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Government Finance Statistics (Local Government): Year ended June 2013
Embargoed until 10:45am  –  23 July 2014
Commentary

This release analyses local government in New Zealand, using government finance statistics (GFS) concepts and principles.

See Introducing government finance statistics for more GFS information.

Surplus doubles due to higher income and lower expenses

GFS net operating balance for local government was a surplus of $1.0 billion for the year ended June 2013. The surplus doubled from 2012, and was driven by lower spending and the transfer of ownership of several state highways from the Crown to Auckland (see other capital transfers in table 1). The latest surplus is the largest since the time series began in 2009.

Capital transfers are excluded in the accounting presentation of the operating statement in the Local Authority Financial Statistics: Year ended June 2013, which shows an operating deficit of $0.4 billion in the June 2013 year, an improvement of $0.3 billion from 2012.

Total operating income was $9.0 billion for the year ended June 2013. The 3.2 percent increase from 2012 was mainly due to the transfer of ownership of several state highways from the Crown to Auckland. This transfer is a significant contribution to the rise in capital transfers, to $0.7 billion in 2013. Increases in tax revenue (up 3.4 percent to $4.8 billion) and sales of goods and services (up 4.1 percent to $1.7 billion), also contributed to the overall increase in operating income. Reduced income from capital grants for the Canterbury earthquake recovery drove the decrease of capital grants in 2013, which fell by one-third to $0.6 billion, and is now at the same level as in 2009. 

Graph, Operating balance of local government, year ended June, 2009 to 2013.

Revenue from taxation was $4.8 billion for the year ended June 2013, up $0.2 billion from 2012. The annual increase has slowed down each year since 2009 and is now below 4.0 percent for the first time.  Most tax revenue shown in the GFS tables come from taxes on property (rates), more than 92 percent across years. All but five councils showed an increase in taxes on property. The Thames-Coromandel District Council reported the largest percentage decrease in income from property taxes in 2013. The Kaipara District Council had one of the largest nominal increases in tax income on property in 2013.

See Local Authority Financial Statistics: Year ended June 2013 for more information on rates, including a breakdown by region.

Total operating expenses decreased 3.0 percent to $8.0 billion in the year ended June 2013. This is the first decrease in expenses since the global financial crisis in 2009. The latest decrease was due to reduced purchases on goods and services, down 8.6 percent from 2012 to $3.2 billion in 2013. More than half of the local authorities spent less on purchasing goods and services in 2013 than in 2012, with Christchurch City Council and Auckland Council the main contributors. Employee and interest expenses, and depreciation increased in 2013, while expenses on current and capital transfers decreased.

The fall in operating expenses was spread across all functions of government except recreation, culture, and religion (see table 3). The biggest fall was in transport-related activities (economic affairs). The increased spending on recreation was due to a rise in employee expenses and higher grants and depreciation, partly offset by lower spending on goods and services.

Graph, Operating expenses of local government, year ended June, 2009 to 2013.

Net borrowing increases from 2012

Net borrowing was $1.1 billion for the year ended June 2013. It showed that the operating surplus was not enough to finance the net acquisition of non-financial assets, mainly additional infrastructure work (see net acquisition of fixed assets in table 1 and additions in buildings and structures in table 5). One way of financing large additions to assets is to borrow, which was reflected in increased loans on the balance sheet in 2013 (see table 2). 

The net acquisition of buildings. structures, and land in the year ended June 2013 drove the total rise of net acquisition of non-financial assets, which exceeded $2.0 billion. The state highways, which are now local roads, drove the increase in land (as land under roads). Auckland Transport (a council-controlled organisation) and Christchurch City Council had the most additions in infrastructural work in progress. In 2013, net borrowing was the highest since the time series began, but at similar levels as in 2009.

Graph, Net borrowing of local government, year ended June, 2009 to 2013.

Net worth increases

As total assets grew more than liabilities in the year ended June 2013, the net worth of local government increased 1.7 percent to $101.3 billion. Taking only liabilities and financial assets into account, the local government's financial net worth was $2.9 billion at 30 June 2013, down from $3.4 billion at June 2012.

At 30 June 2013 local government's total assets was $114.2 billion (up 2.5 percent from 2012). This increase was due to a 4.2 percent increase in financial assets to $15.9 billion, and a 2.2 percent increase in non-financial assets, to $98.3 billion. The increase in non-financial assets was driven by a 9.9 percent increase in additions in buildings and structures, and a fall in buildings and structure disposals from 2012 to 2013 (see table 5). 

Land assets contributed around 28 percent to total non-financial assets across years. The value of land assets fell slightly in the year ended June 2013. This decrease occurred despite the large addition of land from the state highways (see table 5), and was mainly due to land revaluation in Auckland.

Graph, Contribution of change in non-financial assets of local government, year ended June, 2009 to 2013.

Liabilities increased $1.1 billion to $12.9 billion in the year ended 30 June 2013. The increase reflected an increase in loans raised, which exceeded $10.0 billion for the first time ($10.3 billion). Loans increased each year and nearly doubled between 2009 and 2013. More than one-third of the local authorities reduced their loans in 2013, but the larger councils reported an increase, with Auckland Council and Christchurch City Council making up over half of the total loans. See Local Authority Financial Statistics: Year ended June 2013 for a breakdown of loans.

Graph, Assets and liabilities of local government, year ended June, 2009 to 2013.

For more detailed data, see the Excel tables in the 'Downloads' box.

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