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Local Authority Financial Statistics: Year ended June 2011
Embargoed until 10:45am  –  24 July 2012
Commentary

Local authorities increased their operating income and spending in the year ended June 2011. Spending increased more than income. Local authorities' operating balance worsened, from $0.2 billion in 2010 to $0.6 billion in 2011. The deficit increase over this period was $371 million.

Once all transactions (such as valuation changes and capital transactions) are taken into consideration, local authorities ran a surplus of $3.5 billion. This was $1.3 billion greater than the surplus in 2010.

The data presented in this release are available for each local authority in New Zealand. The statistics are based on their financial accounts. The latest available figures are for the year ended June 2011.

These statistics include some earthquake-related spending in Canterbury, though this expenditure is not separately identifiable. Further spending in Canterbury will be included when this information becomes available. These statistics also include data for the councils that combined to form Auckland Council on 1 November 2010 as well as data for the new council. 

Local authorities' income and spending up

Funding that local authorities earned to provide core services (operating income) increased 6.5 percent in the year ended June 2011, compared with the year ended June 2010. This increase is due to:

  • current grants, subsidies, and donations received increasing 36.0 percent
  • rates increasing 4.9 percent
  • sales and other operating income increasing 2.8 percent
  • interest income increasing 6.5 percent. 

 These increases were partly offset by decreases in:

  • dividend income, down 20.8 percent
  • regulatory income and petrol tax collected, down 5.2 percent.

Local authorities earned $7.3 billion in the year ended June 2011.

Graph, Income from current operations, selected items, from 2006 to 2011.  

Spending on core services (operating expenditure) by local authorities increased 11.6 percent in the year ended June 2011, compared with the previous year ended June. All components of spending rose: 

  • purchases and other expenditure, up 9.8 percent
  • current grants, subsidies, and donations paid, up 44.7 percent
  • interest payments, up 34.6 percent
  • employee costs, up 4.5 percent 
  • depreciation and amortisation, up 4.2 percent. 

Local authorities spent $7.8 billion in the year ended June 2011.

Graph, Expenditure on current operations, selected items, from 2006 to 2011.  

Local authorities' operating deficit worsens

Local authorities total operating deficit (which occurs because spending exceeds income) worsened from $0.2 billion in 2010 to $0.6 billion in the year ended June 2011. The deficit increase over this period was $371 million. Before June 2008, local authorities had successive operating surpluses (where their operating income exceeded their spending).

Graph, operating surplus/deficit, from 2006 to 2011.  

Local authorities' non-operating income rises

In addition to income from current operations, local authorities earn income from non-operating transactions (such as valuation changes) and capital transactions (capital grants and vested assets). Vested assets occur when ownership or control of assets is passed to a council from a private party, such as a property developer. For example, land transferred to a council to create a community park.

Valuation changes are the largest contributor to non-operating income. Local authorities earned $4.1 billion from valuation changes in the year ended June 2011. This is a rise of 131.4 percent compared with the year ended June 2010.

For the year ended June 2011, the total value of local authorities’ income from capital transactions decreased 11.4 percent, compared with the year ended June 2010. The most significant contribution to this fall came from vested assets, which were down 39.0 percent.

This decrease was partly offset by a rise in capital grants, subsidies, and donations income, up 7.7 percent.

Expenditure on non-operating transactions (mainly revaluation losses) increased 86.8 percent in the year ended June 2011, compared with the previous year. This was due to:

  • valuation changes, and provisions and write-offs rising 72.1 percent
  • other non-operating expenditure rising 193.8 percent.

Spending on capital transactions increased 38.6 percent in the year ended June 2011, to $0.2 billion. Capital transactions include capital grants, subsidies, and donations made by local authorities. 

 Graph, Non-operating and capital transactions, year ended June, 2010 and 2011.  

When all income and spending is taken into account (non-operating and capital transactions as well the operational budget), local authorities were $3.5 billion in surplus in the year ended June 2011. This was 60.4 percent higher than in the year ended June 2010, when local authorities had a surplus of $2.2 billion.

Graph, Surplus including non-operating and capital transactions, from 2006 to 2011.  

Financial position improves

When compared with 2010, local authorities’ total equity (the difference between the value of their assets and liabilities) improved in 2011. This was mainly due to an increase in investments.

Assets increase in value

Local authorities held assets worth $120.6 billion at June 2011. This is an increase of 17.1 percent compared with June 2010.

Current (short-term) assets made up 2.3 percent of total assets. The value of current assets increased 10.2 percent compared with June 2010. The increase is due to:

  • other current assets rising 22.8 percent
  • cash and bank deposits falling 17.0 percent.

The value of non-current (long-term and fixed) assets held by local authorities at June 2011 was up 17.3 percent. The total value of non-current assets listed on local authorities’ balance sheets was $117.7 billion at June 2011. The increase between June 2010 and June 2011 is due to:

  • investment assets increasing 235.9 percent
  • fixed assets (infrastructure, land, buildings, etc) rising 1.6 percent
  • other non-current assets increasing 1.3 percent.

The increase in the value of investments was driven by the creation of new council-controlled organisations by Auckland Council.

Value of liabilities increases

Local authorities' accumulated total liabilities (obligations for payment) were $10.5 billion at June 2011. This is an increase of 9.6 percent since June 2010.

The value of current (short-term) liabilities rose from $3.4 billion at June 2010 to $3.8 billion at June 2011. The increase was due to:

  • current debt rising 15.2 percent
  • other current liabilities rising 7.5 percent.

Non-current (long-term) liabilities increased 8.7 percent between June 2010 and June 2011. The value of term debt (debt due in more than 12 months) increased 5.9 percent between June 2010 and June 2011, while other non-current liabilities rose 27.8 percent. Term debt makes up 85.2 percent of total non-current liabilities.

Graph, Value of assets and liabilities, from 2006 to 2011.  

Total equity is the difference between the value of all assets and liabilities. At the end of June 2011, local authorities had total equity of $110.0 billion, up 17.9 percent from June 2010.

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