Financial Statements

Notes forming part of the financial statements


For the year ended 30 June 2013

Summary of significant accounting policiesTop


Reporting entity

Wellington City Council is a territorial local authority governed by the Local Government Act 2002.

The primary objective of the Council and Group is to provide goods or services for community or social benefits rather than making a financial return. Accordingly, for the purposes of financial reporting, Wellington City Council is a public benefit entity.

The financial statements include the Council and Group. A Group structural diagram is included in Note 38. The Council includes the results and operations of Wellington City Council as a separate legal entity, the Council’s interests in the joint ventures as disclosed in Note 39 and both the Wellington Waterfront and Wellington Venues projects. The Group includes the Council, the subsidiaries disclosed in Note 40, and the Council’s interest in the associates disclosed in Note 41. All entities included within the Group are domiciled in Wellington, New Zealand.

The financial statements of the Council and Group are for the year ended 30 June 2013 and were authorised for issue by Council on 28 August 2013.

Basis of preparation

Statement of compliance

The financial statements have been prepared in accordance with the requirements of the Local Government Act 2002, which includes the requirement to comply with New Zealand Generally Accepted Accounting Practice (NZ GAAP).

The financial statements comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable Financial Reporting Standards, as appropriate for public benefit entities.

Measurement base

The measurement basis applied is historical cost, modified by the revaluation of certain assets and liabilities as identified in this summary of significant accounting policies. The accrual basis of accounting has been used unless otherwise stated.

For the assets and liabilities recorded at fair value, fair value is defined as the amount for which an item could be exchanged, or a liability settled, between knowledgeable and willing parties in an arm’s-length transaction. For investment property, non-current assets classified as held for sale and items of property, plant and equipment which are revalued, the fair value is determined by reference to market value. The market value of a property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction.

Amounts expected to be recovered or settled more than one year after the end of the reporting period are recognised at their present value. The present value of the estimated future cash flows is calculated using applicable inflation factors and a discount rate. The inflation rates used are obtained from the latest relevant BERL forecasts and the discount rate is the Council’s forecast long-term cost of borrowing.

The financial statements are presented in New Zealand dollars, rounded to the nearest thousand ($000), unless otherwise stated.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

Change of accounting policies

There have been no changes in accounting policies during the financial period.

Standards, amendments and interpretations issued but not yet effective and not early adopted

Standards, amendments and interpretations issued but not yet effective that have not been early adopted and which are relevant to the Council include:

The suite of approved accounting standards currently applicable for Public Benefit Entities (PBE) is temporarily frozen pending the development of a new set of New Zealand public sector accounting standards (PAS) based on the International Public Sector Accounting Standards (IPSAS). The expected transition date to the new standards is 1 July 2014.

An interim ‘new’ set of standards (NZ IFRS PBE) with effect for periods beginning on or after 1 December 2012 will replace the ‘old’ NZ IFRS with PBE paragraphs. There are no differences between the ‘old’ and ‘new’ sets of standards.

No disclosures have been made in regard to new or amended NZ IFRS that are presently only applicable to ‘for profit’ entities.

Judgements and estimations

The preparation of financial statements using NZ IFRS requires the use of judgements, estimates and assumptions. Where material, information on the main assumptions is provided in the relevant accounting policy or in the relevant note.

The estimates and assumptions are based on historical experience as well as other factors that are believed to be reasonable under the circumstances. Subsequent actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis and adjustments are made where necessary.

Judgements that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the relevant notes. Significant judgements and estimations include landfill post-closure costs, asset revaluations, impairments, certain fair value calculations and provisions.

Basis of consolidation

The Group includes joint ventures, subsidiaries and associates. A Group structure diagram is included in Note 38.

Joint ventures

Joint ventures are contractual arrangements with other parties to undertake a jointly controlled operation. The Council has a liability in respect of its share of joint ventures’ deficits and liabilities, and shares in any surpluses and assets. The Council’s proportionate interest in the assets, liabilities, revenue and expenditure is included in the financial statements of the Council and Group on a line-by-line basis.

Subsidiaries

Subsidiaries are entities that are controlled by the Council. In the Council financial statements, the investment in subsidiaries are carried at cost. In the Group financial statements, subsidiaries are accounted for using the purchase method where assets, liabilities, revenue and expenditure is added in on a line-by-line basis.

All significant transactions between Group entities, other than rates, are eliminated on consolidation. Rates are charged on an arm’s-length basis and are not eliminated to ensure that reported costs and revenues are consistent with the Council’s Annual Plan.

Associates

Associates are entities where the Council has significant influence, but not control, over their operating and financial policies. In the Council financial statements, the investments in associates are carried at cost. In the Group financial statements, the Council’s share of the assets, liabilities, revenue and expenditure of associates is included on an equity accounting basis as a single line.

Income

Income comprises revenue, gains and finance income and is measured at the fair value of consideration received or receivable. Specific accounting policies for major categories of income are outlined below:

Rates

Rates are set annually by resolution from the Council and relate to a particular financial year. All ratepayers are invoiced within the financial year for which the rates have been set. Rates revenue is recognised proportionately throughout the year.

Operating activities

Grants, subsidies and reimbursements

Grants, subsidies and reimbursements are initially recognised at their fair value where there is reasonable assurance that the payment will be received and all attaching conditions will be complied with. Grants and subsidies received in relation to the provision of services are recognised on a percentage of completion basis. Reimbursements (eg NZ Transport Agency roading claim payments) are recognised upon entitlement, which is when conditions pertaining to eligible expenditure have been fulfilled.

Development contributions

Development contributions are recognised as income when the Council provides, or is able to provide, the service for which the contribution was charged. Until such time as the Council provides, or is able to provide, the service, development contributions are recognised as liabilities.

Fines and penalties

Revenue from fines and penalties (eg traffic and parking infringements, library overdue book fines, rates penalties) is recognised when infringement notices are issued or when the fines/penalties are otherwise imposed.

Rendering of services

Revenue from the rendering of services (eg building consent fees) is recognised by reference to the stage of completion of the transaction, based on the actual service provided as a percentage of the total services to be provided. Under this method, revenue is recognised in the accounting periods in which the services are provided.

Sale of goods

Sale of goods is recognised when products are sold to the customer and all risks and rewards of ownership have transferred to the customer.

Investment revenues

Dividends

Dividends are recognised when the shareholders’ rights to receive payment have been established.

Investment property lease rentals

Lease rentals (net of any incentives given) are recognised on a straight line basis over the term of the lease.

Other income

Specific accounting policies for major categories of other income are outlined below:

Donated, subsidised or vested assets

Where a physical asset is acquired for nil or nominal consideration, the fair value of the asset received is recognised as income when the control of the asset is transferred to the Council.

Gains

Gains include additional earnings on the disposal of property, plant and equipment and movements in the fair value of financial assets and liabilities.

Finance income

Interest

Interest income is recognised using the effective interest rate method.

Donated services

The Council benefits from the voluntary service of many Wellingtonians in the delivery of its activities and services (e.g. beach cleaning and Otari-Wilton’s Bush guiding and planting). Due to the difficulty in determining the precise value of these donated services with sufficient reliability, donated services are not recognised in these financial statements.

Expenses

Specific accounting policies for major categories of expenditure are outlined below:

Operating activities

Grants and sponsorships

Expenditure is classified as a grant or sponsorship if it results in a transfer of resources (eg cash or physical assets) to another entity in return for compliance with certain conditions relating to the operating activities of that entity. It includes any expenditure arising from a funding arrangement with another entity that has been entered into to achieve the objectives of the Council. Grants and sponsorships are distinct from donations which are discretionary or charitable gifts. Where grants and sponsorships are discretionary until payment, the expense is recognised when the payment is made. Otherwise, the expense is recognised when the specified criteria have been fulfilled.

Finance expense

Interest

Interest expense is recognised using the effective interest rate method. All borrowing costs are expensed in the period in which they are incurred.

Depreciation and amortisation

Depreciation of property, plant and equipment and amortisation of intangible assets are charged on a straight-line basis over the estimated useful life of the associated assets.

Taxation

Income tax on the surplus or deficit for the year comprises current and deferred tax.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, plus any adjustment to tax payable in respect of previous periods.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the assets and liabilities, and the unused tax losses using tax rates enacted or substantively enacted at the end of the reporting period. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which they can be utilised.

Goods and Services Tax (GST)

All items in the financial statements are exclusive of GST, with the exception of receivables and payables, which are stated as GST inclusive. Where GST is not recoverable as an input tax, it is recognised as part of the related asset or expense.

Financial instruments

Financial instruments include financial assets (loans and receivables and financial assets at fair value through other comprehensive income), financial liabilities (payables and borrowings) and derivative financial instruments. Financial instruments are initially recognised on trade-date at their fair value plus transaction costs. Subsequent measurement of financial instruments depends on the classification determined by the Council. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the Group has transferred substantially all of the risks and rewards of ownership.

Financial instruments are classified into the categories outlined below based on the purpose for which they were acquired. The classification is determined at initial recognition and re-evaluated at the end of each reporting period.

Financial assets

Financial assets are classified as loans and receivables or financial assets at fair value through other comprehensive income.

Loans and receivables comprise cash and cash equivalents, trade and other receivables and loans and deposits.

Cash and cash equivalents comprise cash balances and call deposits with maturity dates of less than three months.

Trade and other receivables have fixed or determinable payments. They arise when the Group provides money, goods or services directly to a debtor, and has no intention of trading the receivable.

Loans and deposits include loans to other entities (including subsidiaries and associates), and bank deposits with maturity dates of more than three months.

Financial assets in this category are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method. Fair value is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date for assets of a similar maturity and credit risk. Trade and other receivables due in less than 12 months are recognised at their nominal value. A provision for impairment is recognised when there is objective evidence that the asset is impaired. As there are statutory remedies to recover unpaid rates, penalties and water meter charges, no provision has been made for impairment in respect of these receivables.

Financial assets at fair value through other comprehensive income relate to equity investments that are held by the Council for long-term strategic purposes and therefore are not intended to be sold. Financial assets at fair value through other comprehensive income are initially recorded at fair value plus transaction costs. They are subsequently measured at fair value and changes, other than impairment losses, are recognised directly in a reserve within equity. On disposal, the cumulative fair value gain or loss previously recognised directly in other comprehensive income is recognised within surplus or deficit.

Financial liabilities

Financial liabilities comprise trade and other payables and borrowings. Financial liabilities with duration of more than 12 months are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method. Amortisation is recognised within surplus or deficit. Financial liabilities with duration of less than 12 months are recognised at their nominal value.

On disposal any gains or losses are recognised within surplus or deficit.

Derivatives

Derivative financial instruments include interest rate swaps used to hedge exposure to interest rate risk on borrowings. Derivatives are initially recognised at fair value, based on quoted market prices, and subsequently remeasured to fair value at the end of each reporting period. Fair value is determined by reference to quoted prices for similar instruments in active markets. Derivatives that do not qualify for hedge accounting are classified as non-hedged and fair value gains or losses are recognised within surplus or deficit.

Recognition of fair value gains or losses on derivatives that qualify for hedge accounting depends on the nature of the item being hedged. Where a derivative is used to hedge variability of cash flows (cash flow hedge), the effective part of any gain or loss is recognised within other comprehensive income while the ineffective part is recognised within surplus or deficit. Gains or losses recognised in other comprehensive income transfer to surplus or deficit in the same periods as when the hedged item affects the surplus or deficit. Where a derivative is used to hedge variability in the fair value of the Council’s fixed rate borrowings (fair value hedge), the gain or loss is recognised within surplus or deficit.

As per the International Swap Dealers’ Association (ISDA) master agreements, all swap payments or receipts are settled net.

Inventories

Inventories consumed in the provision of services (such as botanical supplies) are measured at the lower of cost and current replacement cost.

Inventories held for resale (such as rubbish bags), are recorded at the lower of cost (determined on a first-in, first-out basis) and net realisable value. This valuation includes allowances for slow-moving and obsolete stock. Net realisable value is the estimated selling price in the ordinary course of business.

Inventories held for distribution at no or nominal cost, are recorded at the lower of cost and current replacement cost.

Investment properties

Investment properties are properties which are held primarily to earn rental income or for capital growth or both. These include the Council’s ground leases, land and buildings and the Wellington Waterfront Project’s investment properties.

Investment properties exclude those properties held for strategic purposes or to provide a social service. This includes properties which generate cash inflows as the rental revenue is incidental to the purpose for holding the property. Such properties include the Council’s social housing assets, which are held within operational assets in property, plant and equipment. Borrowing costs incurred during the construction of investment property are not capitalised.

Investment properties are measured initially at cost and subsequently measured at fair value, determined annually by an independent registered valuer. Any gain or loss arising is recognised within surplus or deficit. Investment properties are not depreciated.

Non-current assets classified as held for sale

Non-current assets held for sale are separately classified as their carrying amount will be recovered through a sale transaction rather than through continuing use. A non-current asset is classified as held for sale where:

A non-current asset classified as held for sale is recognised at the lower of its carrying amount or fair value less costs to sell. Impairment losses on initial classification are included within surplus or deficit.

Property, plant and equipment

Property, plant and equipment consists of operational assets, restricted assets and infrastructure assets.

Operational assets include land, the landfill post-closure asset, buildings, the Civic Centre complex, the library collection, and plant and equipment.

Restricted assets include art and cultural assets, zoo animals, restricted buildings, parks and reserves and the Town Belt. These assets provide a benefit or service to the community and in most cases cannot be disposed of because of legal or other restrictions.

Infrastructure assets include the roading network, water, waste and drainage reticulation networks and infrastructure land (including land under roads). Each asset type includes all items that are required for the network to function.

Vested assets are those assets where ownership and control is transferred to the Council from a third party (eg infrastructure assets constructed by developers and transferred to the Council on completion of a subdivision). Vested assets are recognised within their respective asset classes as above.

Recognition

Expenditure is capitalised as property, plant and equipment when it creates a new asset or increases the economic benefits of an existing asset. Costs that do not meet the criteria for capitalisation are expensed.

Measurement

Property, plant and equipment is recognised initially at cost, unless acquired for nil or nominal cost (eg vested assets), in which case the asset is recognised at fair value at the date of transfer. The initial cost of property, plant and equipment includes the purchase consideration (or the fair value in the case of vested assets), and those costs that are directly attributable to bringing the asset into the location and condition necessary for its intended purpose. Subsequent expenditure that extends or expands the asset’s service potential is capitalised.

Borrowing costs incurred during the construction of property, plant and equipment are not capitalised.

After initial recognition, certain classes of property, plant and equipment are revalued to fair value. Where there is no active market for an asset, fair value is determined by optimised depreciated replacement cost.

Specific measurement policies for categories of property, plant and equipment are shown below:

Operational assets

Plant and equipment and the Civic Centre complex are measured at historical cost and not revalued.

Library collections are valued at depreciated replacement cost on a three-year cycle by the Council’s library staff in accordance with guidelines outlined in Valuation Guidance for Cultural and Heritage Assets, published by the Treasury Accounting Team, November 2002.

Land and buildings are valued at fair value on a three-year cycle by independent registered valuers.

Restricted assets

Art and cultural assets (artworks, sculptures and statues) are valued at historical cost. Zoo animals are stated at estimated replacement cost. All other restricted assets (buildings, parks and reserves and the Town Belt) were valued at fair value as at 30 June 2005 by independent registered valuers. The Council has elected to use the fair value of other restricted assets at 30 June 2005 as the deemed cost of the assets. These assets are no longer revalued. Subsequent additions have been recorded at cost.

Infrastructure assets

Infrastructure assets (roading network, water, waste and drainage reticulation assets) are valued at optimised depreciated replacement cost on a three-year cycle by independent registered valuers. Infrastructure valuations are based on current quotes from actual suppliers. As such, they include ancillary costs such as breaking through seal, traffic control and rehabilitation. Between valuations, expenditure on asset improvements is capitalised at cost.

Infrastructure land (excluding land under roads) is valued at fair value on a three-year cycle.

Land under roads, which represents the corridor of land directly under and adjacent to the Council’s roading network, was valued as at 30 June 2005 at the average value of surrounding adjacent land discounted by 50% to reflect its restricted nature. The Council elected to use the fair value of land under roads at 30 June 2005 as the deemed cost of the asset. Land under roads is no longer revalued. Subsequent additions have been recorded at cost.

The carrying values of revalued property, plant and equipment are reviewed at the end of each reporting period to ensure that those values are not materially different to fair value.

Revaluations

The result of any revaluation of the Council’s property, plant and equipment is recognised within other comprehensive income and taken to the asset revaluation reserve. Where this results in a debit balance in the reserve for a class of property, plant and equipment, the balance is included in the surplus or deficit. Any subsequent increase on revaluation that offsets a previous decrease in value recognised within surplus or deficit will be recognised firstly, within surplus or deficit up to the amount previously expensed, with any remaining increase recognised within other comprehensive income and in the revaluation reserve for that class of property, plant and equipment.

Accumulated depreciation at the revaluation date is eliminated so that the carrying amount after revaluation equals the revalued amount.

While assumptions are used in all revaluations, the most significant of these are in infrastructure. For example where stormwater, wastewater and water supply pipes are underground, the physical deterioration and condition of assets are not visible and must therefore be estimated. Any revaluation risk is minimised by performing a combination of physical inspections and condition modelling assessments.

Further information in respect of the most recent valuations for each class is provided in Note 25: Revaluation reserves.

Impairment

The carrying amounts of property, plant and equipment are reviewed at least annually to determine if there is any indication of impairment. Where an asset’s, or class of assets’, recoverable amount is less than its carrying amount it will be reported at its recoverable amount and an impairment loss will be recognised. The recoverable amount is the higher of an item’s fair value less costs to sell and value in use. Losses resulting from impairment are reported within surplus or deficit, unless the asset is carried at a revalued amount in which case any impairment loss is treated as a revaluation decrease and recorded within other comprehensive income.

Disposal

Gains and losses arising from the disposal of property, plant and equipment are recognised within surplus or deficit in the period in which the transaction occurs. Any balance attributable to the disposed asset in the asset revaluation reserve is transferred to retained earnings.

Work in progress

The cost of projects within work in progress is transferred to the relevant asset class when the project is completed and then depreciated.

Depreciation

Depreciation is provided on all property, plant and equipment, with certain exceptions. The exceptions are land, restricted assets other than buildings, and assets under construction (work in progress). Depreciation is calculated on a straight-line basis, to allocate the cost or value of the asset (less any assessed residual value) over its estimated useful life. The estimated useful lives and depreciation rate ranges of the major classes of property, plant and equipment are as follows:

Land unlimited not depreciated
Buildings 1 to 100 years 1% to 100%
Civic Centre complex 10 to 100 years 1% to 10%
Plant and equipment 3 to 100 years 1% to 33.3%
Library collections 3 to 11 years 9.1% to 33.3%
Restricted assets (excluding buildings) unlimited not depreciated
Infrastructure assets:    
Land (including land under roads)
unlimited not depreciated
Roading:
   
Formation/earthworks
unlimited not depreciated
Pavement
13 to 40 years 2.5% to 7.7%
Traffic islands
80 years 1.25%
Bridges and tunnels
3 to 150 years 0.67% to 33.3%
Drainage
15 to 120 years 0.83% to 6.67%
Retaining walls
30 to 100 years 1% to 3.33%
Pedestrian walkway
10 to 50 years 2% to 10%
Pedestrian furniture
8 to 25 years 4% to 12.5%
Barriers
10 to 110 years 0.91% to 10%
Lighting
10 to 50 years 2% to 10%
Cycleway network
25 to 45 years 2.2% to 4%
Parking equipment
8 to 10 years 10% to 12.5%
Passenger transport facilities
25 years 4%
Traffic infrastructure
3 to 30 years 3.33% to 33.3%
Drainage, waste and water:
   
Pipework
40 to 110 years 0.91% to 2.5%
Fittings
7 to 100 years 1% to 14.29%
Water pump stations
10 to 100 years 1% to 10%
Water reservoirs
40 to 100 years 1% to 2.5%
Equipment
25 years 4%
Sewer pump stations
20 to 80 years 1.25% to 5%
Tunnels
150 years 0.67%
Treatment plants
3 to 100 years 1% to 33.3%

The landfill post-closure asset is depreciated over the life of the landfill based on the capacity of the landfill.

Variation in the range of lives for infrastructural assets is due to these assets being managed and depreciated by individual component rather than as a whole asset.

