Friday, 30 October 2020

WHITIANGA WEATHER

Spending to be cut as TCDC prepares for tough recovery phase

A decade of severe austerity has been signalled by Thames-Coromandel District Council as it anticipates a difficult post-COVID recovery period will compound an already challenging financial outlook.

Council has adopted a “stalled rebuild scenario” in terms of its forecasting for the upcoming 2021 - 2013 Long Term Plan. “What this means is that any new services over the next 10 years will need to be adjusted downwards, or rates income upwards, in order to meet a balanced budget,” it said in a statement. “It also means we will be heavily restrained in every aspect of our operations in where money is spent. Our district’s reliance on tourism, along with a predominantly ageing population puts us into the most vulnerable category.”

Staff and elected officials assessed the recommendations of a report from economic agency, BERL, aimed at providing all local councils with guidance on appropriate cost adjustments in the wake of COVID-19. The agency suggested that most districts in New Zealand would fit what they described as a mid-scenario, where the local economies were likely to experience “a prolonged but generally healthy recovery.”

However, for a small number, recovery would be slow and subdued with unemployment remaining higher and GDP growing more slowly out to 2031. While it was a matter for each council to decide what scenario it should adopt, BERL laid out a range of factors that could lead to a stalled rebuild. These include a greater reliance on industries hardest hit by COVID-19, such as tourism and retail, a lack of significant infrastructure upgrades over the next decade, a slowly growing, or shrinking, more aged population, a low proportion of employment in local and central government and a low proportion of employment in agriculture.

Voting at a council meeting on Tuesday last week, elected members agreed that the Thames-Coromandel District best fits the stalled rebuild criteria and therefore those cost forecasts should be used in the development of the Long Term Plan. This means TCDC will need to plan for an estimated 24 percent increase in operating costs over the life of the plan - just over two per cent per year - and a 23.5 percent rise in the cost of any capital investment over the same period. It is a more conservative approach than the mid scenario where total spending would rise by 30 per cent and the more ambitious faster rebuild scenario where a 33.5 per cent rise is suggested.

How the costings translate into services, projects and rates bills, will be clearer when the draft Long Term Plan is released for public consultation. This is expected to happen in February next year. Meanwhile, TCDC chief executive, Rob Williams, has given assurances that improved systems have now been put in place in an effort to address “systemic problems” which led to what he described as a surprise eight percent budget overrun in 2018/2019.

Discussing TCDC’s latest Interim Audit Report, councillors Gary Gotlieb and Terry Walker both raised the issue of overspending and asked what was being done to ensure any future problems were identified and resolved quickly. “We’ve implemented this year some significant pieces of software management,” Mr Williams replied. “Those are tools, they are good tools, but they still rely on good staff to do their job and so it’s an ongoing process of training and ensuring that those tools are now used effectively.”

Mr Williams said a key goal for this year was having the processes and systems in place to try and avoid a repeat of the situation last year where the cost blowouts were only discovered between July and October - after the end of the financial year, when the TCDC Annual Report was being compiled. “Management have changed the process, we are well on the way in terms of that journey,” he said. “We still have work to do… because you cannot solve all of those systemic problems in one year, but they are well underway in terms of being fixed. We’re confident we have dealt with the issue, but again it’s a continuous improvement focus that we have in this phase.”

In the Interim Audit report, TCDC describes how it has implemented a project management system - Project Online - which provides a tool for project managers to manage projects and “provide visibility of financial and non-financial information across the capital work programme.” This was introduced in response to an urgent recommendation from the 2018/2019 audit that council implement “ongoing controls that would improve the monitoring and control over capital spending and ensure improved accountability by the applicable project/contract managers regarding their budgets.”

This year the auditor recommended that TCDC urgently undertakes a formal, systematic assessment of the impact of COVID-19 on its Annual Report, especially the financial statements.

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