Christchurch City Council is likely to end the financial year with an operating deficit of more than $33 million due to the COVID-19 crisis.
“The impacts of this crisis on our organisation and on our trading companies has been significant and like many other businesses we are now in a difficult financial position,’’ says Council Chief Executive Dawn Baxendale
“Next week staff will be bringing a financial performance report to Council which forecasts that we will end the financial year with an operating deficit of $33.2 million.
“Our trading companies, particularly Christchurch Airport, have taken a big financial hit. We were expecting to get a final dividend instalment from Christchurch City Holdings Limited in June of $26.3 million but it is now unlikely that we will get any further dividend payment.
“With all our facilities shut since mid-March we have lost a significant amount of revenue. We’ve also had some unexpected extra costs. For example, during the lockdown we couldn’t send recyclable material collected through the kerbside collection to the sorting plant so we had to send it to landfill instead, which pushed costs for that service up by $345,000.
“The cumulative effect of these things means we are now in a very different financial position than we were earlier this year when we put together our Draft 2020-21 Annual Plan and released it for public consultation.
“The economic environment we are operating in has also changed in a way that we could not have foreseen when the Draft Annual Plan was put together,’’ Mrs Baxendale says.
"After we released our Draft Annual Plan, and before the COVID-19 crisis, our financial position had improved to the extent that the actual rate increase needed would have reduced to 4.33 per cent. This was due to a number of factors, including prudential financial management and higher rating growth.
On Thursday, staff will be bringing a report to the Council which recommends a process for revisiting the Draft 2020-21 Annual Plan so that the impacts of the COVID-19 crisis – both on the organisation and on ratepayers – can be taken into account.
Mrs Baxendale says the Council’s Executive Leadership Team is working to identify savings right across the organisation.
Staff are reprioritising the capital programme and investigating options for increasing borrowing to ease the immediate financial pressure on the organisation.
“As I have said previously, there are no ‘no-go’ areas for scrutiny as we look for savings. Our challenge is to make sure that we are offering the right services to residents while continuing to support our city and economy to recover from the COVID-19 pandemic.’’
Mrs Baxendale says the staff will present all options for reworking the budget to elected members so that they can make informed decisions about where, and when, the Council spends money and what levels of service it provides. It is hoped this work will be concluded by the end of this month.
Residents will then be given an opportunity in June to provide their feedback on the amended plan.
“If the proposed process we have mapped out is endorsed by the Council, it means we are unlikely to be in a position to finalise our 2020-21 Annual Plan until the end of July. That is outside our original 30 June deadline, but it is critical that we take the extra time to get this budget right.