Intangible assets

Intangible assets predominantly comprise computer software and carbon credits. They are recorded at cost less any subsequent amortisation and impairment losses.

Computer software has a finite economic life and amortisation is charged to surplus or deficit on a straight-line basis over the estimated useful life of the asset. Typically, the estimated useful lives and depreciation rate range of these assets are as follows:

Computer software 1 to 7 years 14.29% to 100%

Carbon credits comprise either allocations of emission allowances granted by the Government related to forestry assets or units purchased in the market to cover liabilities associated with landfill operations. Carbon credits are recognised at cost at the date of allocation or purchase.

Gains and losses arising from disposal of intangible assets are recognised within surplus or deficit in the period in which the transaction occurs. Intangible assets are reviewed at least annually to determine if there is any indication of impairment. Where an intangible asset’s recoverable amount is less than its carrying amount, it will be reported at its recoverable amount and an impairment loss will be recognised. Losses resulting from impairment are reported within surplus or deficit.

Research and Development

Research costs are expensed as incurred. Development expenditure on individual projects is capitalised and recognised as an asset when it meets the definition and criteria for capitalisation as an asset and it is probable that the Council will receive future economic benefits from the asset. Assets which have finite lives are stated at cost less accumulated amortisation and are amortised on a straight-line basis over their useful lives.

Leases

Operating leases as lessee

Leases where the lessor retains substantially all the risks and rewards of ownership of the leased items are classified as operating leases. Payments made under operating leases are recognised within surplus or deficit on a straight-line basis over the term of the lease. Lease incentives received are recognised within surplus or deficit over the term of the lease as they form an integral part of the total lease payment.

Operating leases as lessor

The Group leases investment properties and a portion of land and buildings. Rental income is recognised on a straight-line basis over the lease term.

Finance leases

Finance leases transfer to the Group (as lessee) substantially all the risks and rewards of ownership of the leased asset. Initial recognition of a finance lease results in an asset and liability being recognised at amounts equal to the lower of the fair value of the leased property or the present value of the minimum lease payments.

The finance charge is released to surplus or deficit over the lease period and the capitalised values are amortised over the shorter of the lease term and the useful life of the leased item.

Employee benefit liabilities

A provision for employee benefit liabilities (holiday leave, long service leave and retirement gratuities) is recognised as a liability when benefits are earned but not paid.

Holiday leave

Holiday leave includes: annual leave, long service leave (qualified for), statutory time off in lieu and ordinary time off in lieu. Annual leave is calculated on an actual entitlement basis in accordance with section 21(2) of the Holidays Act 2003.

Retirement gratuities

Retirement gratuities are calculated on an actuarial basis based on the likely future entitlements accruing to employees, after taking into account years of service, years to entitlement, the likelihood that employees will reach the point of entitlement, and other contractual entitlements information.

Other contractual entitlements

Other contractual entitlements include termination benefits, which are recognised within surplus or deficit only when there is a demonstrable commitment to either terminate employment prior to normal retirement date or to provide such benefits as a result of an offer to encourage voluntary redundancy. Termination benefits settled within 12 months are reported at the amount expected to be paid, otherwise they are reported as the present value of the estimated future cash outflows.

Provisions

Provisions are recognised for future liabilities of uncertain timing or amount when there is a present obligation as a result of a past event, it is probable that expenditure will be required to settle the obligation and a reliable estimate of the obligation can be made. Provisions are measured at the expenditure expected to be required to settle the obligation. Liabilities and provisions to be settled beyond 12 months are recorded at their present value.

Landfill post-closure costs

The Council, as operator of the Southern Landfill, has a legal obligation to apply for resource consents when the landfill or landfill stages reach the end of their operating life and are to be closed. These resource consents will set out the closure requirements and the requirements for ongoing maintenance and monitoring services at the landfill site after closure. A provision for post-closure costs is recognised as a liability when the obligation for post-closure arises, which is when each stage of the landfill is commissioned and refuse begins to accumulate.

The provision is measured based on the present value of future cash flows expected to be incurred, taking into account future events including known changes to legal requirements and known improvements in technology. The provision includes all costs associated with landfill post-closure including final cover application and vegetation; incremental drainage control features; completing facilities for leachate collection and monitoring; completing facilities for water quality monitoring; completing facilities for monitoring and recovery of gas.

Amounts provided for landfill post-closure are capitalised to the landfill asset. The capitalised landfill asset is depreciated over the life of the landfill based on the capacity used.

The Council has a 21.5% joint venture interest in the Spicer Valley landfill. The Council’s provision for landfill post-closure costs includes the Council’s proportionate share of the Spicer Valley landfill provision for post-closure costs.

ACC partnership programme

The Council is an Accredited Employer under the ACC Partnership Programme. As such the Council accepts the management and financial responsibility of our employee work-related injuries. From 1 April 2009 the Council changed its agreement with ACC from Full Self Cover (FSC) to Partnership Discount Plan (PDP). Under the PDP option, the Council is responsible for managing work related injury claims for a two-year period only and transfer ongoing claims to ACC at the end of the two-year claim management period with no further liability. Under the ACC Partnership Programme the Council is effectively providing accident insurance to employees and this is accounted for as an insurance contract. The value of this liability represents the expected future payments in relation to work-related injuries occurring up to the end of the reporting period for which the Council has responsibility under the terms of the Partnership Programme.

Financial guarantee contracts

A financial guarantee contract is a contract that requires the Council to make specified payments to reimburse the contract holder for a loss it incurs because a specified debtor fails to make payment when due.

Financial guarantee contracts are initially recognised at fair value. The Council measures the fair value of a financial guarantee by determining the probability of the guarantee being called by the holder. The probability factor is then applied to the principal and the outcome discounted to present value.

Financial guarantees are subsequently measured at the higher of the Council’s best estimate of the obligation or the amount initially recognised less any amortisation.

Equity

Equity is the community’s interest in the Council and Group and is measured as the difference between total assets and total liabilities. Equity is disaggregated and classified into a number of components to enable clearer identification of the specified uses of equity within the Council and the Group.

The components of equity are accumulated funds and retained earnings, revaluation reserves, a hedging reserve, a fair value through other comprehensive income reserve and restricted funds (special funds, reserve funds, trusts and bequests).

Restricted funds are those reserves that are subject to specific conditions of use, whether under statute or accepted as binding by the Council, and that may not be revised without reference to the Courts or third parties. Transfers from these reserves may be made only for specified purposes or when certain specified conditions are met.

Contingent assets and liabilities

Contingent liabilities and contingent assets are disclosed in the Notes forming part of the Financial Statements at the point at which the contingency is evident. Contingent liabilities are disclosed if the possibility they will crystallise is not remote. Contingent assets are disclosed if it is probable the benefits will be realised.

Statement of cash flows

Cash and cash equivalents for the purposes of the cash flow statement comprises bank balances, cash on hand and short term deposits with a maturity of three months or less. The statement of cash flows has been prepared using the direct approach subject to the netting of certain cash flows. Cash flows in respect of investments and borrowings that have been rolled-over under arranged finance facilities have been netted in order to provide more meaningful disclosures.

Operating activities include cash received from all non-financial income sources of the Council and the Group and record the cash payments made for the supply of goods and services. Investing activities relate to the acquisition and disposal of assets and investment income. Financing activities relate to activities that change the equity and debt capital structure of the Council and Group and financing costs.

Related parties

Related parties arise where one entity has the ability to affect the financial and operating policies of another through the presence of control or significant influence. Related parties include members of the Group and key management personnel, including the Mayor and Councillors, the Chief Executive and all members of the Executive Leadership Team.

The Mayor and Councillors are considered directors as they occupy the position of a member of the governing body of the Council reporting entity. Directors’ remuneration comprises any money, consideration or benefit received or receivable or otherwise made available, directly or indirectly, to a director during the reporting period. The disclosures for the Group include the remuneration of the Mayor and those Councillors in their role as trustees or directors of entities within the Group. Directors’ remuneration does not include reimbursement of authorised work expenses or the provision of work-related equipment such as cellphones and laptops.

Budget figures

The Annual Plan budget figures included in these financial statements are for the Council as a separate entity. The Annual Plan figures do not include budget information relating to subsidiaries or associates. These figures are those approved by the Council at the beginning of each financial year following a period of consultation with the public as part of the Annual Plan process. These figures do not include any additional expenditure subsequently approved by the Council outside the Annual Plan process. For completeness, any additional expenditure approved by the Council is explained in Notes 32 to 35. The Annual Plan figures have been prepared in accordance with GAAP and are consistent with the accounting policies adopted by the Council for the preparation of these financial statements.

Cost allocation

The Council has derived the cost of service for each significant activity (as reported within the Statements of Service Performance). Direct costs are expensed directly to the activity. Indirect costs relate to the overall costs of running the organisation and include staff time, office space and information technology costs. These indirect costs are allocated as overheads across all activities.

Comparatives

To ensure consistency with the current year, certain comparative information has been reclassified where appropriate. This has occurred:

Note 1: Revenue from ratesTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
General rates        
Base sector 68,202 67,032 68,202 67,032
Commercial, industrial and business sector 58,723 57,836 58,723 57,836
Targeted rates        
Base sector 6,579 6,112 6,579 6,112
Commercial, industrial and business sector 5,163 4,411 5,163 4,411
Sewerage 33,518 31,287 33,518 31,287
Stormwater 17,397 16,986 17,397 16,986
Water 22,648 23,210 22,648 23,210
Downtown levy 13,745 10,987 13,745 10,987
Marsden Village 14 14 14 14
Tawa driveways 33 33 33 33
Total revenue from rates (excluding metered water) 226,022 217,908 226,022 217,908
Revenue from water rates by meter 11,366 12,356 11,366 12,356
Total revenue from rates for Wellington City Council 237,388 230,264 237,388 230,264
         
Total rates billed 284,043 273,942 284,043 273,942
less Greater Wellington Regional Council component (46,655) (43,678) (46,655) (43,678)
         
Total revenue from rates for Wellington City Council 237,388 230,264 237,388 230,264
         

The total amount of rates charged on Council-owned properties that have not been eliminated from revenue and expenditure is $10.419m (2012: $10.125m). For the Group rates of $10.455m (2012: $10.161m) have not been eliminated.

Rates remissions

Revenue from rates and levies is shown net of rates remissions. The Council’s Rates Remission and Postponement Policies provide for general rates to be partially remitted for rural open space; land used principally for games or sport and in special circumstances (where the rating policy is deemed to unfairly disadvantage an individual ratepayer). A remission of the Downtown levy targeted rate may also be granted to provide rates relief for downtown commercial property temporarily not fit for the purpose due to the property undergoing development and therefore not receiving the benefits derived by contributing to the Downtown levy targeted rate. The Council committed itself at the start of the year to certain remissions, which for the reporting period ended 30 June 2013 totalled $0.260m (2012: $0.224m).

  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Total revenue from rates 237,648 230,488 237,648 230,488
         
less Council policy remissions        
Rural open space 129 99 129 99
Land used principally for games or sport 80 78 80 78
Downtown levy 51 47 51 47
Total remissions 260 224 260 224
         
Total revenue from rates (net of remissions) 237,388 230,264 237,388 230,264
         

Non-rateable land

Under the Local Government (Rating) Act 2002 certain properties are non-rateable. This includes schools, churches, public gardens and certain land vested in the Crown. This land is non-rateable in respect of general rates but, where applicable, is rateable in respect of sewerage and water. Non-rateable land does not constitute a remission under the Council’s Rates Remission and Postponement Policies.

Note 2: Revenue from operating activitiesTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Grants, subsidies and reimbursements        
Grants, subsidies and reimbursements – operating 7,192 7,452 12,237 14,112
Grants, subsidies and reimbursements – capital 39,603 62,071 38,839 62,308
Total grants, subsidies and reimbursements 46,795 69,523 51,076 76,420
         
Development contributions 4,356 3,434 4,356 3,434
         
Other operating activities        
Fines and penalties 10,132 11,140 10,132 11,140
Rendering of services 94,888 91,055 104,687 97,577
Sale of goods 6,036 6,334 7,789 10,801
Total other operating activities 111,056 108,529 122,608 119,518
         
Total revenue from operating activities 162,207 181,486 178,040 199,372
         

For the Council, the principal grants and reimbursements are from:

  1. The New Zealand Transport Agency (NZTA), which reimburses part of the Council’s costs for maintaining the local roading infrastructure. The capital reimbursements from NZTA of $10.641m (2012: $12.377m) and operating reimbursements of $4.471m (2012: $4.527m) are for costs already incurred and there are no unfulfilled conditions or other contingencies relating to the reimbursements.
  2. ​The Crown, for the upgrade of the Council's social housing stock. The capital grant recognised in the current year of $28.088m (2012: $48.050m) is part of a 10 year work programme that commenced in 2008 and the revenue is recognised in accordance with that agreed work programme. There are no unfulfilled conditions or other contingencies relating to this grant.

For the Group, the additional principal subsidy was $3.814m (2012: $5.632m) from Greater Wellington Regional Council to Wellington Cable Car Limited for the maintenance of the overhead wire trolley system.

Rendering of services includes revenue from all Council services and is broken down as follows:

Rendering of services Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Animal control 1,128 1,043 1,128 1,043
Berths and boat sheds 578 585 578 585
Building consents and licensing services 11,591 10,500 11,591 10,500
Community programmes and facilities hire 2,403 1,929 2,403 1,929
Community housing 17,992 16,717 17,992 16,717
Convention and conference centre 14,441 13,663 14,441 13,663
Encroachments and reserve land contributions 1,702 1,517 1,702 1,517
Green spaces 1,967 1,987 1,967 1,987
Landfill operations and recycling 7,673 8,084 7,673 8,084
Lease revenue from property, plant and equipment 4,744 4,572 4,744 4,572
Libraries – hireage 1,095 1,047 1,095 1,047
Parking fees and permits 17,042 16,699 17,042 16,699
Rendering of services recognised in subsidiaries - - 9,799 6,522
Roading infrastructure projects 1,261 1,628 1,261 1,628
Services to Greater Wellington Regional Council 751 727 751 727
Swimming pools 6,382 6,135 6,382 6,135
Trade waste 565 529 565 529
Other 3,573 3,693 3,573 3,693
         
Total rendering of services 94,888 91,055 104,687 97,577
         

Note 3: Revenue from investmentsTop


    Council Group
  NOTE 2013
$000
2012
$000
2013
$000
2012
​$000
           
           
Dividend from investment in associates   10,828 22,426 - -
Dividend from investment in subsidiary   94 10 - -
Investment property lease rentals 17 12,668 12,493 12,668 12,493
           
Total revenue from investments   23,590 34,929 12,668 12,493
           
 

Note 4: Other incomeTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Gain on disposal of property, plant and equipment 360 6,701 361 6,701
Release of provisions 2,403 1,276 2,415 1,293
Petrol tax 1,102 1,127 1,102 1,127
Restricted funds 322 184 322 184
Vested assets 10,519 7,163 10,519 7,163
         
Total other income 14,706 16,451 14,719 16,468
         

Restricted funds are received for specific purposes and are generally held for future use within special reserves or bequest and trust funds. For further information refer to Note 28: Restricted funds.

Vested assets are principally infrastructural assets such as roading, drainage, waste and water assets that have been constructed by developers. As part of the consents process, ownership of these assets is transferred to the Council, and on completion they become part of the city’s network.

The values of principal vested assets received were: roading ($6.322m) and drainage, waste and water ($3.640m).

Note 5: Finance income and expenseTop


    Council Group
  NOTE 2013
$000
2012
$000
2013
$000
2012
​$000
           
Finance income          
Amortisation of loans to related parties 13 465 504 465 504
Cash flow hedge movements reclassified from hedging reserve 26 163 268 163 268
Fair value hedge adjustments to borrowings   648 217 648 217
Interest on deposits, loans and receivables   1,641 951 1,999 1,242
Movements on derivatives at fair value through surplus or deficit   222 262 222 262
           
Total finance income   3,139 2,202 3,497 2,493
           
Less          
Finance expense          
Fair value hedge movements   648 217 648 217
Interest on borrowings   21,269 20,015 21,269 20,107
Interest on finance leases   62 117 64 117
Re-discounting of interest on provisions   1,171 1,229 1,171 1,229
           
Total finance expense   23,150 21,578 23,152 21,670
           
Net finance cost   20,011 19,376 19,655 19,177
           

Movements arising from the remeasurement of the Group's fair value hedges are offset by a fair value adjustment to borrowings so there is no impact on the net surplus for the year.

Movements on derivatives at fair value through surplus or deficit represents the fair value movements on interest rate swaps that do not meet the criteria for hedge accounting. Movements in the Group's other derivatives that meet the criteria for hedge accounting are taken to the cash flow hedge reserve and have no impact on the net surplus for the year.

Re-discounting of interest on provisions is the Council’s funding cost for non-current provisions (where the cash flows will not occur until a future date). For further information refer to Note 22: Employee benefit liabilities and provisions, and Note 23: Provision for other liabilities.

Note 6: Expenditure on operating activitiesTop


    Council Group
  NOTE 2013
$000
2012
$000
2013
$000
2012
​$000
           
Auditor's remuneration:          
Audit services – Audit New Zealand – Financial Statements   301 314 390 359
Audit services – Audit New Zealand – Long-term Plan   - 135 - 135
Audit services – Audit New Zealand – other   7 7 7 7
Audit services – Other Auditors   - - 50 29
           
Impairments          
Bad debts written off not previously provided for   - 78 - 78
Increase in provision for impairment of trade and other receivables 12 803 222 803 222
Impairment loss from property, plant and equipment 18 - 132 - 132
           
Governance and employment          
Councillor remuneration as directors/trustees 43 1,317 1,314 1,407 1,404
Directors/trustees of subsidiaries – remuneration   - - 467 453
Other elected members' remuneration (Community Boards) 43 105 102 105 102
Employee benefits expense:          
- remuneration   73,666 76,698 91,320 94,052
- superannuation contributions (including KiwiSaver)   1,380 1,246 1,644 1,457
- termination benefits (including severances)   1,781 2,410 1,862 2,502
Other personnel costs   2,894 3,492 3,339 3,944
           
Insurance          
Insurance premiums   11,482 9,084 11,910 9,423
Self insurance costs – net 29 451 915 451 915
           
General          
Advertising, printing and publications   2,146 2,976 8,189 8,595
Consultants and legal fees   5,961 5,647 6,157 5,796
Contractors   2,701 3,278 3,815 4,593
Direct costs   105,690 98,727 113,917 108,634
Grants – general   13,182 11,025 13,082 10,970
Grants to subsidiaries 42 18,274 17,824 - -
Grants to associates 42 1,355 180 1,355 180
Information and communication technology   6,012 5,482 6,748 6,090
Loss on disposal of property, plant and equipment   1,357 210 1,393 210
Loss on disposal of intangibles   130 20 130 20
Operating lease – minimum lease payments   1,174 1,196 1,706 1,692
Reassessment of provisions 23 15,945 9,903 15,945 9,903
Utility costs   17,861 17,151 18,355 17,655
Other general costs   17,955 18,843 14,193 15,128
           
Total expenditure on operating activities   303,930 288,611 318,740 304,680
           

Auditor’s remuneration

During the period Audit New Zealand provided other services to the Council, namely assurance services relating to the Clifton Terrace car park managed by the Council on behalf of the NZTA.

General

Direct costs are costs directly attributable to the provision of Council services, including contracts, maintenance, management fees, materials and services.

Grants – general include $2.250m towards the funding of Te Papa.

Operating lease minimum lease payments are for non-cancellable agreements for the use of assets such as buildings and specialised computer equipment.

Utility costs are those relating to the use of electricity, gas, and water. It also includes the payment of rates on Council-owned properties.

 

Note 7: Depreciation and amortisationTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Depreciation        
Buildings 17,780 16,442 17,780 16,442
Civic Centre complex 2,866 2,807 2,866 2,807
Restricted buildings 1,240 1,168 1,240 1,168
Drainage, waste and water infrastructure 33,176 33,222 33,176 33,222
Landfill post closure 250 213 250 213
Library collections 2,307 2,070 2,307 2,070
Plant and equipment 10,243 10,779 10,994 11,529
Roading infrastructure 19,418 18,695 19,418 18,695
         
Total depreciation 87,280 85,396 88,031 86,146
         
Amortisation        
Computer software 3,868 3,141 3,946 3,210
         
Total amortisation 3,868 3,141 3,946 3,210
         
Total depreciation and amortisation 91,148 88,537 91,977 89,356
         

Depreciation (amortisation) is an expense charged each year to reflect the estimated cost of using our assets over their lives. Amortisation relates to intangible assets such as software (as distinct from physical assets, which are covered by the term depreciation).

