The place of the possible

Our highlights – 2015/16

Our key achievements and challenges

We largely completed what we set out to do in our Long-term plan 2015–25. Some key highlights and challenges include:

Governance

Democracy and governance: Our new DigiHub provides timely access to all Council electronic information such as old house drawings or site plans. Our main challenges in 2016/17 are to better engage with our community so they feel more involved in decision-making and improve access to our information.

Implementation of our Customer Strategy during 2016/17 will help with this as will continued dialogue with the community. We will put into practice the lessons we learnt when engaging with the community on the Wellington City Urban Cycleways Programme (WCUCP) Island Bay cycleway. We will also build on the positive feedback we received on our social housing engagement for which we won International and Australasian awards.

Environment

Gardens, beaches and green open spaces: We invested to maintain and improve existing assets by improving our network of walking tracks and mountain bike facilities. We ran a successful Parks Week, and at the Botanic Garden a successful Summer City and Spring festival. Visitor numbers at the Zoo and Zealandia increased, particularly education visits to Zealandia.

Our challenge in 2016/17 is to continue working with our new partners to make sure we get back on track to plant two million trees by 2020.

Waste: We commercialised our successful start-up Kai to Compost Food Waste Collection Service. This means we can better meet the increasing demand for food waste diversion, and extended collection boundaries to Porirua, Upper Hutt, and beyond. We continued to work with other councils in the region on the Love Food Hate Waste Prevention programme that aims to educate households about how to reduce food waste, save money, and have fun at the same time.

Our key challenge in 2016/17 is to better understand why we aren’t meeting our target for residents satisfied with the quality of street cleaning as there has been no increase in complaint numbers.

Energy conservation: We launched the ‘Wellington 2050 Energy Calculator’ which allows our residents to explore how their energy and transport use shapes our carbon footprint. We also insulated 167 homes through our initiative ‘Warm Up Wellington’. Our Low Carbon Challenge brought together innovators to develop initiatives to reduce emissions. Six teams were selected to enter the incubator programme, of which three qualify for match funding with us. We also produced a Low Carbon Capital Plan 2016-2018 – a plan we will implement over the next 3 years.

Water, wastewater and stormwater: Through a Council Controlled Organisation (CCO) – Wellington Water Ltd – we continued to maintain and improve existing water, wastewater and stormwater facilities over the year. We continue to fully comply with New Zealand drinking water standards and maintain the water supply quality gradings from the Ministry of Health. Customer satisfaction with our water supply and wastewater services has increased and our stormwater activities resulted in an increase in the number of days monitored beaches are suitable for recreational use.

Our main challenges in 2016/17 are to better understand residents’ declining satisfaction with our stormwater services and dry weather wastewater overflows.

Economic

Economic development: To support our growth agenda, we agreed to support a movie museum and convention centre, purchasing the land needed on Cable Street. We also supported a number of events that foster economic growth including the New Zealand Festival (395 performances and seven world premieres), Beervana, Wellington on a Plate, the World of Wearable Art Show, Elton John, Royal Edinburgh Military Tattoo, the Super Rugby final, All Blacks vs Wales and Australia, and the ICC Cricket World Cup. We also supported arts and cultural activities including commemorating the 100-year anniversary of WW1 during Anzac Week, and supported Te Papa during its most successful year with 1,784, 939 visitors attending. Visitor numbers were strong over the year and commercial guest nights reached a combined total of 2,286,095. Also over the year, logins into our CBD free Wi-fi increased by 161%. Over the year the Basin Reserve Trust significantly exceeded its targets for sport and community events held at the Basin Reserve.

International relations: We attended the New Zealand-China Mayoral Forum Forum hosted by our Chinese sister city Xiamen, which focussed on trade and investment opportunities. To support our growth agenda the Mayor opened the NZ section of the Seashine Supermarket in Xiamen. On ANZAC day we signed a Memorandum of Understanding with the Turkish city of Çanakkle – where Gallipoli is located.

Cultural wellbeing

Museums, galleries and visitor attractions: In addition to the successful high profile events such as the 100th anniversary of WW1 noted above, we supported a number of more local events such as Summer City Programme, Capital Christmas and the Sky Show. The Wellington Museums Trust also exceeded its visitor target for the year.

