spending), compared to an original surplus forecast of $806,000 (0.88 per cent of budgeted spending), said finance and audit committee chairman John Fisher.
He was commenting ahead of information to be presented to Thursday’s finance and audit committee meeting which will show the original estimate of income from the council’s investment fund was $5.13 million. (The fund, currently valued at around $84 million, stems from the proceeds of the council selling its shares in the ports of Auckland and Tauranga, as well as some of the council’s surplus cash at hand.)
“Due to the unexpected falls on global financial markets, linked to economic conditions in the United States, a new forecast shows this investment fund income is now expected to be $3.13 million, some $2 million less than first budgeted,” said Cr Fisher.
“There are signs financial markets have become more stable and we will continue to monitor the fund investments very closely.”
However, Cr Fisher also said staff shortages meant council spending was tracking below budget in areas such as regional hazard programme development.
“The reality is that the Waikato labour market for those with professional skills is extremely tight and we have not been able to fully staff all our intended policy work programmes,” said Cr Fisher.
A particular area where work was behind schedule was in Environment Waikato helping councils in the region develop new policies for river hazard management. Private consultants may need to be employed in this area if staff were not found, Cr Fisher said.
There was also more income than expected from resource consent processing and less legal expenses than anticipated.
The expenditure put off because of staff shortages and other factors would more than compensate for the investment fund income drop, Cr Fisher said.
It was unclear at this stage whether the lower than expected investment fund income this year would have any impact on rating levels in future, he added.
“As is well known, the regional council is committed to very close control of costs, so we will continue to watch income and expenditure like hawks to ensure that rate rises are contained, whatever the fund’s performance.”