Note 8: Income tax expenseTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Current tax expense        
       
Current year - - 47 107
Prior period adjustment - - - -
         
Total current tax expense - - 47 107
         
Deferred tax expense        
         
Origination and reversal of temporary differences (270) (190) - 103
Change in unrecognised temporary differences - - 44 (46)
Recognition of previously unrecognised tax losses 270 190 - (57)
         
Total deferred tax expense - - 44 -
         
Reconciliation of tax on the surplus and tax expense Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Surplus for the period before taxation 28,187 62,186 30,533 50,069
         
Prima facie income tax based on domestic tax rate – 28% 7,892 17,412 8,549 14,019
Effect of non-deductible expenses and tax exempt income (8,169) (17,539) (8,013) (17,539)
Effect of tax losses utilised 270 190 - -
Current year's loss for which no deferred tax asset was recognised 7 (25) 7 (30)
Recognition of prior year loss - - (51) -
Change in unrecognised temporary differences - - 103 (16)
Prior period adjustment - - 22 (57)
Share of income tax of equity accounted associates - (38) (526) 3,730
         
Tax Expense - - 91 107
         
Imputation credits Group
  2013
$000
2012
$000
     
Imputation credits available in subsequent periods 101 70

Note 9: Deferred tax assets and liabilitiesTop


Unrecognised temporary differences and tax losses

Deferred tax assets have not been recognised in respect of the following items:

  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Deductible temporary differences - - 463 363
Tax losses 2,003 2,911 2,005 2,924
Total 2,003 2,911 2,468 3,287
         

Under current income tax legislation, the tax losses and deductible temporary differences referred to above do not expire.

The unrecognised deferred tax asset in respect of the above items for the Council is $0.561m (2012: $0.815m) and for the Group $0.691m (2012: $0.819m).

Deferred tax assets have not been recognised in respect of these items as it is not probable that future taxable profits will be available against which the benefit of the losses can be utilised.

In 2013 $0.964m (2012: $0.679m) previously unrecognised tax losses, with a tax effect of $0.270m (2012: $0.190m) were recognised by the Group by way of loss transfer arrangement.

As at 30 June 2013, the Group had a deferred tax liability of $1.427m (2012: $1.196m).

 

Note 10: Cash and cash equivalentsTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Cash at bank 7,284 2,574 10,105 5,266
Cash on hand 105 48 115 59
Short term bank deposits 37,000 20,000 40,298 21,587
         
Total cash and cash equivalents 44,389 22,622 50,518 26,912
         

Bank balances that are interest bearing earn interest based on current floating bank deposit rates.

Short term deposits are made with a registered bank for varying periods of up to three months depending on the immediate cash requirements and short term borrowings of the Group, and earn interest at the applicable short term deposit rates.

The Council holds short term deposits as part of its overall liquidity risk management programme. This enables the Council to maintain its regular commercial paper programme and to pre-fund upcoming debt maturities. The combination of the commercial paper programme and holding short term deposits reduces the Council’s cost of funds.

Note 11: Derivative financial instrumentsTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Current assets        
Interest rate swaps – fair value hedges 409 108 409 108
         
Total current assets 409 108 409 108
         
Non-current assets        
Interest rate swaps – fair value hedges - 949 - 949
Interest rate swaps – cash flow hedges 3,280 - 3,280 -
         
Total non-current assets 3,280 949 3,280 949
         
Total derivative financial instrument assets 3,689 1,057 3,689 1,057
         
Current liabilities        
Interest rate swaps – cash flow hedges 404 247 404 247
Interest rate swaps – non-hedged - 222 - 222
         
Total current liabilities 404 469 404 469
         
Non-current liabilities        
Interest rate swaps – cash flow hedges 12,831 23,812 12,831 23,812
         
Total non-current liabilities 12,831 23,812 12,831 23,812
         
Total derivative financial instrument liabilities 13,235 24,281 13,235 24,281
         

Derivative financial instruments are used by the Group in the normal course of business to hedge exposure to cash flow and fair value interest rate risk. The amounts shown above represent the fair values of these derivative financial instruments. Although these are managed as a portfolio, the Group has no rights to offset assets and liabilities and must present these figures separately.

Cash flow hedges are used to fix interest rates on floating rate debt (floating rate notes or commercial paper) or bank borrowings. Fair value hedges are used to convert interest rates on some fixed rate debt (bonds) to floating rates.

For further information on the Council’s interest rate swaps please refer to Note 31: Financial instruments.

Note 12: Trade and other receivablesTop


    Council Group
  NOTE 2013
$000
2012
$000
2013
$000
2012
​$000
           
           
Trade receivables – debtors   10,959 8,402 13,048 11,078
Provision for impairment of trade receivables – debtors   (241) (318) (532) (591)
Net trade receivables – debtors   10,718 8,084 12,516 10,487
           
Trade receivables – fines   10,703 10,758 10,703 10,758
Provision for impairment of trade receivables – fines   (6,623) (6,329) (6,623) (6,329)
Net trade receivables – fines   4,080 4,429 4,080 4,429
           
Trade receivables from related parties          
- Subsidiaries 42 671 1,089 - -
- Associates 42 13 25 13 25
Total trade receivables from related parties   684 1,114 13 25
           
Total net trade receivables   15,482 13,627 16,609 14,941
           
Accrued income   6,099 13,704 6,602 14,069
GST receivable   4,406 3,568 4,722 3,572
Rates receivable   10,417 9,605 10,417 9,605
Sundry receivables   13,152 13,829 13,697 14,029
           
Total trade and other receivables   49,556 54,333 52,047 56,216
           
Represented by:          
Current   49,556 41,658 52,047 43,541
Non-current   - 12,675 - 12,675
           
Total trade and other receivables   49,556 54,333 52,047 56,216
           

Current trade receivables, rates receivables and sundry receivables are non-interest bearing and receipt is generally on 30-day terms, therefore the carrying value of trade and other receivables approximates their fair value.

The movement in the provision for impairment of trade receivables is analysed as follows:

Provision for impairment of total trade receivables Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance 6,647 7,301 6,920 7,574
New provisions made 803 222 821 222
Release of unused provision (367) (295) (367) (295)
Amount of provision utilised (219) (581) (219) (581)
         
Provision for impairment of total trade receivables – closing balance 6,864 6,647 7,155 6,920
         

The ageing profile of trade and other receivables at the reporting date is as follows:

Council Receivables
2013
Receivables
​2012
  Gross
$000
Impaired
$000
Net
$000
Gross
$000
Impaired
$000
Net
$000
             
Trade and other receivables            
             
Not past due 31,020 - 31,020 38,832 - 38,832
Past due 0 – 3 months 7,802 (113) 7,689 6,325 (125) 6,200
Past due 3 – 6 months 3,218 (111) 3,107 2,199 (114) 2,085
Past due more than 6 months 14,380 (6,640) 7,740 13,624 (6,408) 7,216
             
Total trade and other receivables 56,420 (6,864) 49,556 60,980 (6,647) 54,333
             
Group Receivables
2013
Receivables
​2012
  Gross
$000
Impaired
$000
Net
$000
Gross
$000
Impaired
$000
Net
$000
             
Trade and other receivables            
             
Not past due 32,575 - 32,575 40,512 - 40,512
Past due 0 – 3 months 8,126 (113) 8,013 6,405 (125) 6,280
Past due 3 – 6 months 3,695 (111) 3,584 2,227 (114) 2,113
Past due more than 6 months 14,806 (6,931) 7,875 13,992 (6,681) 7,311
             
Total trade and other receivables 59,202 (7,155) 52,047 63,136 (6,920) 56,216
             

The receivables past due for more than six months primarily relates to fines. Due to their nature, the collection pattern for fines is longer than that for trade debtors.

Note 13: Other financial assetsTop


    Council Group
  NOTE 2013
$000
2012
$000
2013
$000
2012
​$000
           
Financial assets at fair value through other comprehensive income          
Equity investments:          
- Civic Assurance   620 681 620 681
- NZ Local Government Funding Agency (LGFA)   1,883 2,000 1,883 2,000
           
Loans and deposits          
Bank deposits – term   - - 400 1,520
LGFA – borrower notes   480 240 480 240
Loans to related parties – associates 42 1,407 1,248 1,407 1,248
Loans to related parties – other organisations   3,979 3,673 3,979 3,673
           
Total other financial assets   8,369 7,842 8,769 9,362
           

Civic Assurance is the trading name of New Zealand Local Government Insurance Corporation Limited, which provides insurance products and other financial services principally to local authorities. The Council holds a 4.78% (2012: 4.78%) shareholding in this entity with no present intention to sell.

The New Zealand Local Government Funding Agency Limited (LGFA), which commenced in December 2011 is an alternative debt provider majority owned by and operated for local authorities. The Council holds an 8% shareholding of the paid-up capital and as a shareholder will benefit from a return on its investment and as a borrower from lower borrowing costs. The small reduction in value relates to the sell-down of shares to enable other councils to become shareholders. The LGFA has a AA+ (domestic long term) credit rating from Standard and Poors.

The loans to related parties are concessionary in nature, since the loans have been granted on interest-free terms.

The movements in the loans are as follows:

    Council Group
  NOTE 2013
$000
2012
$000
2013
$000
2012
​$000
           
Loans to related parties – associates          
Wellington Regional Stadium Trust          
(nominal value $15,394,893)          
Opening balance   1,248 1,107 1,248 1,107
Amortisation of fair value adjustment   159 141 159 141
Closing balance at fair value 42 1,407 1,248 1,407 1,248
           
Loans to related parties – other organisations          
Karori Wildlife Sanctuary Trust          
(nominal value $10,346,689)          
Opening balance   3,673 4,312 3,673 4,312
Amortisation of fair value adjustment   306 363 306 363
Additional fair value movement   - (1,002) - (1,002)
Closing balance at fair value   3,979 3,673 3,979 3,673
           
Total loans to related parties   5,386 4,921 5,386 4,921
           

The fair value movement on loans reflects the timing of their expected repayments and the interest free nature of the loan. Over the remaining life of the loans their fair value will be amortised back up to their full nominal value.

The amortisation rate applicable to the Wellington Regional Stadium Trust is 12.710% and the rates applicable to the Karori Wildlife Sanctuary Trust range from 6.875% to 12.710%.

Further information on the related parties is disclosed in Note 42: Related party disclosures.

Note 14: InventoriesTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Consumables 551 432 613 1,355
Inventories held for resale 193 368 1,157 596
Inventories held for distribution 131 66 131 66
         
Total inventories 875 866 1,901 2,017
         

Consumables are materials or supplies which will be consumed in conjunction with the delivery of services. Consumables within the Council predominately comprise nursery plants, printing products and drainage and waste consumables. Consumables within the Group are mainly Wellington Cable Car Limited inventories of spare parts.

Inventories held for resale within the Council mainly comprise inventories at the Botanic Gardens and the Council’s swimming pools. The Group includes inventories at Wellington Museums Trust and Wellington Zoo.

Inventories held for distribution primarily relate to the holding of wheelie bins, green bins and recycling bags for distribution at no or nominal cost.

 

Note 15: Non-current assets classified as held for saleTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance 949 8,099 949 8,099
Disposals (899) (7,916) (899) (7,916)
Transfers from property, plant and equipment 222 899 222 899
Transfers to property, plant and equipment - (133) - (133)
         
Non-current assets classified as held for sale – closing balance 272 949 272 949
         

Non-current assets held for sale are valued at the lower of the carrying amount and fair value less costs to sell at the time of reclassification.

Note 16: IntangiblesTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Computer software        
Cost – opening balance 38,981 34,128 39,662 34,865
Accumulated amortisation (28,936) (25,943) (29,509) (26,525)
Computer software opening balance 10,045 8,185 10,153 8,340
Acquired by direct purchase 5,023 5,021 5,029 5,043
Net disposals (130) (20) (130) (20)
Amortisation (3,868) (3,141) (3,946) (3,210)
Transfer from property, plant and equipment - - 3 -
Total computer software – closing balance 11,070 10,045 11,109 10,153
         
Cost 43,011 38,981 43,701 39,662
Accumulated amortisation (31,941) (28,936) (32,592) (29,509)
         
Total computer software – closing balance 11,070 10,045 11,109 10,153
         
Work in progress        
Computer software 2,442 2,124 2,442 2,124
         
Total work in progress 2,442 2,124 2,442 2,124
         
Carbon credits        
Cost – Opening Balance - - - -
Additions 37 - 37 -
         
Total carbon credits – closing balance 37 - 37 -
         
Total intangibles 13,549 12,169 13,588 12,277
         

Disposals and transfers are reported net of accumulated amortisation.

Carbon credits

As part of the Emissions Trading Scheme the Council received carbon credits from Central Government in recognition of the carbon absorbed by a portion of the Council’s green belt. The Council received 149,979 credits for the 2013 calendar year (2012: 1,196). The Council has also purchased 80,000 credits in the market to cover the expected liabilities associated with landfill operations. At 30 June 2013 the total number of credits held is 234,686 (2012: 4,707).

At 30 June 2013 the liability relating to these credits is $0.080m (2012: nil).

More information on carbon credits can be found in the Statements of Service Performance under activity 2.2: Waste reduction and energy conservation.

Note 17: Investment propertiesTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance 200,474 203,742 200,474 203,742
Additions by acquisition - 21 - 21
Additions by subsequent expenditure 92 129 92 129
Fair value revaluation movements taken to surplus/(deficit) 5,385 (3,418) 5,385 (3,418)
         
Investment properties – closing balance 205,951 200,474 205,951 200,474
         

Wellington City Council’s investment properties were valued as at 30 June 2013 by William Bunt (FNZIV, FPINZ), registered valuer and Director of Valuation Services for CBRE Limited. Wellington Waterfront Project’s investment properties were valued as at 30 June 2013 by Paul Butchers (BBS, FNZIV, FPINZ), Director of Bayleys Valuation Limited.

The Council’s total investment properties comprise ground leases of $154.902m (2012: $154.527m) and land and buildings of $51.049m (2012: $45.947m) held for investment purposes.

Ground leases are parcels of land owned by the Council in the central city or on the waterfront that are leased to other parties who own the buildings situated on the land. The leases are generally based on 21-year perpetually renewable terms. As these parcels of land are held for investment purposes the rentals are charged on a commercial market basis.

The basis of valuation varies depending on the nature of the lease. For sites that are subject to a terminating lease the approach is to assess the value of the rental income over the remaining term of the lease and add the residual value of the land at lease expiry. For sites subject to perpetually renewable leases values have been assessed utilising a discounted cash flow and arriving at a net present value of all future anticipated gross rental payments.

Revenues and expenses Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Revenue from investment properties 12,668 12,493 12,668 12,493
         
Direct operating expenses of investment properties        
– from investment properties that generated income 339 1,058 339 1,058
         
Contractual obligations for capital expenditure 35 6,947 35 6,947
         
Contractual obligations for operating expenditure 48 62 48 62
         

The direct operating expenses relating to investment properties form part of the direct expenses in Note 6: Expenditure on operating activities.

Fair value of investment properties valued by independent registered valuers Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
William Bunt – CBRE Limited 156,662 156,577 156,662 156,577
Paul Butchers – Bayleys Valuation Limited 49,289 43,897 49,289 43,897
         
Total fair value of investment properties valued by independent registered valuers 205,951 200,474 205,951 200,474
         

Note 18: Property, plant and equipmentTop


The movements in the property, plant and equipment assets are summarised as follows:  

Summary Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Property, plant and equipment – Opening balance 6,501,686 6,362,494 6,514,367 6,393,223
Additions 149,795 226,238 149,956 223,057
Disposals (6,823) (1,936) (6,860) (16,028)
Depreciation expense (87,280) (85,396) (88,031) (86,146)
Impairment losses - (132) - (132)
Revaluation movement - 48,612 - 48,612
Transfer from non-current assets held for sale - 133 - 133
Transfer to non-current assets held for sale (222) (899) (222) (899)
Transfer to intangibles - - (3) -
Movement in work in progress (10,864) (47,428) (10,274) (47,453)
         
Property, plant and equipment – Closing balance 6,546,292 6,501,686 6,558,933 6,514,367
         

The movements according to the individual classes of assets are as follows:

  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
OPERATIONAL ASSETS        
         
Land        
Land – at cost – opening balance - 3,081 - 6,172
Land – at valuation – opening balance 206,036 198,283 206,036 198,283
Total land – opening balance 206,036 201,364 206,036 204,455
Additions - 4,222 - 4,222
Disposals (2,205) (1,356) (2,205) (4,447)
Revaluation movement - 2,536 - 2,536
Transfer between asset classes (500) 145 (500) 145
Transfer to non-current assets held for sale - (875) - (875)
Total land closing balance 203,331 206,036 203,331 206,036
         
Land – at cost – closing balance - - - -
Land – at valuation – closing balance 203,331 206,036 203,331 206,036
Total land  closing balance 203,331 206,036 203,331 206,036
         
Buildings        
Buildings – at cost – opening balance - 41,057 - 54,112
Buildings – at valuation – opening balance 547,704 369,665 547,704 369,665
Total cost/valuation 547,704 410,722 547,704 423,777
Accumulated depreciation - (26,115) - (28,169)
Total buildings – opening balance 547,704 384,607 547,704 395,608
Additions 60,906 130,694 60,906 130,694
Depreciation expense (17,780) (16,442) (17,780) (16,442)
Disposals (485) (56) (485) (11,057)
Revaluation movement - 46,076 - 46,076
Transfer between asset classes 30 2,825 30 2,825
Total buildings closing balance 590,375 547,704 590,375 547,704
         
Buildings – at cost – closing balance 60,906 - 60,906 -
Buildings – at valuation – closing balance 547,282 547,704 547,282 547,704
Total cost/valuation 608,188 547,704 608,188 547,704
Accumulated depreciation (17,813) - (17,813) -
Total buildings closing balance 590,375 547,704 590,375 547,704
         
Landfill post closure costs26        
Landfill post closure – at cost – opening balance 3,930 3,635 3,930 3,635
Accumulated depreciation (1,850) (1,701) (1,850) (1,701)
Total landfill post closure costs – opening balance 2,080 1,934 2,080 1,934
Depreciation expense (250) (213) (250) (213)
Transfer between asset classes - (700) - (700)
Movement in post closure costs (147) 1,059 (147) 1,059
Total landfill post closure costs closing balance 1,683 2,080 1,683 2,080
         
Landfill post closure – at cost – closing balance 3,783 3,930 3,783 3,930
Accumulated depreciation (2,100) (1,850) (2,100) (1,850)
Total landfill post closure costs closing balance 1,683 2,080 1,683 2,080
         
Civic Centre complex        
Civic Centre complex – at cost – opening balance 172,949 170,774 172,949 170,774
Accumulated depreciation (53,065) (50,259) (53,065) (50,259)
Total Civic Centre complex – opening balance 119,884 120,515 119,884 120,515
Additions 745 2,170 745 2,170
Transfer between asset classes (3) 6 (3) 6
Depreciation expense (2,866) (2,807) (2,866) (2,807)
Total Civic Centre complex  closing balance 117,760 119,884 117,760 119,884
         
Civic Centre complex – at cost – closing balance 173,691 172,949 173,691 172,949
Accumulated depreciation (55,931) (53,065) (55,931) (53,065)
Total Civic Centre complex  closing balance 117,760 119,884 117,760 119,884
         
Plant and equipment        
Plant and equipment – at cost – opening balance 156,363 150,472 169,045 167,405
Accumulated depreciation (74,512) (68,257) (79,448) (73,514)
Total plant and equipment – opening balance 81,851 82,215 89,597 93,891
Additions 11,304 13,057 11,464 9,877
Depreciation expense (10,243) (10,779) (10,994) (11,529)
Disposals (3,548) (520) (3,585) (520)
Transfer between asset classes (27) (2,122) (27) (2,122)
Transfer to intangibles - - (3) -
Total plant and equipment closing balance 79,337 81,851 86,452 89,597
         
Plant and equipment – at cost 157,065 156,363 169,867 169,045
Accumulated depreciation (77,728) (74,512) (83,415) (79,448)
Total plant and equipment –​ closing balance 79,337 81,851 86,452 89,597
         

Disposals and transfers are reported net of accumulated depreciation.