Social and recreation

Community facilities and services: We invested in and maintained existing services by upgrading the Wellington Regional Aquatic Centre, and worked with sports clubs and schools to form community sports hubs at Kilbirnie Park, Alex Moore Park, and Hataitai Ballpark. Our Pools Partnership Fund enabled Wellington East Girls’ College, Rewa Rewa School, Berhampore and Kilbirnie Schools to improve their pool facilities. Visits to our recreation centres including the ASB Sports Centre increased from last year. User satisfaction with our library services and facilities has improved since last year. Website visits along with e-library user satisfaction also increased over the year. We continued to support people isolated in our communities including new refugees and extended our successful Local Hosts initiative.

Our key challenges in 2016/17 are:Top

In light of our LTP objective to maximise usage of existing assets (rather than spending money on new infrastructure) in 2016/17 we will work to better understand these demand drivers and whether we need to change the way we provide community facilities and services.

City housing: We continued to provide affordable city housing (for around 4000 people) and started construction at the Kotuku and Arlington apartments. Our tenants are satisfied with our housing services and facilities and the condition of their houses. We won the regional and national New Zealand Institute of Architects Award for Marshall Court in Miramar. The Marshall Court flats also won the Winstone Wallboards Residential award at the New Zealand Commercial Project Awards.

Urban

City planning and development: Consistent with our objective to invest to maintain and improve, we revitalised a number of public spaces, including a series of public lanes that make the city a livelier place to be. The value of commercial building consents has also increased over the last 3 years.

Resilience: We were selected to join the Rockefeller Foundation 100 Resilient Cities (100RC) programme, from around the world and are developing a Resilience Strategy focussing on earthquake recovery, adapting to sea level rise, quality of life and economic prosperity.

Regulatory services: The majority of our customers are happy with our building control services. This reflects the effort we put into our customers to help them through their building consent and associated processes.

Our key challenges in 2016/17 are to improve the timeliness of issuing building consents, codes of compliance and Land Information Memorandums (LIMs). A combination of training provided to new building staff and improved internal monitoring systems will help with these timeliness issues in 2016/17. We also need to focus on our local suburban centres as our residents don’t consider them lively and attractive. Our work on Business Improvement Districts is one way of improving suburban centres. The type of traffic work recently carried out in Johnsonville is another way of addressing the liveliness of other suburban areas.

Transport

Roads: We exceeded our target for the percentage of roads that meet compulsory smooth road standards. The increase in residents and visitors in the city has resulted in more passengers using the iconic Wellington Cable Car.

Our key challenge for 2016/17 is the Island Bay component of the WCUCP. The method and level of community engagement on the cycleway resulted in significant unease that impacted on other projects in the WCUCP, and confidence in Council’s ability to deliver the WCUCP. A review of the WCUCP commissioned by New Zealand Transport Authority (NZTA) made a series of recommendations for change. In 2016/17 working with NZTA we are refreshing the cycle way programme and our engagement process with the community.

Other challenges for 2016/17 were:

Resident dissatisfaction with suburban street lighting is largely a result of power cuts – an issue beyond our control. As failures occur we are upgrading our lights with more reliable LEDs. Resident dissatisfaction with the condition of our roads and footpaths, and the decline in the percentage of local roads being re-surfaced are a result of contractual issues. In 2016/17 we will make sure any shortfalls are resolved.

Finances made simpleTop

This section outlines what our financial results mean to you. For greater detail on our financial performance and position, see the Financial Statements on page 138.

As part of the Long-term plan 2015–25, we committed to the following approach:

The following pages explain how well we’ve performed in relation to this overall approach.

Doing the basics well

The Council is doing the financial basics well. We have achieved our goal of a small underlying surplus of $6.1 million, 1.3% of operating expenditure for the financial year. We are successful if the underlying surplus or deficit is close to breakeven (zero), as our aim is to have operating revenue equal to operating expenditure.

The balanced budget requirement (as per the Local Government Act) is closely linked to the principle of intergenerational equity, the notion that each generation of ratepayers pays their fair share for the goods and services they use.

