Rotorua Lakes Council is almost $6 million in the red, and the council says it is mostly due to the "ongoing impact of Covid-19".
Council organisational enablement deputy chief executive Thomas Colle presented an update on the council's financial performance for the six months to December to the Operations and Monitoring Committee last week.
In the meeting, Colle described the situation as "a deterioration of the financial result" since the last update two months before.
The report for the meeting showed for the month ending December 31, the council had an overall deficit of $5.9m against a budgeted deficit of $3.3m.
Operating expenditure was over budget by $2.5m, and revenue for fees and charges was behind budget by $1.4m.
The report said the unfavourable position was "materially driven by [the] ongoing impact of Covid".
It said this was because of the impact of Covid and the traffic light system on revenue from fees and charges, such as parking revenue, lease rental income and venue hire.
Rates revenue continued to track "marginally ahead of budget", the report said.
It also identified five main causes of the unfavourable position – the council's $1m grant for the QE Health redevelopment project, consultancy fees and legal fees and fines for the landfill court case.
Other contributing expenses were the council's $1m community resilience fund, professional fees for three waters reform and increased security patrols over the summer period, the report said.
The cost of three waters reform was expected to be offset by funding from the Department of Internal Affairs, the report said.
Rotorua Lakes Council organisational enablement deputy chief executive Thomas Colle. Photo / Andrew Warner
Colle told the committee the underlying operating result was "not ideal, however a positive considering the challenges in front of us".
The council had begun reviewing operating expenditure, he said.
He said the intention was there would be "targeted savings" that had a "minimal impact" on services.
"However … the priority needs to remain with our housing initiatives … and community safety as well.
"While that operating result for the year to date shows as a deficit, we haven't included capital revenues in particular for roading, so when they come in, we are generating an overall surplus to help fund our renewal programme."
His presentation showed parking revenue was down 30 per cent on the year prior and the Energy Events Centre business revenue was down 58 per cent compared to pre-pandemic levels.
He said large subdivisions had been approved so the council was seeing the results of the investment in district development, an area which was $1.8m over budget.
Colle said the council expected to bring the operating result to within two per cent of the budget by financial year-end, and an update on that was due in March.
He said operating costs would not be funded by debt.
Capital expenditure for the year to December 31 was $31.3m, mostly spent on the Sir Howard Morrison Performing Arts Centre and lakefront redevelopment he said, and a $50m underspend was expected on capital expenditure due to the timing of projects.
Councillor Merepeka Raukawa-Tait asked Colle if he expected impacts on fees and charges would continue through the year. Colle said it was safer to presume they would.
Committee chairwoman Tania Tapsell said ratepayers would appreciate the council was "going through line by line" and reviewing operating expenditure.
Rotorua district councillor Tania Tapsell. Photo / Andrew Warner
"It's concerning also to know that we do anticipate further impact of fees and charges as we navigate these unprecedented times".
'Rocky conditions ahead' for Rotorua economy
There are "rocky conditions ahead" for Rotorua's economy, but the picture is a mixture of good news and bad news, Rotorua's economic development agency head says.
Rotorua Economic Development (RED) chief executive Andrew Wilson made the comments in the Operations and Monitoring Committee meeting last week, as part of an update on Rotorua's trading and activity over the summer period.
He said 2022 was "looking really challenging", and the release of updated inflation figures was "as ugly as were expected", at 5.9 per cent – the highest since 1990.
Wilson said it was driven by a "potent cocktail" of supply and demand pressures worldwide, a lot of which was due to Covid-19's disruption of supply chains and manufacturing industries.
He said domestic prices were also being driven up and the demand for workers had "surged" with the border closed.
Rotorua Economic Development chief executive Andrew Wilson. Photo / Andrew Wilson
"It's a bit of a perfect storm growing there."
However, unemployment was low at 3.2 per cent nationally but labour shortages were "widespread" across all sectors and wages were starting to go up in response.
"It's a good news, bad news state."
Wilson said December had been "really tough" for business and Rotorua's economy, with tourism and hospitality particularly under a "tough set of tradiing conditions" around Christmas time.
That picked up after Christmas, he said.
"The town had a really good buzz on [after Christmas] for a good couple of weeks. It has fallen away pretty rapidly, though."
He said that was because of the move to the national red traffic light setting.
"[Wood processing] along with construction [and] manufacturing has been going gang-busters over the last six months."
Wilson said indicators showed that strength would likely continue into 2022, and dairy farming was also performing well, albeit hampered by supply chain and workplace issues as well.