  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Library collections        
Library collections – at cost – opening balance 1,977 - 1,977 -
Library collections – at valuation – opening balance 15,715 15,715 15,715 15,715
Total cost/valuation 17,692 15,715 17,692 15,715
Accumulated depreciation (2,070) - (2,070) -
Total library collections – opening balance 15,622 15,715 15,622 15,715
Additions 1,995 1,977 1,995 1,977
Depreciation expense (2,307) (2,070) (2,307) (2,070)
Revaluation movement - - - -
Total library collections closing balance 15,310 15,622 15,310 15,622
         
Library collections – at cost – closing balance 3,972 1,977 3,972 1,977
Library collections – at valuation – closing balance 15,715 15,715 15,715 15,715
Total cost/valuation 19,687 17,692 19,687 17,692
Accumulated depreciation (4,377) (2,070) (4,377) (2,070)
Total library collections – closing balance 15,310 15,622 15,310 15,622
         
TOTAL OPERATIONAL ASSETS 1,007,796 973,177 1,014,911 980,923
         
INFRASTRUCTURE ASSETS        
Drainage, waste and water        
Drainage, waste and water – at cost – opening balance 46,755 - 46,755 -
Drainage, waste and water – at valuation – opening balance 1,350,574 1,365,199 1,350,574 1,365,199
Total cost/valuation 1,397,329 1,365,199 1,397,329 1,365,199
Accumulated depreciation (33,222) - (33,222) -
Total drainage, water and waste – opening balance 1,364,107 1,365,199 1,364,107 1,365,199
Additions 30,130 32,130 30,130 32,130
Depreciation expense (33,176) (33,222) (33,176) (33,222)
Total drainage, water and waste closing balance 1,361,061 1,364,107 1,361,061 1,364,107
         
Drainage, waste and water – at cost – closing balance 76,885 46,755 76,885 46,755
Drainage, waste and water – at valuation – closing balance 1,350,574 1,350,574 1,350,574 1,350,574
Total cost/valuation 1,427,459 1,397,329 1,427,459 1,397,329
Accumulated depreciation (66,398) (33,222) (66,398) (33,222)
Total drainage, water and waste closing balance 1,361,061 1,364,107 1,361,061 1,364,107
         
Roading        
Roading – at cost – opening balance 38,614 - 38,614 -
Roading – at valuation – opening balance 784,374 784,374 786,974 786,974
Total cost/valuation 822,988 784,374 825,588 786,974
Accumulated depreciation (18,695) - (18,695) -
Total roading – opening balance 804,293 784,374 806,893 786,974
Additions 38,613 38,614 38,613 38,614
Depreciation expense (19,418) (18,695) (19,418) (18,695)
Total roading closing balance 823,488 804,293 826,088 806,893
         
Roading – at cost – closing balance 77,227 38,614 77,227 38,614
Roading – at valuation – closing balance 784,374 784,374 786,974 786,974
Total cost/valuation 861,601 822,988 864,201 825,588
Accumulated depreciation (38,113) (18,695) (38,113) (18,695)
Total roading closing balance 823,488 804,293 826,088 806,893
         
Infrastructure land        
Infrastructure land – at cost – opening balance - - - -
Infrastructure land – at valuation – opening balance 36,447 36,447 36,447 36,447
Total infrastructure land – opening balance 36,447 36,447 36,447 36,447
Disposal (370) - (370) -
Total infrastructure land closing balance 36,077 36,447 36,077 36,447
         
Infrastructure land – at cost – closing balance - - - -
Infrastructure land – at valuation – closing balance 36,077 36,447 36,077 36,447
Total infrastructure land closing balance 36,077 36,447 36,077 36,447
         
Land under roads        
Land under roads – at cost – opening balance 2,944,770 2,944,639 2,944,770 2,944,639
Additions 3,117 158 3,117 158
Disposals (88) (4) (88) (4)
Impairment - (132) - (132)
Transfer between asset classes 360 - 360 -
Transfer from non-current assets held for sale - 133 - 133
Transfer to non-current assets held for sale (222) (24) (222) (24)
Land under roads closing balance 2,947,937 2,944,770 2,947,937 2,944,770
         
TOTAL INFRASTRUCTURE ASSETS 5,168,563 5,149,617 5,171,163 5,152,217
         
RESTRICTED ASSETS        
         
Art and cultural assets        
Art and cultural assets – at cost – opening balance 8,731 8,382 11,066 10,718
Additions 548 421 549 420
Transfer between asset classes - (72) - (72)
Art and cultural assets  closing balance 9,279 8,731 11,615 11,066
         
Restricted buildings        
Restricted buildings – at cost – opening balance 33,175 32,820 33,175 32,820
Accumulated depreciation (5,766) (4,615) (5,766) (4,615)
Total restricted buildings – opening balance 27,409 28,205 27,409 28,205
Additions 1,981 454 1,981 454
Depreciation expense (1,240) (1,168) (1,240) (1,168)
Disposals (111) - (111) -
Transfer between asset classes - (82) - (82)
Restricted buildings closing balance 28,039 27,409 28,039 27,409
         
Restricted buildings – at cost – closing balance 34,832 33,175 34,832 33,175
Accumulated depreciation (6,793) (5,766) (6,793) (5,766)
Total restricted buildings closing balance 28,039 27,409 28,039 27,409
         
Parks and reserves        
Parks and reserves – at cost – opening balance 204,516 203,234 204,516 203,234
Additions 603 1,282 603 1,282
Disposals (16) (16)
Transfer between asset classes 3,699 - 3,699 -
Parks and reserves closing balance 208,802 204,516 208,802 204,516
         
Town Belt at cost 88,103 88,103 88,103 88,103
Transfer between asset classes (3,559) - (3,559) -
Total restricted buildings closing balance 84,544 88,103 84,544 88,103
         
Zoo animals at cost 500 500 500 500
         
TOTAL RESTRICTED ASSETS 331,164 329,259 333,500 331,594
         
WORK IN PROGRESS        
- Land 53 460 53 460
- Buildings 13,881 33,873 13,881 33,873
- Civic Centre complex 5,835 1,226 5,835 1,226
- Plant and equipment 13,354 9,416 13,944 9,416
- Drainage, waste and water 457 381 457 381
- Roading 4,840 1,854 4,840 1,854
- Art and cultural 173 326 173 326
- Restricted buildings 176 2,097 176 2,097
TOTAL WORK IN PROGRESS 38,769 49,633 39,359 49,633
         
TOTAL PROPERTY, PLANT AND EQUIPMENT 6,546,292 6,501,686 6,558,933 6,514,367
         

Disposals and transfers are reported net of accumulated depreciation.


​Revaluation of property, plant and equipment

The Council’s operational land and buildings were valued as at 30 June 2012, and infrastructural land as at 30 June 2011 by William Bunt (FNZIV, FPINZI), registered valuer and Director of Valuation Services for CBRE Limited.

Library collections were valued as at 30 June 2011 by the Council’s library staff. The revaluation was carried out in accordance with guidelines outlined in Valuation Guidance for Cultural and Heritage Assets published by the Treasury Accounting Team, November 2002. An independent peer review was conducted by Michaela O’Donovan, Manager Service Design and Implementation, National Library of New Zealand.

Drainage, waste and water infrastructure and the roading network were valued as at 30 June 2011 by John Vessey (MIPENZ), Partner of Opus International Consultants Limited.

In the years which an asset class is not revalued, the Group assesses whether there has been any material change in the value of that asset class. The movement in asset values between 30 June 2012 and 30 June 2013 for the Roads, Water and Library asset classes were assessed using appropriate indices. The increase in asset value of 1.6% was not considered material by management and accordingly the assets were not revalued at 30 June 2013.

Further information on revaluation reserves and movements is contained in Note 25: Revaluation reserves.

Finance leases

The net carrying amount of plant and equipment assets held the Council under finance leases is $0.906m (2012: $1.242m).

Service concession arrangement

The Moa Point sewerage treatment plant is owned by the Council and operated by Veolia Water under a design, build and operate contract. Veolia Water also operates the Council-owned Western (Karori) and Carey’s Gully treatment plants. The plants and building assets are included in the drainage, waste and water asset class above.

Veolia Water is required to fund all renewals and repairs and return the plants to the Council in 2020 with a future life expectancy of at least 25 years.

As asset owner, the Council incurs all associated operating expenses, namely management fees, depreciation and finance costs. In accordance with section 100 of the Local Government Act 2002, the Council does not fully rates fund the plant’s depreciation expenditure.

Veolia’s monthly management fee is determined in accordance with annually adjusted tariffs. The contract terminates either on the expiry of the 25-year term (2020) or on the occurrence of a contract default event by either party. The contract’s right of renewal resides with the Council.

Note 19: Trade and other payablesTop


    Council Group
  NOTE 2013
$000
2012
$000
2013
$000
2012
​$000
           
           
Trade payables and accruals   42,875 41,667 47,118 45,834
           
Trade payables owing to related parties          
- Subsidiaries 42 980 1,344 - -
- Associates 42 712 677 712 677
           
Interest payable   2,826 2,759 2,826 2,759
Sundry payables   11,182 7,400 12,326 8,075
           
Total trade and other payables   58,575 53,847 62,982 57,345
           
Represented by:          
current   57,945 53,217 62,352 56,715
non-current   630 630 630 630
           
Total trade and other payables   58,575 53,847 62,982 57,345
           

Trade payables are non-interest bearing and are normally settled on terms varying between seven days and the 20th of the month following the invoice date.

 

Note 20: Revenue in advanceTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Inspection and licensing fees 2,392 2,733 2,392 2,733
Lease rentals 2,584 2,667 2,584 2,667
Rates and water 1,457 1,152 1,457 1,152
Indoor Community Sports Centre 2,043 2,342 2,043 2,342
Wellington Venues 1,270 1,212 1,270 1,212
Revenue in advance – subsidiaries - - 487 754
Other 1,659 1,783 1,659 1,783
         
Total revenue in advance 11,405 11,889 11,892 12,643
         

Note 21: BorrowingsTop


The Council maintains a prudent borrowings position in relation to our equity and annual income. Borrowings are primarily used to fund the purchase of new assets or upgrades to existing assets that are approved through the Annual Plan and Long-term Plan processes.

Net Borrowings

The following table offsets current (12 months or less) investment deposits held against the gross borrowings to obtain a net borrowings position.

Net borrowings   Council Group
  NOTE 2013
$000
2012
$000
2013
$000
2012
​$000
           
           
Total gross borrowing and overdraft facilities utilised   388,330 361,618 388,340 361,631
           
Less          
Cash and cash equivalents 10 (44,389) (22,622) (50,518) (26,912)
Bank deposits – term (3–12 months) 13 - - (400) (1,520)
           
Total net borrowings   343,941 338,996 337,422 333,199
           

Further discussion and illustration of the net borrowing and investment position is included in the Financial Overview on page 76.

The gross borrowings are comprised as follows:

Gross borrowings Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Current        
         
Bank facilities – short term – committed - 2,000 - 2,000
Commercial paper 100,000 100,000 100,000 100,000
Debt securities – fixed rate bonds 25,000 9,000 25,000 9,000
Debt securities – floating rate notes 30,000 18,000 30,000 18,000
Finance leases 562 572 565 574
         
Total current 155,562 129,572 155,565 129,574
         
Non-current        
         
Bank loans – term 3,035 1,242 3,035 1,242
Debt securities – fixed rate bonds 15,409 36,057 15,409 36,057
Debt securities – floating rate notes 214,000 194,000 214,000 194,000
Finance leases 324 747 331 758
         
Total non-current 232,768 232,046 232,775 232,057
         
Total borrowings 388,330 361,618 388,340 361,631
         

The Council's borrowing strategy is to minimise liquidity risk by avoiding concentration of debt maturity dates and to ensure there is long-term access to funds. Further information on the liquidity and market risks associated with borrowings is contained in Note 31: Financial instruments.

Bank facilities

A total of $145m (2012: $155m) of committed bank facilities is available to the Council. Some $55m is on a short term basis of less than one year and $90m for longer than one year. Interest is payable in arrears at wholesale market rates. A further $5m (2012: $5m) is available as an uncommitted facility with interest payable in arrears at wholesale market rates. Of these facilities, none were drawn at the end of the reporting period (2012: $2m).

Bank loans – term

Loans for the Council relate to the wastewater treatment plant joint venture with Porirua City Council, and comprise several individual loans totalling $3.035m (2012: $1.242m) with maturities from 2015 to 2036. The average effective interest rate applicable is 7.00%

Commercial paper

The Group has issued $100m of commercial paper with maturities of three months or less. The interest is paid on issue. The interest rates range from 2.69% to 2.87%.

Debt securities

The Group has issued $40m (2012: $44m) of fixed rate bonds with maturities from 31 March 2014 to 17 January 2020. Interest is payable six monthly in arrears. The interest rates range from 4.47% to 7.13%. The value of fixed rate debt securities includes a fair value hedge adjustment of $0.409m (2012: $1.057m) relating to the fair value interest rate swaps associated with these bonds.

The Group has issued $244m (2012: $212m) of floating rate notes with maturities from 30 September 2013 to 2 August 2019. Interest is payable quarterly in arrears. The interest rates vary from 2.76% to 4.15% and are subject to quarterly reset dates.


The following table shows the total borrowing facilities available to the Council and Group, and the use of these facilities at the end of the reporting period.

Gross borrowing and overdraft facilities Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Gross borrowing and overdraft facilities available        
         
Bank facilities – short term – committed 55,000 55,000 55,000 55,000
Bank facilities – long term – committed 90,000 100,000 90,000 100,000
Bank facilities – short term – uncommitted 5,000 5,000 5,000 5,000
Bank loans – term 3,035 1,242 3,035 1,242
Bank overdraft 1,500 1,500 1,550 1,550
Commercial paper 100,000 100,000 100,000 100,000
Debt securities – fixed rate bonds 40,409 45,057 40,409 45,057
Debt securities – floating rate notes 244,000 212,000 244,000 212,000
Finance leases 886 1,319 896 1,332
         
Total gross borrowing and overdraft facilities available 539,830 521,118 539,890 521,181
         
Gross borrowing and overdraft facilities utilised        
         
Bank facilities – short term – committed - 2,000 - 2,000
Bank loans – term 3,035 1,242 3,035 1,242
Commercial paper 100,000 100,000 100,000 100,000
Debt securities – fixed rate bonds 40,409 45,057 40,409 45,057
Debt securities – floating rate notes 244,000 212,000 244,000 212,000
Finance leases 886 1,319 896 1,332
         
Total gross borrowing and overdraft facilities utilised 388,330 361,618 388,340 361,631
         
Gross borrowing and overdraft facilities unutilised        
         
Bank facilities – short term – committed 55,000 53,000 55,000 53,000
Bank facilities – long term – committed 90,000 100,000 90,000 100,000
Bank facilities – short term – uncommitted 5,000 5,000 5,000 5,000
Bank overdraft 1,500 1,500 1,550 1,550
         
Total gross borrowing and overdraft facilities unutilised 151,500 159,500 151,550 159,550
         

Bank overdraft

An overdraft facility of $1.500m (2012: $1.500m) is available to the Council. This facility was undrawn as at 30 June 2013 (2012: undrawn). The Group has additional overdraft facilities of $0.050m (2012: $0.050m).

Security

Council borrowings are secured by way of a Debenture Trust Deed over the Council’s rates revenue.

Internal borrowings

Council borrows on a consolidated level and as such does not use internal borrowing and therefore does not prepare internal borrowing statements.

Ringfenced funds

The Council holds $15.442m (2012: $8.738m) of cash that may only be used for a specified purpose; this amount has been offset against borrowings. As part of the agreement with the Crown for the Housing Upgrade Project an amount of $13.059m (2012: $7.700m), representing the accumulated cash surpluses from the Housing activity, has been ringfenced for future investment in the Council's social housing assets. There is also an amount of $2.383m (2012: $1.038m) related to accumulated cash surpluses from the Waste Reduction and Energy Conservation activity which, under the Waste Minimisation Act 2008, must be ring fenced for future investment in waste activities.

Finance lease liabilities

The Group has entered into finance leases for items of plant and equipment, predominantly computer equipment. The net carrying amount of the leased items is included within plant and equipment shown in Note 18: Property, plant and equipment.

The finance leases can be renewed at the Group’s option, with rentals set by reference to current market rates for items of equivalent age and condition. The Group does have the option to purchase the asset at the end of the lease term.

There are no restrictions placed on the Group by any of the finance leasing arrangements.

Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

The finance lease liabilities are analysed as follows:

Analysis of finance lease liabilities Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Future minimum lease payments        
Not later than one year 596 634 600 638
Later than one year and not later than five years 336 793 344 805
Later than five years - - - -
         
Total future minimum lease payments 932 1,427 944 1,443
Future finance charges (46) (108) (48) (111)
         
Present value of future minimum lease payments 886 1,319 896 1,332
         
Present value of future minimum lease payments        
Not later than one year 562 572 565 574
Later than one year and not later than five years 324 747 331 758
Later than five years - - - -
         
Total present value of future minimum lease payments 886 1,319 896 1,332
         

Note 22: Employee benefit liabilities and provisionsTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Current        
         
Short-term benefits        
Payroll accruals 459 417 793 743
Holiday leave 4,525 4,992 5,481 5,964
         
Total short-term benefits 4,984 5,409 6,274 6,707
         
Termination benefits        
Other contractual provisions 714 1,229 714 1,229
         
Total termination benefits 714 1,229 714 1,229
         
Total current 5,698 6,638 6,988 7,936
         
Non-current        
         
Long-term benefits        
Long service leave provision - - 78 101
Retirement gratuities provision 1,474 1,649 1,486 1,699
         
Total long-term benefits 1,474 1,649 1,564 1,800
         
Total employee benefit liabilities and provisions 7,172 8,287 8,552 9,736
         

Movements in the above short term and long term benefit provisions are analysed as follows:

Long service leave provision Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance - - 101 118
Additional or increased provision made - - - -
Release of provision - - - (17)
Amount utilised - - (23) -
         
Long service leave – closing balance - - 78 101
         

 

Retirement gratuities provision Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance 1,649 1,600 1,699 1,648
Movement in required provision (23) 3 (23) 5
Release of unused provision (170) (14) (182) (14)
Rediscounting of interest 102 100 102 100
Amount utilised (84) (40) (110) (40)
         
Retirement gratuities – closing balance 1,474 1,649 1,486 1,699
         

Background

The Council’s retirement gratuities provision is a contractual entitlement for a reducing number of employees who, having qualified with 10 years service, will on retirement be entitled to a payment based on years of service and current salary. This entitlement has not been offered to Council employees since 1991. Based on the age of remaining participants the provision may not be extinguished until 2037, assuming retirement at age 65.

Estimation

The gross retirement gratuities provision (inflation adjusted at 2.30%) as at 30 June 2013, before discounting, is $2.093m (2012: $2.360m). The discount rate used is 6.50%.

Movements in the above termination benefits provision are analysed as follows:

Other contractual provisions Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance 1,229 373 1,229 373
New provision 714 1,229 714 1,229
Release of unused provision (463) (11) (463) (11)
Amount utilised (766) (362) (766) (362)
         
Other contractual provisions – closing balance 714 1,229 714 1,229
         

Background

The above provision is to cover estimated redundancy costs as at 30 June 2013 resulting from the current restructuring of the Council.

Note 23: Provision for other liabilitiesTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Current        
ACC Partnership programme 20 10 20 10
Landfill post-closure costs 3,322 4,509 3,322 4,509
Storm costs 855 - 855 -
Weathertight homes 30,304 27,690 30,304 27,690
         
Total current 34,501 32,209 34,501 32,209
         
Non-current        
Landfill post-closure costs 13,027 12,708 13,027 12,708
Weathertight homes 36,675 28,367 36,675 28,367
         
Total non-current 49,702 41,075 49,702 41,075
         
Total provision for other liabilities 84,203 73,284 84,203 73,284
         

Movements in the above provisions for other liabilities are analysed as follows:

ACC Partnership programme Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance 10 133 10 133
Change in provision for risks incurred 96 (5) 96 (5)
Amounts utilised (86) (118) (86) (118)
         
Total liability for claims outstanding 20 10 20 10
         
Represented by:        
         
Present value of future payments 17 9 17 9
Risk margin 3 1 3 1
         
Total liability for claims outstanding 20 10 20 10
         

Background

The Council is a member of the Accident Compensation Corporation (ACC) partnership programme. The Council acts as an agent on behalf of ACC managing claims for its employees and providing entitlements under the Accident Insurance Act 1998 in relation to work-related personal injuries and illnesses.