In order to calculate the underlying surplus, we exclude certain accounting transactions such as vested assets, fair value movements and other items which are recognised as revenue but are really capital or non-cash in nature. We exclude these because they do not impact on the amount of the rates we collect.

  Actual
2016
$M
Budget
2016
$M
Variance

$M
Reported net surplus 34.1 23.1 11.0
Add back Non-cash funded items4 1.7 11.2 (9.5)
Less revenue for capital items5 (28.3) (38.0) 9.7
Other adjustments (1.4) 3.7 (5.1)
Underlying surplus 6.1 0 6.1

For 4 of the last 5 years we have been consistent in achieving our goal of coming close to breakeven. For instance, in 2016 operating expenditure was $453.0 million for the year and the underlying surplus was 1.3% of that total.

Net Surplus versus Underlying Surplus/(Deficit)
NOTE: The numbers in the graph above all exclude the movement in the Council’s weathertight homes provision as this is being separately funded.
During this time, we have delivered a wide range of services, from resurfacing roads and managing the water network to providing parks, pools, sportfields and libraries at a cost of $6.056 per day per resident.

During the year we received total revenue of $487.1 million (2015: $469.9m) compared to a budget of $462.2 million. The difference is largely due to unbudgeted vested assets (which, while not cash in nature, are required to be shown as revenue) and higher than expected revenue from Wellington Venues and our share in joint ventures with Porirua City Council.

Sources of Revenue

Rates are our main source of funding, with revenue from operating activities (including user fees) the next largest source. Some of our other sources include revenue from capital expenditure, revenue from interest, and dividends.

In 2016 we received $272.1 million (2015: $253.6m) of revenue from rates.7 Rates revenue includes general rates levied on properties and a range of targeted rates including water, stormwater and sewerage rates, along with sector and area-based rates. The average increase in rates was 3.9%, as outlined in the LTP.
Rates Revenue

As part of doing the basics well, we need to ensure we collect the revenue we have charged. We have achieved this, and only have a small proportion of current rates revenue, 1.8%, still to be collected. This compares favourably with previous years, where the 3-year average and 5-year average is 2.1% of rates revenue.

Our total expenses for the year were $453.0 million (2015: $434.3m), which represents the cost of running the city during the year. Our activities and their related expenditure are divided into the strategic areas of focus, as shown in the graph below:

Operational Expenditure by Strategic Area

The table below shows the cost for each of the strategic areas per resident per day.

Strategic area Total cost $m Cost per resident per year $ Cost per resident per day $
Governance 16.2 79 0.22
Environment 151.5 738 2.02
Economic development 38.8 189 0.52
Cultural wellbeing 19.2 94 0.26
Social and recreation 103.7 505 1.38
Urban development 27.8 136 0.37
Transport 58.9 287 0.79
Council 36.9 180 0.49
Total 453.0 2,208 6.05

To find out more about these strategic areas, see Statements of Service Provision.

As discussed above, there is a difference between the reported net surplus and the “Underlying Surplus” due to the exclusion of non-funded and capital-related transactions and what is required to be reported under Financial Reporting Standards. On this basis, we have achieved a $34.1 million net surplus (2015: $35.5m) compared to a budgeted $23.1 million – a favourable difference of $11.0 million. The major variances from budget are discussed following the Statement of Comprehensive Revenue and Expense on page 146.

We have a comprehensive renewal programme for our assets and have completed $124.4 million (excluding unbudgeted expenditure of $21.5 million relating to the purchase of land for the proposed movie museum and convention centre) of capital expenditure which equates to 72% of our capital expenditure plan for the year. We will carry forward $48.0 million into future years to finish what we have started.

Sound Finances

There are a number of aspects to being in a sound financial position, and some of them have been covered in the previous section. Central to this, however, is the Council’s debt position and future borrowing capacity. Constraints on borrowing could affect our ability to maintain assets or fund growth initiatives.

