Major project casualty of cash crisis

Rotorua District Council operations and monitoring committee held a meeting to discuss their cash crisis.

While council staff have managed to reduce the organisation's $3.3 millon budget deficit, councillors have become gun-shy about spending, deferring another major project until the books have been balanced.

At a meeting of the Rotorua District Council operations and monitoring committee yesterday, councillors decided to defer a decision on a $3 million contract to construct the new Terax demonstration plant for recycling bio-solid waste from the city's wastewater treatment plant.

At the same meeting councillors were also told the council's $3.3 million budget deficit - reported by this paper in December - had been revised down to $572,000 after efforts by staff to reduce costs significantly.

Committee chairwoman Janet Wepa said an investigation would now go ahead regarding the comparative costs of the Terax project compared with other technologies.

She said while the project was a "compelling business proposition" councillors needed more time to review their options.

"This project provides a long-term sustainable solution for safely disposing of large volumes of hazardous waste for our district."

Councillors Mike McVicker and Glenys Searancke said councillors had become gun-shy about spending after the recent revelation the organisation's debt levels were unsustainable.

Mr McVicker said some councillors were overly cautious but they were all concerned about debt.

"I would like to proceed with it [Terax] because it has a lot of potential. It's a wise move to slow down and consider our options, but I do think we have gone too far to back out now."

Council finance manager Thomas Colle said while there was a single-minded focus by management and staff on reducing costs, substantially cutting the $3.3 million shortfall was a big ask and would require "exceptional rigour and discipline".

But, he said anticipated debt had been revised down to $570,000 and to keep it there would be an ongoing process.

Mr Colle said the deficit was the result of a range of factors including over-optimistic revenue figures and a number of budget anomalies, including an understatement of salaries.

Mrs Wepa said councillors and management had responded swiftly to make the hard decisions needed to balance the council's books.

"There have been some tough calls made by elected members to improve our bottom line, including the deferral of a number of non-essential capital projects.

"Management and staff have also stepped up and I thank them for their single-minded determination to reduce costs.

"Decisive action such as not replacing more than 50 staff who have left in recent times, reviewing all budget lines and generally tightening belts across the organisation have all helped achieve this improved forecast.

"The real challenge now will be to ensure that with our much improved financial forecasting capability and new financial management resources in place, we set more realistic and sustainable budgets for the future through our annual planning process," she said.