Estimation

This provision represents an estimate of the claims outstanding at the end of the reporting period together with an estimate of the claims incurred but not yet reported.

Landfill post-closure costs Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance 17,217 16,830 17,217 16,830
Additional or increased provision made 29 1,011 29 1,011
Release of provision (1,550) (957) (1,550) (957)
Re-discounting of interest 1,069 1,129 1,069 1,129
Amount utilised (416) (796) (416) (796)
         
Landfill post-closure costs – closing balance 16,349 17,217 16,349 17,217
         

Background

The Council operates the Southern Landfill (Stage 3) and has a 21.5% joint venture interest in the Spicer Valley Landfill. It also manages a number of closed landfill sites around Wellington. The Council has responsibility for the closure of its landfills and to provide ongoing maintenance and monitoring of the landfills after they are closed.

As part of the closure of landfills, or landfill stages, the Council’s responsibilities include:

Post closure responsibilities include:

The management of the landfill will influence the timing of recognition of some liabilities – for example, the Southern Landfill operates in stages. A liability relating to any future stages will only be created when the stage is commissioned and when refuse begins to accumulate in this stage.

Estimations

The long term nature of the liability means there are inherent uncertainties in estimating costs that will be incurred. The provision has been estimated using known improvements in technology and known changes to legal requirements. Future cashflows are discounted using the rate of 6.50%. The gross provision (inflation adjusted at 2.80%), before discounting, is $24.505m as at 30 June 2013 (2012: $28.630m). This represents the Council’s projection of the amount required to settle the obligation at the estimated time of the cash outflow.

Stage 3 of the Southern Landfill has an estimated remaining capacity of 658,051m3 (2012: 751,160m3) and is expected to close in 2018. These estimates have been made by the Council’s engineers based on expected future and historical volume information.

The Council’s provision includes a proportionate share of the Spicer Valley Landfill provision for post closure costs. The Spicer Valley Landfill has an estimated remaining capacity of 589,000m3 (2012: 620,000m3) and an estimated remaining life out to the end of 2022.

Storm costs Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance 855 - 855 -
         

Background

Following a severe storm in June 2013 a provision has been made for an estimate of the associated clean-up costs not covered through the self insurance reserve fund.

Weathertight homes Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance 56,057 50,864 56,057 50,864
Additional or increased provision made 14,965 9,903 14,965 9,903
Amount utilised (4,043) (4,710) (4,043) (4,710)
         
Weathertight homes – closing balance 66,979 56,057 66,979 56,057
         

Background

This provision represents the Council’s estimated liability relating to the settlement of claims arising in relation to the Weathertight Homes Resolution Services (WHRS) Act 2006 and civil proceedings for weathertightness.

A provision has been recognised for the potential net settlement of all known claims, including those claims that are being actively managed by the Council as well as claims lodged with WHRS but not yet being actively managed. The provision also includes an amount of $7.739m (2012: $8.933m) as a provision for future claims relating to weathertightness issues not yet identified or not yet reported.

Estimation

The Council has provided for the expected future costs of reported claims. The provision for active claims is based on the best estimate of the Council’s expected future costs to settle these claims and is reviewed on a case by case basis. The estimate for claims which have been notified and are not yet actively managed and unreported claims is based on actuarial assessments and other information on these claims. The nature of the liability means there are significant inherent uncertainties in estimating the likely costs that will be incurred in the future. This represents the Council’s best estimate of the amount required to settle the obligation at the estimated time of the cash outflow. Future cashflows are inflation adjusted and discounted using an applicable discount rate. The provision is net of any third-party contributions including insurance, where applicable.

The provision is based on best estimates and actuarial assessments and therefore actual costs incurred may vary significantly from those included in this provision, especially for future claims relating to weathertightness issues not yet identified or not yet reported.

The significant assumptions used in the calculation of the weathertight homes provision are as follows:

Amount claimed

Represents the expected amount claimed by the homeowner and is based on the actual amounts for claims already settled.

Settlement amount

Represents the expected amount of awarded settlement and is based on the actual amounts for claims already settled.

Amount expected to be paid by the Council

Represents the amount expected to be paid by the Council out of any awarded settlement amount and is based on the actual amounts for claims already settled. This figure has been increasing over the last few years as it is becoming more common for the other parties involved in a claim to be either in liquidation or bankrupt, or have limited funds and be unable to contribute to settlement.

Timing of claim payments

Represents the expected timing of claim payments based on the expected length of time it takes to settle claims. This assumption is based on experience and the actual timings for claims already settled.

Participation in Financial Assistance Package scheme

The provision for 2013 includes certain actuarial assumptions around the Government’s Financial Assistance Package (FAP). This assumption is based on actual and expected participation rates in the scheme.

Percentage of homeowners who will make a successful claim

Historical data collected on the number of claims lodged has enabled assumptions to be made on the percentage of homes built in the last 10 years which may experience weathertightness problems and therefore the percentage of homeowner who may make a successful claim.

The table below illustrates the potential impact on surplus or deficit of changes in some of the assumptions listed above.

Council and Group 2013
$000
  10% -10%
Assumption Effect on Surplus or Deficit
     
Amount claimed 5,438 (5,439)
Settlement level award 5,438 (5,439)
Council contibution to settlement 5,438 (5,439)
Timing of claim payments 285 (213)
Participation in FAP scheme (2,949) 2,949
Percentage of homeowners who will make a successful claim 774 (774)
Council and Group 2013
$000
  2% -2%
Assumption Effect on Surplus or Deficit
Discount rate (1,894) 2,444

Funding of weathertight homes settlements

Weathertight homes settlements are funded initially through borrowings. To repay those borrowings, the Council has agreed to incrementally increase rates by 0.75% per annum until such time as the weathertight homes liability has been settled and the associated borrowings and funding costs are repaid. To ensure that the funding of weathertight homes is fully transparent the associated settlement costs, borrowings and rates funding is reported annually.

Funding for weathertight homes liability Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance (2,562) - (2,562) -
Funding for weathertight homes liability 3,331 2,221 3,331 2,221
Total amounts paid (4,043) (4,711) (4,043) (4,711)
Interest allocation (168) (72) (168) (72)
         
Closing balance funded through borrowings (3,442) (2,562) (3,442) (2,562)
         

Note 24: Accumulated funds and retained earningsTop


    Council Group
  NOTE 2013
$000
2012
$000
2013
$000
2012
​$000
           
           
Accumulated funds   1,269,134 1,269,134 1,293,162 1,293,162
           
Retained earnings          
Opening balance   3,628,545 3,550,373 3,650,181 3,597,367
Net surplus   28,187 62,186 30,442 49,962
Adjustment for wind-up of St James 40 - 14,577 - -
Adjustment for disposal by associate 41 - - - 1,745
Transfers from revaluation reserves 25 370 25 370 25
Transfers from restricted funds 28 813 1,901 1,293 2,355
Transfers to restricted funds 28 (4,072) (517) (4,639) (1,273)
           
Retained earnings – closing balance   3,653,843 3,628,545 3,677,647 3,650,181
           
Total accumulated funds and retained earnings   4,922,977 4,897,679 4,970,809 4,943,343
           

Note 25: Revaluation reservesTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Land – opening balance 144,672 142,136 144,672 142,136
Revaluation recognised in other comprehensive income - 2,536 - 2,536
Transfer to retained earnings on disposal of assets (370) - (370) -
         
Land – closing balance 144,302 144,672 144,302 144,672
         
Buildings – opening balance 240,462 194,411 240,462 194,411
Revaluation recognised in other comprehensive income - 46,076 - 46,076
Transfer to retained earnings on disposal of assets - (25) - (25)
         
Buildings – closing balance 240,462 240,462 240,462 240,462
         
Library collections – opening balance 7,147 7,147 7,147 7,147
Revaluation recognised in other comprehensive income - - - -
         
Library collections – closing balance 7,147 7,147 7,147 7,147
         
Drainage, waste and water – opening balance 641,549 641,549 641,549 641,549
Revaluation recognised in other comprehensive income - - - -
         
Drainage, waste and water – closing balance 641,549 641,549 641,549 641,549
         
Infrastructure land – opening balance 13,347 13,347 13,347 13,347
Revaluation recognised in other comprehensive income - - - -
         
Infrastructure land – closing balance 13,347 13,347 13,347 13,347
         
Roading – opening balance 370,516 370,516 372,389 372,389
Revaluation recognised in other comprehensive income - - - -
         
Roading – closing balance 370,516 370,516 372,389 372,389
         
Associates' revaluation reserves – opening balance - - 109,934 76,497
Revaluation recognised in other comprehensive income - - - 33,437
Effect of changed shareholding in Chaffers Marina Holdings Limited - - - -
         
Associates' revaluation reserves – closing balance - - 109,934 109,934
         
Total revaluation reserves 1,417,323 1,417,693 1,529,130 1,529,500
         
These revaluation reserves are represented by:        
Opening balance 1,417,693 1,369,106 1,529,500 1,447,476
Revaluation recognised in other comprehensive income - 48,612 - 82,049
Effect of changed shareholding in Chaffers Marina Holdings Limited - - - -
Transfer to retained earnings on disposal of assets (370) (25) (370) (25)
         
Total revaluation reserves – closing balance 1,417,323 1,417,693 1,529,130 1,529,500
         

The revaluation reserves are used to record accumulated increases and decreases in the fair value of land, buildings, the library collection, and drainage, waste, water and roading assets.

The Council did not have any assets revalued during the period ending 30 June 2013 as part of its normal revaluation cycle, except for investment properties as explained in Note 17: Investment properties.

Note 26: Hedging reserveTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance (23,896) (9,173) (24,050) (10,399)
Cash flow hedge net movement recognised in other comprehensive income 14,104 (14,455) 14,104 (14,455)
Cash flow hedge movement reclassified to finance income (163) (268) (163) (268)
Cash flow hedge movement reclassified to share of equity accounted surplus of associate - - 153 1,072
         
Hedging reserve – closing balance (9,955) (23,896) (9,956) (24,050)
         

The hedging reserve shows accumulated fair value changes for interest rate swaps which satisfy the criteria for hedge accounting and have operated as effective hedges during the period. The Group includes the equity accounted net movement in the hedging reserve of our associate, Wellington International Airport Limited.


Note 27: Fair value through other comprehensive income reserveTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Opening balance 154 748 154 748
Fair value adjustment taken to other comprehensive income (61) (594) (61) (594)
         
Fair value through other comprehensive income – closing balance 93 154 93 154
         

This reserve reflects the accumulated fair value movement in the Council’s investment in Civic Assurance, for which there is no intention to sell. See Note 13: Other financial assets – for further information.


Note 28: Restricted fundsTop


    Council Group
  NOTE 2013
$000
2012
$000
2013
$000
2012
​$000
           
           
Special reserves and funds 29 17,553 14,288 20,240 16,888
Trusts and bequests 30 407 413 407 413
           
    17,960 14,701 20,647 17,301
           
Opening balance   14,701 16,085 17,301 18,383
Additional funds   4,072 517 4,639 1,273
Funds utilised   (813) (1,901) (1,293) (2,355)
           
Closing balance   17,960 14,701 20,647 17,301
           

These funds are held by the Council for specific purposes. More detailed information on the Council’s restricted funds is disclosed in Note 29: Special reserves and funds and Note 30: Trusts and bequests.

Note 29: Special reserves and fundsTop


  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Wellington economic initiatives development fund        
Opening balance - - - -
Additional funds 3,000 - 3,000 -
         
Wellington economic initiatives development fund – closing balance 3,000 - 3,000 -
         
Reserve purchase and development fund        
Opening balance 299 1,199 299 1,199
Additional funds received 7 - 7 -
Funds utilised (21) (900) (21) (900)
         
Reserve purchase and development fund – closing balance 285 299 285 299
         
Early Settlers Memorial Park reserve        
Opening balance 23 44 23 44
Funds utilised (20) (21) (20) (21)
         
Early Settlers Memorial Park reserve – closing balance 3 23 3 23
         
Self insurance reserve        
Opening balance 9,723 10,138 9,723 10,138
Additional funds received 750 500 750 500
Funds utilised net of recoveries (451) (915) (451) (915)
         
Self insurance reserve – closing balance 10,022 9,723 10,022 9,723
         
Subsidiaries' resticted funds        
Opening balance - - 2,600 2,298
Additional funds received - - 567 756
Funds utilised - - (480) (454)
         
Subsidiaries' restricted funds – closing balance   - 2,687 2,600
         
Subdivision development reserve 4,119 4,119 4,119 4,119
Other reserves 124 124 124 124
         
Total special reserves and funds – closing balance 17,553 14,288 20,240 16,888
         

Wellington economic initiatives development fund

This fund has been set up to be part of an integrated approach to fostering growth in the economy.

Reserve purchase and development fund

This fund is used to purchase and develop reserve areas within the city. The funds were utilised for the costs associated with the purchase of reserve land on Te Ahumairangi (Tinakori) Hill and the Kinnoull Station.

Early Settlers Memorial Park reserve

This reserve is used to upgrade and maintain the Bolton Street Cemetery and surrounding park and walkways.

Self-insurance reserve

This reserve came into effect in 2001 and allows the Council to meet the uninsured portion of insurance claims. Annual additions to the reserve of $0.750m (2012: $0.500m) are funded through rates as identified in the Annual Plan.

Subsidiaries’ restricted funds

The restricted funds of the subsidiaries relate to the Wellington Museums Trust and the Wellington Zoo Trust:

Note 30: Trusts and bequestsTop


Council Opening
Balance
Additional
Funds
Funds
Utilised
Closing
Balance
  2013
$000
2013
$000
2013
$000
2013
$000
         
         
A Graham Trust 2 1 - 3
A W Newton Bequest 272 14 - 286
Charles Plimmer Bequest - 298 (298) -
E A McMillan Estate 6 - - 6
E Pengelly Bequest 11 1 - 12
F L Irvine Smith Memorial 6 - - 6
Greek NZ Memorial Association 5 - - 5
Kidsarus 2 Donation 3 - - 3
Kirkcaldie and Stains Donation 17 - - 17
Lewis Glover Bequest - - - -
QEII Memorial Book Fund 19 1 - 20
Schola Cantorum Trust 6 - - 6
Stanley Banks Trust 31 - (12) 19
Terawhiti Grant 10 - - 10
W G Morrison Estate 11 - (11) -
Wellington Beautifying Society Bequest 14 - - 14
         
Total trusts and bequests 413 315 (321) 407
         

Analysis of movements in trusts and bequests

Additional funds

Trusts and bequests receiving additional funds during the year were those where interest has been applied in accordance with the original terms and conditions.

Charles Plimmer – Distributions through the Public Trust recognised as income – $298,000

Funds utilised

Trusts and bequests funds utilised during the year were:

Other than those specific trusts and bequests discussed above, the others are generally provided for library, educational or environmental purposes.

Note 31: Financial InstrumentsTop


The following tables provide an analysis of the Council’s financial assets and financial liabilities by reporting category as described in the summary of accounting policies:

  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Financial assets        
         
Loans and receivables        
Cash and cash equivalents 44,389 22,622 50,518 26,912
Trade and other receivables 49,556 54,333 52,047 56,216
Other financial assets 5,866 5,161 6,266 6,681
Total loans and receivables 99,811 82,116 108,831 89,809
         
Financial assets at fair value through other comprehensive income        
Other financial assets 2,503 2,681 2,903 4,201
Total financial assets at fair value through other comprehensive income 2,503 2,681 2,903 4,201
         
Hedged derivative financial instruments        
Derivatives designated as fair value hedges 3,689 1,057 3,689 1,057
Total hedged derivative financial instruments 3,689 1,057 3,689 1,057
         
Total financial assets 106,003 85,854 115,423 95,067
Total non-financial assets 6,805,315 6,753,683 6,965,931 6,911,297
         
Total assets 6,911,318 6,839,537 7,081,354 7,006,364
         
Financial liabilities        
         
Financial liabilities at amortised cost        
Trade and other payables 58,575 53,847 62,982 57,345
Borrowings 388,330 361,618 388,340 361,631
Total financial liabilities at amortised cost 446,905 415,465 451,322 418,976
         
Derivative financial instruments        
Derivatives designated as cash flow hedges 13,235 24,059 13,235 24,059
Total derivative financial instruments 13,235 24,059 13,235 24,059
         
Financial liabilities at fair value through surplus/deficit        
Derivative financial instruments - 222 - 222
Total financial liabilities at fair value through surplus/deficit - 222 - 222
         
Total financial liabilities 460,140 439,746 464,557 443,257
Total non-financial liabilities 102,780 93,460 106,074 96,859
         
Total liabilities 562,920 533,206 570,631 540,116
         

Fair value

The fair values of all financial instruments equate to the carrying amount recognised in the Statement of Financial Position.

Fair value hierarchy

For those financial instruments recognised at fair value in the Statement of Financial Position, the fair values are determined according to the following hierarchy:

Council and Group 2013 2012
  Level 1
$000
Level 2
$000
Level 3
$000
Level 1
$000
Level 2
$000
Level 3
$000
             
Financial assets            
Financial assets at fair value through other comprehensive income - - 2,503 - - 2,681
             
Derivative financial instruments            
- fair value hedges - 409 - - 1,057 -
- cash flow hedges - 3,280 - - - -
             
Financial liabilities            
Derivative financial instruments            
- cash flow hedges - 13,235 - - 24,059 -
- non-hedged swaps - - - - 222 -
             
Reconciliation of fair value movements in Level 3 Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Financial assets at fair value through other comprehensive income        
- Equity investments        
         
Opening balance - 1 July 2,681 1,275 2,681 1,275
Purchases - 2,000 - 2,000
Disposals (117) - (117) -
Gains or losses recognised in other comprehensive income (61) (594) (61) (594)
         
Closing balance - 30 June 2,503 2,681 2,503 2,681
         

Financial risk management

As part of its normal operations, the Group is exposed to a number of risks. The most significant are credit risk, liquidity risk and market risk, which includes interest rate risk. The Group’s exposure to these risks and the action that the Group has taken to minimise the impact of these risks is outlined below:

Credit risk

Credit risk is the risk that a third party will default on its obligations to the Group, thereby causing a financial loss. The Group is not exposed to any material concentrations of credit risk other than its exposure within the Wellington region. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the Statement of Financial Position and the face value of financial guarantees to related parties (refer Note 37: Contingencies). There is currently no liability recognised for these guarantees as the Group does not expect to be called upon for payment.

The Group’s maximum exposure to credit risk at the end of the reporting period is:

  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Financial instruments with credit risk        
         
Cash and cash equivalents 44,284 22,574 50,403 26,853
         
Derivative financial instrument assets 3,689 1,057 3,689 1,057
         
Trade and other receivables        
- Trade receivables 15,482 13,627 16,609 14,941
- Other receivables 34,074 40,706 35,438 41,275
         
Other financial assets        
- Bank deposits – term - - 400 1,520
- LGFA borrower notes 480 240 480 240
- Loans to related parties – associates 1,407 1,248 1,407 1,248
- Loans to related parties – other organisations 3,979 3,673 3,979 3,673
         
Financial guarantees to related parties 700 800 700 800
         
Total financial instruments with credit risk 104,095 83,925 113,105 91,607
         

Receivables balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

The Council is exposed to credit risk as a guarantor of the LGFA’s borrowings. Further information about this exposure is explained in Note 37: Contingencies.

Credit quality of financial assets

The credit quality of financial assets that are neither past due or impaired can be assessed by reference to Standard and Poor’s credit ratings.

Counterparties with credit ratings Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Cash – registered banks        
AA- 7,284 2,574 10,105 5,266
         
Short term deposits – registered banks        
AA- 36,000 20,000 38,970 21,587
A+ 1,000 - 1,328 -
         
Term deposits – registered banks        
AA- - - 400 1,520
         
Term deposits – borrower notes – LGFA        
AA+ 480 240 480 240
         
Derivative financial instrument assets        
AA- 3,689 1,057 3,689 1,057
         

Liquidity risk

Liquidity risk refers to the situation where the Group may encounter difficulty in meeting obligations associated with financial liabilities. The Group maintains sufficient funds to cover all obligations as they fall due. Facilities are maintained in accordance with the Council’s Liability Management Policy to ensure the Group is able to access required funds.