Net borrowings have increased by $28.7 million (2015: $21.3m) during the year to $396.5 million (2015: $367.8m). Net borrowings are the total borrowings less any cash and cash equivalents and current deposits. The average borrowing per resident is $1,932 (2015: $1,844). The total net borrowing of $396.5 million (2015: $367.8m) is less than 82% (2015: 80%) of our annual revenue and makes up 10% (2015: 10%) of total assets. This is equivalent to a household with a property value of $570,000 earning $70,000 a year, having a mortgage of less than $57,000.

How much we need to borrow depends on the level of capital expenditure during the year. For 2016 capital expenditure was $145.9 million, or $124.4million excluding $21.5million relating to the purchase of land for the proposed movie museum and convention centre, (2015: $146.5m) compared to a budget of $173.8 million. The difference is mainly due to major upgrade projects being delayed, including earthquake strengthening of the Town Hall, and in the city social housing programme.

Net Borrowings - 5 year Trend

In terms of borrowings compliance, we have maintained our AA rating with the independent credit rating agency Standard and Poor’s. The credit rating is a comparative measure of our financial strength. Our AA credit rating is the highest given to any council in New Zealand. Holding and maintaining such a high credit rating provides us with a range of benefits that would not otherwise be available. These benefits include access to lower cost borrowings and a wider range of borrowing alternatives.

As detailed below, we have a very strong financial position based on the following major asset types:

These assets have increased due to the level of capital expenditure and investment property revaluations.

We also continue to maintain a strong investment position when compared with the level of borrowings. The graph below compares the balance of investments and net borrowings over the last 5 years.

Investment and Net Borrowings – 5 year Trend
Note: Investments comprise investment properties; investment in associates and jointly controlled entities; investment in controlled entities and other financial assets. Net Borrowings comprise current and non-current borrowing offset by cash and cash equivalents.

The value of investments mainly relates to investment properties, our share of the net assets of our associates (including Wellington International Airport Limited) and other financial assets.

We have prudently managed our borrowings to ensure we meet the specified requirements in our Long-term Financial Strategy. Net borrowings at 30 June 2016 are 81% (2015: 79%) of revenue, within the target of 150% set by the Council and significantly less than the 175% limit contained within our Financial Strategy. This is illustrated in the Financial Prudence section on page 237 on Local Government Benchmarks.

Our major liabilities include:

There have been no significant changes in “Other Liabilities” during the year.

Growing the local economy and ratepayer base

We are also focused on developing and implementing our eight “big ideas” as outlined in the LTP 2015-25 to grow the local economy and encourage commercial development. We achieved our budgeted growth in the rating base of 1.2% (2015: 1.4%). Growth through residential and commercial developments means we can further spread the rates impact of the broad range of services that the Council provides.

The most significant growth initiative we are working on is the new movie museum and convention centre. We have already purchased the land and are now developing plans and budgets for its construction. We have a number of others already under way and these are described in greater detail in section 3, Economic Development, on page 54.

Another measure of growth in the city is the level of development contributions and vested assets to the Council. Vested assets are non-cash in nature – such as roads, streetlights, water, wastewater, and stormwater pipes – that are often the result of sub-division work. The Council received $2.7 million (2015: $2.1m) of development contributions, and $10.2 million (2015: $12.4m) of assets were vested during the year. This takes the level of development contributions and vested assets transferred to the Council to $37.1 million over the last 3 years.

Overall

As we have explained, we are sticking to the direction and are delivering on the financial approach contained in our Long-term plan 2015–25. We have performed well in our stewardship and financial governance role on behalf of the ratepayer. We have managed the finances so the rates requirement has not exceeded what was committed to in the Long-term plan, and have managed our borrowings in a prudential manner for all ratepayers.

4Items such as vested assets (assets where the ownership of the asset have been transferred to the Council) or fair-value movements (changes in market value for assets that are revalued - primarily annual Investment Property revaluations) are transactions that are non-cash in nature but are required to be recognised as part of the net surplus.
5Revenue for capital items refers to subsidies we receive for the construction of capital items such as roads and social housing assets but are required to be recognised as part of the net surplus.
6Based on the total rates revenue divided by total number of residents.
7Annual Report, Notes to the financial statements, Note 1: Rates Revenue, page 147.
8Annual Report, Notes to the financial statements, Note 23 Borrowings, page 191.