Contractual maturity

The following maturity analysis sets out the contractual cash flows for all financial liabilities that are settled on a gross cash flow basis. Contractual cash flows for financial liabilities include the nominal amount and interest payable.

  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Contractual cash flows of financial liabilities excluding derivatives        
0–12 months 224,791 192,578 229,832 196,079
1–2 years 39,429 65,023 38,804 65,027
2–5 years 176,441 154,421 176,444 154,430
More than 5 years 46,526 37,167 46,526 37,167
Total contractual cash flows of financial liabilities excluding derivatives 487,187 449,189 491,606 452,703
         
Represented by:        
Carrying amount as per the Statement of Financial Position 446,905 415,465 451,322 418,976
Future interest payable 40,282 33,724 40,284 33,727
Total contractual cash flows of financial liabilities excluding derivatives 487,187 449,189 491,606 452,703
         

The following maturity analysis sets out the contractual cash flows for all financial liabilities that are settled on a net cash flow basis. Contractual cash flows for derivative financial liabilities are the future interest payable.

  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Contractual cash flows of derivative financial liabilities        
0–12 months 6,612 6,894 6,612 6,894
1–2 years 4,310 5,946 4,310 5,946
2–5 years 3,998 11,304 3,998 11,304
More than 5 years 39 1,653 39 1,653
Total contractual cashflow of derivative financial liabilities 14,959 25,797 14,959 25,797
         
Represented by:        
Future interest payable 14,959 25,797 14,959 25,797
Total contractual cash flows of derivative financial liabilities 14,959 25,797 14,959 25,797
         

In addition to cash to be received in 2013/14 the Council currently has $145m in unused committed bank facilities available to settle obligations as well as $77.7m of cash, cash equivalents and receivables and is expected to have sufficient cash to meet all contractual liabilities as they fall due.

The Council is exposed to liquidity risk as a guarantor of all of LGFA’s borrowings. This guarantee becomes callable in the event of the LGFA failing to pay its obligations when they fall due. Information about this exposure is explained in Note 37: Contingencies.

The Council mitigates exposure to liquidity risk by managing the maturity of its borrowings programme within the following maturity limits:

Period Minimum Maximum Actual
0 – 3 years 20% 60% 60%
3 – 5 years 20% 60% 21%
More than 5 years 15% 60% 19%

Market risk

Market risk is the risk that the value of an investment will decrease or a liability will increase due to changes in market conditions. The Group uses interest rate swaps in the ordinary course of business to manage interest rate risks. A Treasury Committee, headed by senior management personnel, provides oversight for financial risk management and derivative activities and ensures any activities are in line with the Liability Management Policy which is formally approved by the Council as part of the Long-term Plan (LTP).

Cash flow and fair value interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will decrease due to changes in market interest rates. The Group is exposed to interest rate risk from its interest-earning financial assets and interest-bearing financial liabilities. The Group is risk averse and seeks to minimise exposure arising from its borrowing activities primarily by entering into interest rate swap arrangements to fix interest rates on its borrowings.

The Group manages its cash flow interest rate risk by using interest rate swaps. These have the economic effect of converting borrowings from floating rates to fixed rates. The Council uses interest rate swaps to maintain a required ratio of borrowing between fixed and floating interest rates as specified in the liability management policy:

Minimum fixed rate Maximum fixed rate Actual % of fixed debt prior interest rate swaps Actual % of fixed debt after interest rate swaps
50% 95% 12% 76%

The table below shows the effect of the interest rate swaps at reducing the Council’s exposure to interest rate risk:

  Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Financial instruments subject to interest rate volatility – before effect of interest rate swaps        
Cash and cash equivalents 44,389 22,622 50,518 26,912
Bank facilities short term - (2,000) - (2,000)
Bank loans (3,035) (1,242) (3,035) (1,242)
Commercial paper (100,000) (100,000) (100,000) (100,000)
Debt securities floating rate notes (244,000) (212,000) (244,000) (212,000)
Total financial instruments subject to interest rate volatility – before effect of interest rate swaps (302,646) (292,620) (296,517) (288,330)
         
Effect of interest rate swaps in reducing interest rate volatility        
Effect of fair value hedge (25,000) (34,000) (25,000) (34,000)
Effect of cash flow interest rate swaps hedged 277,000 290,000 277,000 290,000
Effect of cash flow interest rate swaps  non-hedged - 10,000 - 10,000
         
Total effect of interest rate swaps in reducing interest rate volatility 252,000 266,000 252,000 266,000
         
Total financial instruments subject to interest rate volatility – after effect of interest rate swaps (50,646) (26,620) (44,517) (22,330)
         

These interest rate swaps have a nominal value which represents the value of the debt they are covering (included above). This amount is not recorded in the financial statements; instead the fair value of these interest rate swaps is recognised. This represents the difference between the current floating interest rate and the fixed swap interest rate. At 30 June 2013 the fair value of the interest rate swaps was -$9.546m (2012: -$23.224m). This liability will reduce to zero as the swaps reach the end of their lives, and therefore do not represent a liability that the Council will be required to pay cash to settle.

Given that the interest rate swaps have terms that match with the borrowings (short term bank facilities, commercial paper and debt securities), it is appropriate to include the effect of the interest rate swaps on the borrowings interest rate and present the net effective interest rates for the underlying borrowings:

Weighted effective interest rates Council Group
  2013
%
2012
%
2013
%
2012
%
         
Investments        
Cash and cash equivalents 3.18 3.45 3.17 3.24
Bank deposits – term - - 4.25 4.40
LGFA – borrower notes 3.35 3.37 3.35 3.37
Loans to related parties - - - -
         
Borrowings        
Bank facilities – short term - 3.70 - 3.70
Bank loans 7.00 7.00 7.00 7.00
Commercial paper 2.78 2.81 2.78 2.81
Debt securities 3.50 4.05 3.50 4.05
Derivative financial instruments – hedged 5.00 5.01 5.00 5.01
Derivative financial instruments – non-hedged - 6.31 - 6.31
Finance leases 10.28 10.32 10.29 10.34
         

Loans to related parties, being the loans to the Wellington Regional Stadium Trust and to the Karori Wildlife Sanctuary Trust, are both on interest free terms.

Sensitivity analysis

While the Council has significantly reduced the impact of short-term fluctuations on the Group’s earnings through interest rate swap arrangements, there is still some exposure to changes in interest rates.

The tables below illustrate the potential surplus and deficit impact of a 1% change in interest rates based on the Council’s and the Group’s exposures at the end of the reporting period:

Council   2013
$000
    +1% -1% +1% -1%
Interest rate risk Note Effect on
Surplus or Deficit
Effect on
Other Comprehensive Income
           
Financial assets          
Cash and cash equivalents – Council a 444 (444) - -
LGFA – Borrower notes   5 (5) - -
Derivatives – interest rate swaps – hedged b - - 126 127
           
Financial liabilities          
Bank term loans   (30) 30 - -
Commercial paper c (180) 180 - -
Debt securities d (1,040) 1,040 - -
Derivatives – interest rate swaps – hedged b - - 16,833 (18,046)
           
Total sensitivity to interest rate risk   (801) 801 16,959 (17,919)

a. Cash and cash equivalents

Council funds are in a number of different registered bank accounts with interest payable on the aggregation of all accounts. A movement in interest rates of plus or minus 1% has an effect on interest income of $0.444m.

b. Derivatives – interest rate swaps

Derivatives include interest rate swaps with a fair value totalling -$9.546m. A movement in interest rates of plus 1% has an effect on increasing the unrealised value of the hedged interest rate swaps by $16.959m. A movement in interest rates of minus 1% has an effect on reducing the unrealised value of the hedged interest rate swaps by $17.919m.

c. Commercial paper

Commercial paper is part of a programme and subject to floating rates and totals $100m. The full exposure to changes in interest rates has been reduced because the Council has $82m of the debt at fixed rates through interest rate swaps. A movement in interest rates of plus or minus 1% has an effect on the interest expense of $0.180m.

d. Debt securities

Debt securities at floating rates total $244m. The full exposure to changes in interest rates has been reduced because the Council has $195m of this debt at fixed rates through interest rate swaps. Debt securities at fixed rates total $40m of which $25m is subject to changes in interest rates as it has been swapped to floating through interest rate swaps. A movement in interest rates of plus or minus 1% has an effect on the interest expense of $1.040m.

Equity management

The Group’s equity includes accumulated funds and retained earnings, revaluation reserves, a hedging reserve, a fair value through other comprehensive income reserve and restricted funds which comprise special funds, reserve funds and trusts and bequests.

The Local Government Act 2002 (the Act) requires the Council to manage its revenues, expenses, assets, liabilities, investments, and general financial dealings prudently and in a manner that promotes the current and future interests of the community. Ratepayer funds are largely managed as a by-product of managing revenues, expenses, assets, liabilities, investments, and general financial dealings.

The objective of managing these items is to achieve intergenerational equity, which is a principle promoted in the Act and applied by the Council. Intergenerational equity requires today’s ratepayers to meet the costs of utilising the Council’s assets but does not expect them to meet the full cost of long-term assets that will benefit ratepayers in future generations. Additionally, the Council has asset management plans in place for major classes of assets, detailing renewal and programmed maintenance. These plans ensure ratepayers in future generations are not required to meet the costs of deferred renewals and maintenance.

The Act requires the Council to make adequate and effective provision in its Long-term Plan and in its Annual Plan (where applicable) to meet the expenditure needs identified in those plans. The Act sets out the factors that the Council is required to consider when determining the most appropriate sources of funding for each of its activities. The sources and levels of funding are set out in the funding and financial policies in the Council’s LTP.

Note 32: Analysis of Operating Surplus by Strategic AreaTop


This analysis by strategic area is a summary of the ‘what it cost’ information within the Statements of Service Performance. Refer to pages 14 to 74 for more detailed information including variance explanations in respect of the Council’s strategies and activities.

Operating Income and Expenditure

Council Income Expenditure Net Net
  Actual
2013
$000
Budget
2013
$000
Actual
2013
$000
Budget
2013
$000
Actual
2013
$000
Budget
2013
$000
Variance
2013
$000
               
Strategic area              
               
Governance 475 384 14,993 15,287 (14,518) (14,903) 385
Environment 21,732 14,897 140,030 140,022 (118,298) (125,125) 6,827
Economic development 14,835 - 33,033 19,404 (18,198) (19,404) 1,206
Cultural wellbeing 1,115 1,047 17,938 17,898 (16,823) (16,851) 28
Social and recreation 63,707 70,642 96,694 97,468 (32,987) (26,826) (6,161)
Urban development 19,725 10,684 36,453 25,777 (16,728) (15,093) (1,635)
Transport 34,385 33,400 50,713 53,737 (16,328) (20,337) 4,009
               
Total strategic areas 155,974 131,054 389,854 369,593 (233,880) (238,539) 4,659
               
Council 290,441 285,552 28,374 9,587 262,067 275,965 (13,898)
               
Total strategic areas and Council 446,415 416,606 418,228 379,180 28,187 37,426 (9,239)
               

The variance in Governance is due to savings arising from personnel vacancies during the year.

The variance in Environment is due to the recognition of unbudgeted vested asset income ($6.3m) for water, stormwater and sewerage pipes and fittings. The variance was also impacted by a favourable movement in the closed landfill provision offset by the need to provide for unbudgeted clean-up costs relating to the June storm.

The variance in Economic Development is due to the receipt of unbudgeted sub-tenant revenue upon the transition of St James Trust assets to Council, as well as lower depreciation than budgeted as a result of the 2011/12 asset revaluation process.

The variance in Social and Recreation is due to less capital funding being recognised as costs on the Berkeley Dallard flats upgrade are occurring later than anticipated in the budget. In addition we have received less revenue than expected particularly from swimming pools.

The variance in Urban Development relates to the unbudgeted $3m contribution towards the National War Memorial Park as approved by Council on 26 September 2012 and the consolidation of Wellington Waterfront Project with an increase in depreciation and insurance costs.

The variance in Transport is due to the recognition of unbudgeted vested asset income ($3.6m) for roading land, roads, footpaths and curb and channel. Depreciation for roading assets was also lower than budgeted ($0.4m).

The variance in Council is due to a number of factors including a higher than budgeted Wellington International Airport Limited dividend income and commercial lease revenue received offset by reduced rates revenue and development contributions. There is also an increase in the provision for weathertight homes.

Other major operating income and expenditure budget variances are explained within Note 33: Major budget variations.

Council Income Expenditure Net Net
  Actual
2012
$000
Budget
2012
$000
Actual
2012
$000
Budget
2012
$000
Actual
2012
$000
Budget
2012
$000
Variance
2012
$000
               
Strategic area              
               
Governance 459 398 15,211 15,998 (14,752) (15,600) 848
Environment 23,136 13,091 136,433 133,295 (113,297) (120,204) 6,907
Economic development 14,228 248 32,687 16,731 (18,459) (16,483) (1,976)
Cultural wellbeing 925 1,042 16,792 16,826 (15,867) (15,784) (83)
Social and recreation 81,223 78,030 97,933 97,367 (16,710) (19,337) 2,627
Urban development 17,006 11,164 29,223 25,035 (12,217) (13,871) 1,654
Transport 31,420 33,430 49,830 54,301 (18,410) (20,871) 2,461
               
Total strategic areas 168,397 137,403 378,109 359,553 (209,712) (222,150) 12,438
               
Council 296,935 281,427 25,037 8,129 271,898 273,298 (1,400)
               
Total strategic areas and Council 465,332 418,830 403,146 367,682 62,186 51,148 11,038
               

Due to a realignment of some activities within the above strategic areas the results for the 2012 year above have changed slightly from those previously published so that they are directly comparable with the 2013 results.

Note 33: Major budget variationsTop


Statement of Comprehensive Financial Performance Council Council
  2013
$000
2012
$000
     
Reconciliation of actual surplus to underlying surplus and variance to budget  
     
Council actual net surplus 28,187 62,186
     
Less:    
Fair value movements:    
Related party loans - 1,002
Investment property revaluation (5,385) 3,418
Other (298) (534)
Total fair value movements (5,683) 3,886
     
Additional net expenditure from Wellington Waterfront and Venues Projects and Porirua Joint Ventures 6,764 3,678
     
Changes to external funding for capital expenditure:    
Restricted funds income (72) 196
Decrease in development contributions revenue 644 2,319
Timing of the Housing New Zealand capital grant 6,513 (5,348)
Change in New Zealand Transport Agency reimbursement – capital (139) 1,601
Additional external funding towards capital projects (271) (849)
Total changes to external funding for capital expenditure 6,675 (2,081)
     
Vested assets – income (10,519) (7,163)
Gain on disposal of assets (360) (6,701)
Loss on disposal of assets and intangible assets 1,487 230
     
Expenditure not funded under section 100 of LGA    
NZTA funded transport projects (31) (1,772)
Moa Point Treatment Plant and Living Earth (517) (25)
Total additional expenditure not funded under section 100 of LGA (548) (1,797)
     
Underlying Council actual net surplus 26,003 52,238
less Council budget net surplus 37,426 51,148
Council underlying variance (11,423) 1,090
     
     
Major budget variations    
     
Unbudgeted revenue/expenditure:    
Restatement of weathertight homes provision (14,965) (9,903)
Provision for storm costs (855) -
Insurance costs (net of recoveries) funded through self insurance reserve (451) (915)
Total unbudgeted revenue/expenditure (16,271) (10,818)
     
Significant variations from budget    
Dividends in excess of budget (including Wellington International Airport Limited) 1,624 13,138
Decrease in income from activities (3,276) (2,366)
Decrease in depreciation 2,820 507
Decrease in rates revenue (2,228) 134
Decrease in net interest expense 1,997 986
Other net variances27 2,039 359
Total significant variations from budget 2,976 12,758
Council underlying variance excluding ringfenced amounts (13,295) 1,940
     
Variance in ringfenced City Housing deficit 505 (1,581)
Variance in ringfenced Waste Activity surplus   731
Council underlying variance (11,423) 1,090
     

Statement of Changes in Equity

Significant variations from budgeted changes in equity are as follows:

Total equity is $18.981m higher than budgeted due to the $4.702m of variations above, plus a $13.908m higher opening position due to annual plan timing.


Statement of Financial Position

Significant variations from budget are as follows:

Current assets are $45.815m higher than budget primarily due to:

Non-current assets are $23.922m higher than budget primarily due to:

Total liabilities are $50.756m higher than budget due to:


Statement of Cash Flows

Significant variations from budget are as follows:

Note 34: Analysis of capital expenditure by strategic areaTop


This analysis reports capital expenditure performance against the approved budget contained within the Annual Plan by strategic area. The note reflects Wellington City Council capital expenditure only.

Council Annual Plan Budget Budget Brought Forward from Total Capex Budget Budget to Carry Forward to Available Capex Budget Actual Capex Variance Net
  2013
$000
2012
$000
2013
$000
2014
$000
2013
$000
2013
$000
2013
$000
               
Strategic area              
               
Governance - 31 31 - 31 19 12
Environment 27,186 5,254 32,440 (5,467) 26,973 26,963 10
Economic development 5,494 1,736 7,230 (3,531) 3,699 3,313 386
Cultural wellbeing 40 - 40 - 40 10 30
Social and recreation 47,075 8,057 55,132 (13,239) 41,893 41,091 802
Urban development 9,545 2,979 12,524 (2,897) 9,627 11,726 (2,099)
Transport 32,258 8,473 40,731 (1,655) 39,076 39,803 (727)
               
Total strategic areas 121,598 26,530 148,128 (26,789) 121,339 122,925 (1,586)
               
Council 14,539 5,032 19,571 (5,954) 13,617 11,192 2,425
               
Total capital expenditure 136,137 31,562 167,699 (32,743) 134,956 134,117 839
               
               
Excluding additional expenditure funded from external sources:
Zoo Trust – Contribution 461
Trench Sharing – Wellington Electricity Lines Limited 109
Track Maintenance – Spicer Forest 99
The Nest Te Kōhanga – Zoo Trust 82
Town Belt Maintenance – Max Drake 50
Willis Street – Wellington Electricity Lines Limited 31
Ross Street – Wellington City Transport Limited   18
ASB Sports Centre – Four Winds 15
Karori Recreation Centre – Energy Efficiency and Conservation Authority 8
Minor funding for capital works 2
               
Total adjusted net variance 1,714

The capex variance of $0.839m has been adjusted for additional external funding received over and above budget.

Budget to carry forward

Amounts committed for future expenditure at end of the reporting period from within these capital expenditure budget carry forwards have been included within Note 36: Commitments.

Significant acquisitions and replacements of assets

In accordance with the provisions of Schedule 10 of the Local Government Act 2002, information in respect of significant acquisitions and replacements of assets is reported within the Statements of Service Performance.

Council Annual Plan Budget Budget Brought Forward from Total Capex Budget Budget to Carry Forward to Available Capex Budget Actual Capex Variance Net
  2012
$000
2011
$000
2012
$000
2013
$000
2012
$000
2012
$000
2012
$000
               
Strategic area              
               
Governance - 31 31 (31) - - -
Environment* 30,610 4,208 34,818 (5,254) 29,564 30,716 (1,152)
Economic development 2,201 332 2,533 (1,736) 797 212 585
Cultural wellbeing 43 232 275 - 275 261 14
Social and recreation 58,967 9,287 68,254 (8,057) 60,197 66,063 (5,866)
Urban development 6,688 3,197 9,885 (2,979) 6,906 7,337 (431)
Transport 38,781 7,553 46,334 (8,473) 37,861 38,307 (446)
               
Total strategic areas 137,290 24,840 162,130 (26,530) 135,600 142,896 (7,296)
               
Council 16,230 3,839 20,069 (5,032) 15,037 11,324 3,713
               
Total capital expenditure 153,520 28,679 182,199 (31,562) 150,637 154,220 (3,583)
               
       
* The budget carry forward for 2011/12 includes a carry forward from 2008/09      
               
Excluding additional expenditure funded from external sources:  
Zoo Trust – Contribution 435
Housing Grant – accrued income 5,348
Waste Activity surplus for capital works 450
Khandallah Town Hall – Cornerstone Trust 157
Indoor Community Sports Centre – NZCT SPARC funding 940
Cobblestone Light Box – Victoria University 17
Willis Street – Citylink 131
Wakefield Park – Lotteries funding 200
Minor funding for capital works 12
               
Total adjusted net variance 4,107

Note 35: Capital expenditure performanceTop


Capital expenditure projects

The following analysis shows the actual capital expenditure against budget. Projects are classified according to the strategic area. Detailed commentaries on each strategic area, activity and the outcomes that they contribute towards are contained in each strategic section of the Statements of Service Performance.

  Actual Expenditure28 Proposed Budget Carry Forward29 Total Forecast Expenditure Budget30 Notes
  2013
$000
2013
$000
2013
$000
2013
$000
 
           
Governance          
City governance and engagement 19 - 19 31  
Total Governance 19 - 19 31  
           
Environment          
Local parks and open spaces 894 551 1,445 1,476  
Botanical gardens 1,065 320 1,385 1,438  
Water network 12,170 397 12,567 12,387  
Sewage collection and disposal network 6,882 831 7,713 7,948 1
Stormwater management 2,564 1,208 3,772 3,792  
Conservation visitor attractions 2,144 1,177 3,321 3,240  
Other 1,244 983 2,227 2,159  
Total Environment 26,963 5,467 32,430 32,440  
           
Economic development          
Visitor attractions and Convention venues 3,313 3,531 6,844 7,230 2
Total Economic development 3,313 3,531 6,844 7,230  
           
Cultural Wellbeing          
Other 10 - 10 40  
Total Cultural wellbeing 10 - 10 40  
           
Social and recreation          
Swimming Pools 4,054 6,272 10,326 10,079 3
Sportsfields 1,375 34 1,409 1,413  
Libraries 1,995 - 1,995 1,993  
Housing 31,744 6,634 38,378 39,510 4
Public toilets 734 150 884 885  
Other 1,189 149 1,338 1,252  
Total Social and recreation 41,091 13,239 54,330 55,132  
           
Urban development          
Urban planning and policy 967 527 1,494 1,494  
Waterfront development 6,307 418 6,725 4,460 5
Public spaces and centres development 2,259 1,330 3,589 3,551  
Earthquake risk mitigation – built environment 2,193 622 2,815 3,019 6
Total Urban development 11,726 2,897 14,623 12,524  
           
Transport          
Vehicle network 27,675 1,465 29,140 28,327 7
Cycle network 1,353 190 1,543 1,543  
Passenger transport network 1,033 - 1,033 1,013  
Pedestrian network 4,674 - 4,674 4,811  
Network-wide control and management 2,526 - 2,526 2,519  
Road safety 2,542 - 2,542 2,518  
Total Transport 39,803 1,655 41,458 40,731  
           
Council          
Organisational projects including IT 11,192 5,954 17,146 19,571  
Total Council 11,192 5,954 17,146 19,571  
           
Total capital expenditure projects 134,117 32,743 166,860 167,699  
           
  1. Savings achieved on several sewer renewal projects, and a change in approach in addressing bypass flows has resulted in savings in costs relating to the earlier proposed UV treatment upgrade.
  2. Savings identified on deferred maintenance costs.
  3. The cost of the new hydrotherapy pool at the Wellington Regional Aquatic Centre and the new teaching pool at the Karori pool were slightly ahead of budget.
  4. Savings on renewals and upgrade projects.
  5. In October 2012 the Council approved an additional $2.9m of capital spend for the strengthening of Shed 6 wharf.
  6. Savings relating to the Mayor’s office relocation.
  7. Increased costs on the Westchester Drive due to time delays experienced and required variations. Additional costs are offset by higher than budgeted external capital revenue received for the project in 2011/12.

Note 36: CommitmentsTop


Capital commitments Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Approved and contracted – property, plant and equipment 48,790 63,935 51,775 63,935
Approved and contracted – investment properties 35 6,940 35 6,940
Approved and contracted – intangibles 1,400 821 1,400 821
Approved and contracted – share of associates - - 5,745 2,400
Approved and contracted – share of joint ventures - - - -
         
Total capital commitments 50,225 71,696 58,955 74,096
         

The capital commitments above often span more than one financial year and includes the capital expenditure carried forward from Note 34: Analysis of capital expenditure by strategic area, which forms only part of the total commitments shown.

Operating leases – Group as lessee

The Group leases certain items of plant, equipment, land and buildings under various non-cancellable operating lease agreements.

The lease terms are between two and 21 years and the majority of the lease agreements are generally renewable at the end of the lease period at market rates.

The amount of minimum payments for non-cancellable operating leases is recognised as an expense in Note 6: Expenditure on operating activities.

The future expenditure committed by these leases is analysed as follows:

Non-cancellable operating lease commitments as lessee Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Plant and equipment        
Not later than one year 22 194 154 345
Later than one year and not later than five years 8 17 172 219
Later than five years - - - -
         
Land and buildings        
Not later than one year 981 1,909 1,263 2,328
Later than one year and not later than five years 2,135 3,763 2,392 4,218
Later than five years 1,398 1,760 1,398 1,760
         
Total non-cancellable operating lease commitments as lessee 4,544 7,643 5,379 8,870
         

Operating leases – Group as lessor

The Group has also entered into commercial property leases of its investment property portfolio and other land and buildings.

The land and buildings held for investment purposes are properties which are not held for operational purposes and are leased to external parties.

Ground leases are parcels of land owned by the Group in the central city or on the waterfront that are leased to other parties who own the buildings situated on the land. The leases are generally based on 21-year perpetually renewable terms. As these parcels of land are held for investment purposes the rentals are charged on a commercial market basis.

The land and buildings not held for investment purposes are either used to accommodate the Group’s operational activities or are held for purposes such as road widening, heritage, or are being monitored for compliance reasons. In some cases, parts of these assets are leased to external parties on a commercial basis. The terms of these commercial leases generally range from one to 15 years.

The committed revenues expected from these lease portfolios are analysed as follows:

Non-cancellable operating lease commitments as lessor Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
Investment properties        
Not later than one year 9,344 9,755 9,344 9,755
Later than one year and not later than five years 36,280 36,430 36,280 36,430
Later than five years 89,994 97,720 89,994 97,720
         
Land and buildings        
Not later than one year 2,158 4,848 1,070 3,787
Later than one year and not later than five years 4,246 9,326 1,045 5,115
Later than five years 4,150 11,238 4,150 11,146
         
Total non-cancellable operating lease commitments as lessor 146,172 169,317 141,883 163,953
         

Commitments to related parties

The Council and Group have no commitments to key management personnel beyond normal employment obligations.

The Council has commitments to its subsidiaries and associates only to the extent of the expenditure approved in the Long-term Plan for the period ending 30 June 2014. Other expenditure approved as part of the Long-term Plan for the period from 1 July 2014 to 30 June 2022 is subject to change and approval each year through the Annual Plan.

Council Annual Plan LTP Total
  2013/14
$000
2015–2022
$000

$000
       
Subsidiaries      
Wellington Waterfront 1,076 8,605 9,681
Wellington Zoo Trust 2,715 22,392 25,107
Wellington Museums Trust 7,710 61,682 69,392
Positively Wellington Tourism 7,375 56,041 63,416
Carter Observatory 300 2,400 2,700
Wellington Venues - 819 819
Total subsidiary commitments 19,176 151,939 171,115
       
Associates      
Basin Reserve Trust 355 2,840 3,195
Total associate commitments 355 2,840 3,195
       
Other related parties      
Karori Wildlife Sanctuary Trust 875 875 1,750
Total other related party commitments 875 875 1,750
       
Total related party commitments 20,406 155,654 176,060
       

Note 37: ContingenciesTop


Contingent liabilities Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Financial guarantees to community groups 700 800 700 800
Uncalled capital – LGFA 1,883 2,000 1,883 2,000
Other legal proceedings 172 280 172 280
Share of associates' contingent liabilities - - - -
Share of joint ventures' contingent liabilities - - - -
         
Total contingent liabilities 2,755 3,080 2,755 3,080
         

The financial guarantees to community groups above are analysed below:

Outstanding debt subject to Council guarantees Council Group
  2013
$000
2012
$000
2013
$000
2012
​$000
         
         
Karori Wildlife Sanctuary Trust 700 800 700 800
         
Total outstanding debt subject to Council guarantees 700 800 700 800
         

Karori Wildlife Sanctuary Trust (Zealandia)

The Council has provided a guarantee over a term loan facility to a maximum limit of $1.550m plus any outstanding interest and enforcement costs.

NZ Local Government Funding Agency Limited (LGFA)

The Council is one of 30 local authority shareholders and 8 local authority guarantors of the LGFA. In that regard the Council has uncalled capital of $1.866m. When aggregated with the uncalled capital of other shareholders, $20m is available in the event that an imminent default is identified. Also, together with the other shareholders and guarantors, Council is a guarantor of all of LGFA’s borrowings. At 30 June 2013, LGFA had borrowings totalling $2,422m (2012: $835m).

Financial reporting standards require the Council to recognise the guarantee liability at fair value. However, the Council has been unable to determine a sufficiently reliable fair value for the guarantee, and therefore has not recognised a liability. The Council considers the risk of LGFA defaulting on repayment of interest or capital to be very low on the basis that we are not aware of any local authority debt default events in New Zealand; and local government legislation would enable local authorities to levy a rate to recover sufficient funds to meet any debt obligations if further funds were required.

Other legal proceedings

Other legal proceedings are current claims against the Council and Group as a result of past events which are currently being contested. The amounts shown reflect potential liability for financial reporting purposes only and do not represent an admission that any claim is valid. The outcome of these remains uncertain at the end of the reporting period. The maximum exposure to Council is anticipated to be less than $0.172m.

Unquantified contingent liabilities

The Government’s Weathertight Homes Financial Assistance Package aims to help people get their non-weathertight homes fixed faster, and centres on the Government and local authorities each contributing 25% of agreed repair costs and affected homeowners funding the remaining 50% backed by a Government loan guarantee. The impact that this package will have on future claim numbers and the quantum of those claims remains unknown at this stage since the scheme is still in its early stage. A provision for known claims and future claims has been made (refer Note 23: Provisions for other liabilities), but there may be an uplift in the number of claims as a result of the Government package. The impact and cost of this potential uplift in claims is unknown at this stage and cannot be measured reliably and therefore the Council and Group have an unquantified contingent liability.

On 11 October 2012 the Supreme Court of New Zealand released a decision clarifying that councils owe a duty of care when approving plans and inspecting construction of a building which was not purely a residential building. The Court held that there was no principled basis for distinguishing between the liability of those who played a role in the construction of residential buildings as against the construction of non-residential buildings. This extends the scope of the potential liability for the Council to include non-residential buildings consented under the Building Act 1991.

Through the process of working with our actuaries, it has been identified that due to a lack of historical and current information relating to non-residential building claims, a reliable estimate of any potential liability cannot be quantified at this time.

There are various other claims that the Council and Group are currently contesting which have not been quantified due to the nature of the issues, the uncertainty of the outcome and/or the extent to which the Council and Group have a responsibility to the claimant. The possibility of any outflow in settlement in these cases is assessed as remote.

Contingent assets

The Council and Group have no contingent assets as at 30 June 2013 (2012: $Nil).

Note 38: Group structureTop


Wellington City Council reporting entity (Council)

Wellington City Council Reporting Entity (Council) diagram.

Wellington City Council Group reporting entity (Group)

Wellington City Council Group Reporting Entity (Group) diagram.

The Council has established several Council-Controlled Organisations (CCOs) and Council-Controlled Trading Organisations (CCTOs) to help it achieve its goals for Wellington. These organisations were set up to independently manage Council facilities, or deliver specific services and developments on behalf of Wellington residents. A report on these organisations is found on page 190. The Council has made appointments to other organisations, which make them Council Organisations (as defined in the Local Government Act 2002) but they are not Council-controlled or part of the Group.

Percentages above represent the Council’s interest and/or ownership (for accounting purposes) in each of the entities in the Group.

  1. The legal name of the subsidiary is the Partnership Wellington Trust Inc.
  2. The legal name of the associate is Capacity Infrastructure Services Limited.
  3. ​The legal name of the subsidiary is Wellington Venues Limited.

Note 39: Joint venturesTop


The Council has significant interests in the following joint ventures:

Joint venture Interest 
2013
Interest 
2012
Nature of business
       
Wastewater treatment plant – Porirua City Council 27.6% 27.6% Owns and operates a wastewater treatment plant and associated trunk sewers and pumping stations that provide services to Wellington City’s northern suburbs.
Spicer Valley Landfill – Porirua City Council 21.5% 21.5% Owns and operates a sanitary landfill that provides services to Wellington City’s northern suburbs.

The end of the reporting period for the joint ventures is 30 June. Included in the financial statements are the following items that represent the Council’s and Group’s interest in the assets and liabilities of the joint ventures.

Share of Net Assets 2013
$000
2012
$000
     
Assets    
     
Current    
Inventory 5 5
Trade and other receivables 693 -
     
Non-current    
Property, plant and equipment 19,430 19,444
     
Share of total assets 20,128 19,449
     
Liabilities    
     
Current    
Trade and other payables - 62
     
Non-current    
Borrowings 3,035 1,242
Provisions for other liabilities 1,768 1,680
     
Share of total liabilities 4,803 2,984
     
Share of net assets 15,325 16,465
     

The Council’s and Group’s share of the joint ventures’ current year net surplus and revaluation movements included in the financial statements are shown below.

Share of Net Surplus and Revaluation Movements 2013
$000
2012
$000
     
     
Operating revenue 2,400 2,525
Operating expenditure (3,540) (2,772)
     
Share of net surplus or (deficit) (1,140) (247)
     
Share of current year revaluation movement - (82)
     

The Council’s and Group’s share of the joint ventures capital commitments is $Nil (2012: $Nil) and contingent liabilities is $Nil (2012: $Nil).

Note 40: Investment in SubsidiariesTop


The following entities are subsidiaries of Council:

Subsidiary Interest
2013
Interest
2012
Nature of business
       
Positively Wellington Tourism (Partnership Wellington Trust Inc) 100% 100% Creates economic and social benefit by marketing the city with the private sector as a visitor destination.
Wellington Waterfront Limited 100% 100% Manages the Wellington Waterfront Project.
Wellington Cable Car Limited   100% 100% Owns and manages the trolley bus overhead wiring system and the Cable Car.
Wellington Museums Trust 100% 100% Administers the Cable Car Museum, Capital E, the City Gallery, the Colonial Cottage Museum, the Carter Observatory and the Museum of Wellington City and Sea
Positively Wellington Venues (Wellington Venues Limited) 100% 100% Manages the Wellington Venues Project.
Wellington Zoo Trust 100% 100% Manages and guides the future direction of the Wellington Zoo.

The reporting period end date for all subsidiaries is 30 June. Full copies of their financial statements can be obtained directly from their offices. Further information on the structure, objectives, the nature and scope of activities, and the performance measures and targets of the entities can be found in the Report on Council Controlled Organisations (page 190).

The cost of the Council’s investment in subsidiaries is reflected in the Council’s financial statements as follows:

Investment in subsidiaries 2013
$000
2012
$000
     
     
Wellington Cable Car Limited 3,809 3,809
     
Total investment in subsidiaries 3,809 3,809
     

The equity investment represents the cost of the investment to the Council and includes all capital contributions made by the Council to subsidiaries. The Council has only made equity investments in Wellington Cable Car Limited. Nominal settlement amounts ($100) made in respect of Trusts, for which Council is the settlor, have not been recognised due to their materiality.

Information on inter-company transactions is included in the Note 42: Related party disclosures.

Note 41: Investment in AssociatesTop


The Council has a significant interest in the following associates:

Associate Interest
2013
Interest
2012
Nature of business
       
Basin Reserve Trust   50% 50% Manages, operates and maintains the Basin Reserve
Capacity (Capacity Infrastructure Services Limited) 62.5% 62.5% Jointly manages water services for Wellington and Lower Hutt cities. (Refer below for voting rights)
Chaffers Marina Holdings Limited 11.45% 11.45% Holding company for Chaffers Marina Limited.
– Chaffers Marina Limited 100% 100% Owns and manages the marina.
Wellington International Airport Limited 34% 34% Owns and manages Wellington International Airport facilities and services.
Wellington Regional Stadium Trust 50% 50% Owns and manages Westpac Stadium.

Full copies of the associates’ separately prepared financial statements can be obtained directly from their offices.

Basin Reserve Trust

The Basin Reserve Trust was established on 24 February 2005 to manage, operate and maintain the Basin Reserve and has a reporting period end date of 30 June. The Trust was jointly created with Cricket Wellington Incorporated (CWI). Wellington City Council and CWI each appoint two of the four trustees. Wellington City Council has significant influence over the Trust through the appointment of trustees, and receives benefits from the complementary activities of the Trust. On this basis the Trust is recognised as an associate of the Council in accordance with NZ IAS 28: Investments in Associates. It is therefore appropriate to recognise the interest that Wellington City ratepayers have in the Trust within the Council’s financial statements. As each party has equal power to appoint Trustees, Wellington City Council’s ownership interest in the Trust has been accounted for at 50%.

Capacity

Capacity, the trading name for Capacity Infrastructure Services Limited was jointly created with Hutt City Council on 9 July 2003 and has a reporting period ending 30 June. Wellington City Council and Hutt City Council each own Class A and Class B shares in the company.

  Wellington City Council Hutt City Council Shares on issue
Class A shares (voting rights) 150 150 300
Class B shares (financial entitlements) 188 112 300

The Class A shares represent voting rights and are split evenly between the two councils. The Class B shares confer the level of contributions and ownership benefits of each council. Wellington City Council holds 188 Class B shares, and Hutt City Council holds 112. The company is considered to be jointly controlled because of the equal sharing of voting rights conferred through the Class A shares and is therefore an associate of both Wellington City Council and Hutt City Council in accordance with NZ IAS 28: Investments in Associates. Each Council will equity account for their respective ownership interest as determined by the proportionate value of Class B shares held. Wellington City Council’s ownership interest in the company is 62.5%.

Wellington City Council, Hutt City Council and Upper Hutt City Council have agreed to move Capacity Infrastructure Services Ltd to an outcomes based business model, which is designed to allow for the better development of a coherent regional strategy on delivering future three-waters services. They have also agreed to Upper Hutt City Council joining as a shareholder of Capacity. Porirua City Council is currently considering a proposal to become a customer and shareholder of Capacity. If both Upper Hutt City Council and Porirua City Council join as shareholders, Wellington City Council’s percentage of voting shares will reduce to 25% and its percentage of income shares will reduce to 50% of the company.

The shareholding changes and shift to the outcomes based business model are anticipated to be effective from 1 October 2013.

Chaffers Marina

Chaffers Marina Holdings Limited and Chaffers Marina Limited have a reporting period end date of 30 June. The shares in Chaffers Marina Holdings Limited are held by Wellington Waterfront Limited in a fiduciary capacity. As at 30 June 2013 Council held an 11.45% interest in Chaffers Marina Holdings Limited (2012: 11.45%) which has been reflected in the Group financial statements on an equity accounting basis reflecting the special rights (as set out in Chaffers Marina Limited’s Constitution) which attach to the golden share that it holds in Chaffers Marina Limited.

Wellington International Airport Limited

Wellington International Airport Limited has a reporting period end date of 31 March. The ultimate majority owner, Infratil Limited, has determined a different end of reporting period to Council, which is legislatively required to use 30 June. The Council owns 34% of the company, with the remaining 66% owned by NZ Airports Limited (which is wholly owned by Infratil Limited).

Wellington Regional Stadium Trust

Wellington Regional Stadium Trust was jointly created with Greater Wellington Regional Council and has a reporting period end date of 30 June. Wellington City Council has significant influence over the Wellington Regional Stadium Trust through the appointment of Trustees and receives benefits from the complementary activities of the Trust. On this basis the Trust is an associate of the Council in accordance with NZ IAS 28: Investments in Associates. It is therefore appropriate to recognise the interest that Wellington City ratepayers have in the Trust within the Council’s financial statements. As each Council has equal power to appoint Trustees, Wellington City Council’s ownership interest in the Trust has been accounted for at 50%.


Summary of Financial Position and Performance of Associates

The Council’s share of the assets, liabilities, revenues and surpluses or deficits of the associates is as follows:

Associates Assets Liabilities Revenues Surplus/(Deficit)
  2013
$000
2013
$000
2013
$000
2013
$000
         
Basin Reserve Trust 524 50 318 (100)
Capacity 1,343 1,073 4,763 45
Chaffers Marina Holdings Limited 690 143 97 (16)
Wellington International Airport Limited 276,346 130,935 36,104 11,349
Wellington Regional Stadium Trust 48,412 9,115 8,347 1,427
Associates Assets Liabilities Revenues Surplus/(Deficit)
  2012
$000
2012
$000
2012
$000
2012
$000
         
Basin Reserve Trust 628 53 300 (69)
Capacity 1,149 925 4,873 53
Chaffers Marina Holdings Limited 688 125 99 (23)
Wellington International Airport Limited 270,192 131,388 33,819 7,289
Wellington Regional Stadium Trust 48,212 10,448 9,353 1,855

Investment in associates

The cost of the Council’s investment in associates is reflected in the Council financial statements as follows:

Investment in associates Council
  2013
$000
2012
$000
     
     
Capacity 376 376
Chaffers Marina Holdings Limited 1,368 1,368
Wellington International Airport Limited 17,775 17,775
     
Total investment in associates 19,519 19,519
     

The investment in associates in the Group financial statements represents the Council’s share of the net assets of the associate. This is reflected in the Group financial statements as follows:

Investment in associates Group
  2013
$000
2012
$000
     
Basin Reserve Trust    
Opening balance 574 643
Equity accounted earnings of associate (100) (69)
     
Closing balance – investment in Basin Reserve Trust 474 574
     
Capacity    
Opening balance 226 173
Equity accounted earnings of associate 45 53
     
Closing balance – investment in Capacity 271 226
     
Chaffers Marina Holdings Limited    
Opening balance 1,014 1,037
Change in shares during the year - -
Change in equity due to changed shareholding - -
Equity accounted earnings of associate (16) (23)
     
Closing balance – investment in Chaffers Marina Holdings Limited 998 1,014
     
Wellington International Airport Limited    
Opening balance 129,959 108,842
Dividends (10,828) (22,426)
Equity accounted earnings of associate 11,349 7,289
Share of net revaluation of property, plant and equipment movement - 33,437
Share of hedging reserve movement 153 1,072
Adjustment for sale of i-site - 1,745
     
Closing balance – investment in Wellington International Airport Limited 130,633 129,959
     
Wellington Regional Stadium Trust    
Opening balance 36,651 34,796
Equity accounted earnings of associate 1,427 1,855
     
Closing balance – investment in Wellington Regional Stadium Trust 38,078 36,651
     
Total investment in associates 170,453 168,424
     

The Council’s share of the results of the Basin Reserve Trust, Capacity, Chaffers Marina Holdings Limited, Wellington International Airport Limited and the Wellington Regional Stadium Trust is as follows:

Share of associates' surplus/(deficit) Group
  2013
$000
2012
$000
     
Basin Reserve Trust    
Share of net surplus/(deficit) before tax (100) (69)
Tax (expense)/credit - -
     
Share of associate's surplus/(deficit) – Basin Reserve Trust (100) (69)
     
Capacity    
Share of net surplus/(deficit before tax) 45 53
Tax (expense)/credit - -
     
Share of associate's surplus/(deficit) – Capacity 45 53
     
Chaffers Marina Holdings Limited    
Share of net surplus/(deficit) before tax (16) (23)
Tax (expense)/credit - -
     
Share of associate's surplus/(deficit) – Chaffers Marina Holdings Limited (16) (23)
     
Wellington International Airport Limited    
Share of net surplus before tax 11,671 5,985
Tax (expense)/credit (322) 1,304
     
Share of associate's surplus/(deficit) – Wellington International Airport Limited 11,349 7,289
     
Wellington Regional Stadium Trust    
Share of net surplus before tax 1,427 1,855
Tax (expense)/credit - -
     
Share of associate's surplus – Wellington Regional Stadium Trust 1,427 1,855
     
Total share of associates' surplus/(deficit) 12,705 9,105
     

Note 42 : Related party disclosuresTop


Identity of related parties

In this section, the Council discloses the remuneration and related party transactions of key management personnel, which comprises the Directors (the Mayor and Councillors), the Chief Executive and all members of the Council’s Executive Leadership Team. All members of the Group are also considered to be related parties of Wellington City Council, including its joint ventures, subsidiaries and associates.

Key management personnel   Council Group
  NOTE 2013
$
2012
$
2013
$
2012
​$
           
Council members (Directors)          
           
Short-term employee benefits 43 1,362,501 1,358,825 1,529,492 1,523,919
           
Chief Executive and Executive Leadership team          
           
Short-term employee benefits   2,324,002 2,627,432 2,324,002 2,627,432
Post employment benefits   22,148 17,791 22,148 17,791
           
Total remuneration paid to key management   3,708,651 4,004,048 3,875,642 4,169,142
           

For further disclosure of the remuneration payable to the Mayor, Councillors and the Chief Executive refer to Note 43: Remuneration and staffing.

Material related party transactions – key management personnel

During the year key management personnel, as part of normal local authority relationships, were involved in transactions of a minor and routine nature with the Council on normal commercial terms (such as payment of rates and purchases of rubbish bags).

Except for these transactions no key management personnel have entered into related party transactions with the Group.

The Mayor and Councillors disclose their personal interests in a register available on the Council Website.

There are no commitments from the Council to key management personnel.

Material related party transactions – other organisations

– NZ Local Government Funding Agency Limited (LGFA)

The LGFA was incorporated on 1 December 2011 and was established to facilitate the efficient, and cost effective, raising of debt funding for local government authorities. There are currently 30 regional, district and city councils throughout New Zealand that own 80% of the issued capital, with the Government holding the remaining 20%. The Council became an establishment shareholder in this Council Controlled Trading Organisation (CCTO) and currently has an investment of $1.883m representing 8% of paid-up capital.

– Karori Wildlife Sanctuary Trust (Zealandia)

The Council has influence in the governance, funding and operations of the Karori Wildlife Sanctuary Trust (trading as Zealandia) which is not part of the Group, to the extent that it is considered appropriate to disclose the nature of the transactions as being between related parties.

The Council appoints two of the five trustees including the Chair. Operational funding of $0.350m was made during the year to 30 June 2013. The Council has a concessionary loan totalling $10.347m on interest free terms to the Trust. Further information on the loan is included in Note 13: Other financial assets.

Intra group transactions and balances

During the year the Council has entered into several transactions with its joint venture partner Porirua City Council. The nature of these intra-group transactions and the outstanding balances at the year-end are as follows:

Intra group transactions and balances – Joint ventures 2013
$000
2012
$000
     
Expenditure incurred by the Council to fund the operation and management of:    
Porirua – waste water treatment plant 1,792 1,537
     

During the year the Council has entered into several transactions with its subsidiaries. The nature of these intra-group transactions and the outstanding balances at the year-end are as follows:

Intra group transactions and balances – Subsidiaries 2013
$000
2012
$000
     
Dividend received from:    
Wellington Cable Car Limited 94 10
     
Revenue for services provided by the Council to:    
Positively Wellington Tourism 125 160
Positively Wellington Waterfront 2 2
Wellington Cable Car Limited 68 63
Wellington Museums Trust 1,970 2,377
Wellington Zoo Trust 608 524
  2,773 3,126
     
Expenditure incurred by the Council to fund operations and management of:    
Positively Wellington Tourism 6,390 5,940
Positively Wellington Waterfront 1,075 1,075
Wellington Museums Trust 8,010 8,010
Wellington Zoo Trust 2,799 2,799
  18,274 17,824
     
Expenditure for services provided to the Council by:    
Positively Wellington Tourism 168 128
Wellington Cable Car Limited 323 195
Wellington Museums Trust 313 230
Wellington Venues Limited 5,386 5,428
Wellington Zoo Trust 1,280 1,112
  7,470 7,093
     
Current receivables owing to the Council from:    
Positively Wellington Waterfront - 1
Wellington Cable Car Limited 2 1
Wellington Museums Trust 30 598
Wellington Zoo Trust 639 489
  671 1,089
     
Current payables owed by the Council to:    
Positively Wellington Tourism 15 -
Wellington Cable Car Limited - 193
Wellington Museums Trust 15 172
Wellington Venues Limited 492 362
Wellington Zoo Trust 458 617
  980 1,344
     

Current receivables and payables

The receivables and payables balances are non-interest bearing and are to be settled with the relevant entities on normal trading terms and conditions.

During the year the Council has entered into several transactions with its associates. The nature of these intra-group transactions and the understanding balances at the year-end are as follows:

Intra group transactions and balances – Associates 2013
$000
2012
$000
     
Dividend received from:    
Wellington International Airport Limited 10,828 22,426
     
Revenue for services provided by the Council to:    
Basin Reserve Trust 71 79
Capacity 34 34
Wellington International Airport Limited 1 3
Wellington Regional Stadium Trust 276 228
  382 344
     
Expenditure incurred by the Council to fund the operation and management of:    
Basin Reserve Trust 355 180
Wellington International Airport Limited 1 1,000 -
  1,355 180
     
Expenditure for services provided to the Council from:    
Basin Reserve Trust - 7
Capacity 11,370 8,190
Wellington International Airport Limited 108 35
Wellington Regional Stadium Trust 297 252
  11,775 8,484
     
Current receivables owing to the Council from:    
Basin Reserve Trust 2 14
Capacity 3 3
Wellington Regional Stadium Trust 8 8
  13 25
     
Current payables owed by the Council to:    
Capacity 605 605
Wellington International Airport Limited 35 -
Wellington Regional Stadium Trust 72 72
  712 677
     
Limited–recourse funding loan and advance    
Wellington Regional Stadium Trust – nominal value – $15,394,893 1,407 1,248
     

Current receivables and payables:

The receivables and payables balances are non-interest bearing and are to be settled with the relevant entities on normal trading terms and conditions.

Limited-recourse funding loan and advance

The $15m loan to the Wellington Regional Stadium Trust (WRST) is unsecured, with no specified maturity and at no interest. The loan is not repayable until all other debts are extinguished.

On maturity of the WRST membership underwrite, the unpaid interest was converted to a $0.395m advance repayable after all other advances made by the Council and Greater Wellington Regional Council.

  1. This grant to Wellington International Airport Limited relates to the agreement to fund 50% (capped at $1m) of the resource consent costs arising from the airport runway extension.

Note 43: Remuneration and staffingTop


Mayoral and Councillor remuneration

Remuneration is any money, consideration or benefit received, receivable or otherwise made available, directly or indirectly, to the Mayor or a Councillor during the reporting period. The Mayor and Councillors are considered directors as they occupy the position of a member of the governing body of the Council reporting entity. The disclosures for the Group include the remuneration of the Mayor and the appropriate Councillors in their role as trustees or directors of entities within the Group.

The following people held office as, either or both, elected members of the Council’s governing body, and trustees or directors of entities comprising the Group during the reporting period. The total remuneration attributed to the Mayor and Councillors during the year from 1 July 2012 to 30 June 2013 was $1,529,492 (2012: $1,523,919) and is disaggregated and classified as follows:

Council Member Monetary Remuneration Non Monetary Remuneration Total Council Remuneration 2013 Director/Trustee Fees Total Remuneration 2013
  Salary



$
Resource
Consent Hearing
​Fees
$
Allowances



$


$



$
 


$


​​$
               
               
Ahipene-Mercer, Ray 80,300 - 360 3,000 83,660 15,000 98,660
Best, Ngaire 80,300 - 360 3,000 83,660 15,000 98,660
Cook, Stephanie 85,220 - 360 3,000 88,580 - 88,580
Coughlan, Jo 80,300 - 360 3,000 83,660 15,000 98,660
Eagle, Paul 80,300 - 360 3,000 83,660 15,000 98,660
Foster, Andy 90,325 2,200 360 3,000 95,885 15,000 110,885
Gill, Leonie 85,220 - - 3,000 88,220 - 88,220
Lester, Justin 80,300 - 360 3,000 83,660 15,000 98,660
McKinnon, Ian 97,430 - 360 3,000 100,790 43,991 144,781
Marsh, Simon 65,926 - 360 3,000 69,286 15,000 84,286
Morrison, John 80,300 - 360 3,000 83,660 18,000 101,660
Pannett, Iona 80,300 2,200 360 3,000 85,860 - 85,860
Pepperell, Bryan 80,300 - 360 3,000 83,660 - 83,660
Ritchie, Helene 80,300 - 360 3,000 83,660 - 83,660
Wade-Brown, Celia 161,600 - - 3,000 164,600 - 164,600
               
Totals 1,308,421 4,400 4,680 45,000 1,362,501 166,991 1,529,492
        Total monetary remuneration 1,317,501 166,991 1,484,492
        Total non- monetary remuneration 45,000 - 45,000
               

Salary

The Remuneration Authority is responsible for setting the remuneration levels for elected members (Clause 6, Schedule 7 of the Local Government Act 2002). The Council’s monetary remuneration (salary) detailed above was determined by the Remuneration Authority. As permitted under the Authority’s guidelines the Council has chosen for its elected members to receive an annual salary for the 2012/13 financial year rather than the alternative option of a combination of meeting fee payments and annual salary.

Resource consent hearings payments

The determination issued by the Remuneration Authority also provides for the payment of hearing fees for those Councillors who sit as members of the Hearings Committee for hearings of resource consent applications lodged under the Resource Management Act 1991. The fees for members, who act in this capacity, are paid at the rate of $100 per hour for the Chair and $80 per hour for other members.

Taxable and non-taxable allowancesmileage, broadband services and mobile phones

Councillors are entitled to claim an allowance for mileage for which the rates are set by the Remuneration Authority. However, from December 2008, Councillors voluntarily decided to forgo receiving this allowance.

Councillors are able to choose either of the following two options:

Both the allowance and reimbursement options are non-taxable. Only the payments under the allowance option have been included as remuneration in the schedule above.

The level of all allowances payable to the Council’s elected members has been approved by the Remuneration Authority and is reviewed by the Authority on an annual basis.

Non-monetary

In addition, the Mayor and Councillors receive non-monetary remuneration in relation to car parking space provided. The Councillors have shared office and working space available for use, and access to phones and computers. Professional indemnity and trustee liability insurance is also provided to Councillors against any potential legal litigation which may occur while undertaking Council business.

Director/trustee fees

The above director/trustee remuneration was paid to the following Council members in their capacity as Council appointees to the following organisations:

Council Member Position Director / Trustee Fees Organisation Council
Interest
​%
    Subsidiaries
$
Associates
$
 
 
           
Ahipene-Mercer, Ray Trustee 15,000 - Wellington Museums Trust 100.0
Best, Ngaire Director 15,000 - Positively Wellington Venues 100.0
Coughlan, Jo Trustee 15,000 - Positively Wellington Tourism 100.0
Eagle, Paul Director 15,000 - Positively Wellington Venues 100.0
Foster, Andy Director - 15,000 Capacity 62.5
Lester, Justin Director 15,000 - Wellington Waterfront Limited 100.0
McKinnon, Ian Director - 43,991 Wellington International Airport Limited 34.0
Marsh, Simon Trustee 15,000 - Wellington Zoo Trust 100.0
Morrison, John Trustee - 18,000 Wellington Regional Stadium Trust 50.0
           
Total director and
trustee fees
  90,000 76,991    

Community Boards

The Council has two community boards – the Tawa Community Board and the Makara/Ohariu Community Board. Remuneration paid to the elected members of these boards is as follows:

Community Board Member Salary Allowances Total
2013
  $ $ $
       
TAWA COMMUNITY BOARD      
Sparrow, Malcolm (Chair) 21,165 540 21,705
Hansen, Graeme (Deputy Chair) 8,465 - 8,465
Lucas, Margaret 8,465 - 8,465
Reading, Chris 8,465 - 8,465
Sutton, Alistair 8,465 - 8,465
Tredger, Robert 8,465 - 8,465
       
MAKARA-OHARIU COMMUNITY BOARD      
Grace, Christine (Chair) 13,550 540 14,090
Bruce, Gavin (Deputy Chair) 5,295 - 5,295
Liddell, Judy 5,295 - 5,295
Rudd, Wayne 5,295 - 5,295
Scotts, Margie 5,295 - 5,295
Todd, Hamish 5,295 - 5,295
       
Totals 103,515 1,080 104,595
       

A technology allowance of $45 per month is available to the chair of both the Tawa and Makara/Ohariu Community Boards. This allowance can be taken as either an allowance or as an actual expense reimbursement. Both options are non-taxable but only payments under the allowance option are included in the above remuneration table.


Chief Executive’s remuneration

The Chief Executive of the Council was appointed in accordance with section 42 of the Local Government Act 2002.

The table below shows the total remuneration of the Chief Executive paid or payable for the year ended 30 June 2013.

Under the terms of his agreement, the Chief Executive of the Council chooses how he wishes to take his remuneration package (salary only or a combination of salary and benefits).

Remuneration of the Chief Executive Council
  2013
$
2012
$
     
Short-term employee benefits    
     
Garry Poole (1 July 2012 – 12 April 2013)    
Salary1 327,345 398,432
Motor vehicle and car park (including FBT) - 25,025
Other remuneration:    
– accrued leave entitlement for the tenure of employment (1998 – 2013) 123,027  
– contractual payment due at expiry of fixed term employment agreement
that commenced on 2 March 2008
104,520  
Total remuneration paid or payable 554,892 423,4572
     
Kevin Lavery (31 March – 30 June 2013)    
Salary3 99,726 -
Total remuneration paid or payable 99,726 -
     
  1. Garry Poole was on a fixed term individual employment agreement with total remuneration of $419,231.
  2. The total paid in 2012 is higher than the Chief Executive’s total annual remuneration (refer footnote 1) because some of the payment relates to the 2011 year (as following the September 2012 remuneration review process, the adjustment to remuneration was backdated to 2 March 2012).
  3. Kevin Lavery is on a fixed term individual employment agreement with total remuneration of $400,000.

Severances

In accordance with Schedule 10, section 19 of the Local Government Act 2002, the Council is required to disclose the number of employees who received severance payments during the year and the amount of each severance payment made.

Severance payments include any consideration (monetary and non-monetary) provided to any employee in respect of the employee’s agreement to the termination of their employment with the Council. Severance payments exclude any final payment of salary, holiday pay and superannuation contributions.

For the year ending 30 June 2013 the Council made severance payments to 12 employees (2012:12) totalling $240,830 (2012: $110,628).

The individual values of each of these severance payments are: $2,500; $13,463; $3,000; $20,013; $22,133; $35,000; $42,747; $35,000; $35,000, $16,275; $13,699; $2,000.


Staffing levels and remuneration bands

The following table identifies the number of full-time employees as at the end of the reporting period and the full-time equivalent number of all other part-time, fixed term and casual employees. The table further identifies the breakdown of remuneration levels of those employees into various bands.

  Council
  2013 2012
     
     
The number of full-time employees as at 30 June 910 1020
     
The full-time equivalent number of all other non full-time employees 216 209
     
The number of employees receiving total annual remuneration of less than $60,000 1033 1126
     
The number of employees receiving total annual remuneration of more than $60,000 in bands of $20,000    
     
$60,000–$79,999 251 278
$80,000–$99,999 123 137
$100,000–$119,999 75 73
$120,000–$139,999 36 39
$140,000–$159,999 15 12
$160,000–$179,999 9 7
$180,000–$219,999* 9 6
$220,000–$279,999* 7 8
$280,000–$419,999* 4 2
     

A full-time employee or full-time equivalent is based on a 40-hour week.

Total annual remuneration has been calculated to include any non-financial benefits and other payments in excess of normal remuneration such as the employer KiwiSaver contribution.

* If the number of employees for any band was five or less then it has been combined with the next highest band.


Note 44: Events after the end of the reporting periodTop


There are no events after the end of the reporting period that require adjustment to the financial statements or the notes to the financial statements.

There were two large earthquakes situated near Wellington on 21July and 16 August 2013 which caused damage to some commercial and residential buildings in the Wellington area. The Council has performed engineering assessments on Council-owned buildings affected by the earthquake and discovered no structural damage. Repair to cosmetic damage and clean-up costs are expected to be minimal and largely covered by the self-insurance reserve fund.

26The Council’s share of the joint venture with Porirua City Council relating to the Spicer Valley Landfill is included in this asset class.
27Other net variances relate to other reduced costs in programmes, projects and organisational costs.
28Actual capital expenditure consists of all expenditure 2012/13 including expenditure against carry forwards.
29Proposed budget carry forwards represent the portion of the project budget to be carried forward to future financial years.
30Budgets comprise 2012/13 Annual Plan budgets brought forward into 2012/13 from the previous financial period.