Volume Three of the Draft Annual Plan

7/29/2019 Volume Three of the Draft Annual Plan

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2013/2014m A i n tA i n i n g m o m e n t u m

FinAnciAl inFormAtion,chAngeS And AmendmentSto the long-term PlAn3volu

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Volume 3: Financial information, changes and amendments to the long-term plan

How this plan is arranged

Auckland Council draft Annual Plan 2013/2014

Volume 3: Financial information,changes and amendments to the long-

term planHow this plan is arrangedThis plan has three separate volumes. To find out information on a particular area of the councils work orservices, you will need to look in the appropriate volume. This is volume 3.

Volume 1: An overview of 2013/2014

This volume is divided into four parts:

Part I provides context and background to the plan. It outlines our proposals for the year, and howto tell us what you think about our proposals and how to give feedback during the consultation

process.

Part II covers the activities and services of Auckland Council, including key projects and financialand performance information.

Part III contains information on our council-controlled organisations (CCOs).

Part IV is the appendices and presents the structure of and contact information for the organisation,and also contains a glossary of terms.

Volume 2: Local board information and draft agreements

This volume is divided into two parts:

Part I provides information on the decision-making responsibilities of local boards, the developmentof local board plans and agreements and a summary of planned expenditure for 2013/2014 across

all local boards.

Part II contains specific information for each of the 21 local boards, including a draft local boardagreement that contains detailed information about local activities and the corresponding budgets

for 2013/2014, along with an introductory section that provides context for the draft agreement and

sets out proposed changes to 2013/2014 budgets and new advocacy areas for consultation.


In addition to the draft annual plan, the council is consulting on changes and amendments to theLTP 2012-2022. These are contained within parts III and IV of this document. This volume is

divided into five parts:

Part I contains detailed financial statements for the Auckland Council, including statements by

parent and group and significant forecasting assumptions.

Part II provides updated information on rating policy and other rates related policies.

Part III identifies changes and amendments to financial policies in the LTP 2012-2022.

Part IV contains a proposal for Regional Facilities Auckland to grant the proceeds of a land sale tothe Counties Manukau Pacific Trust to fund the second stage of the TelstraClear Pacific Events

Centre development.

Part V contains the Auditor-Generals opinion on the councils statement of proposal in part IV.

The full financial and non-financial policies can be found in Volume Three of the Long-term Plan

2012-2022.

To request a Microsoft Word or large print version of this document,please [email protected] call 09 301 0101.

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Explanatory note: Basis of preparation of long-term plan and forecast financial information


Explanatory note: Basis of preparation of long-term plan and forecast financial informationThe council is governed by the Local Government Act 2002 (LGA 2002) and the Local Government (Auckland

Council) Act 2009 (the 2009 Act). The LGA 2002 requires the council to prepare its long-term and annual plansbased on the activities and funding requirements of the Auckland Council as a separate parent entity. Given thesignificance and economic substance of activities provided through CCOs within the broader Auckland CouncilGroup (for example Auckland Transport, Watercare Services), and the relevance and importance of informationrelated to these activities for Auckland ratepayers, the council has decided to prepare its planning documents,including the prospective financial statements and the prospective group of activities statements, on a full groupbasis. The council considers that full group information enhances the transparency of information about the costof services provided to Auckland ratepayers and enables ratepayers to make more informed decisions about theimpact of delivering on the Auckland Plan.

The Auckland Council Group comprises the ultimate parent entity, being the Auckland Council, and itssubsidiaries, associates and joint ventures. The basis for consolidation of group entities into the prospectivefinancial information in the draft annual plan is set out in the Statement of Significant Accounting Policies

(Volume 3).

The forecast financial information has been prepared for the purposes of meeting councils requirements underthe LGA 2002, the 2009 Act and the Local Government (Auckland Transitional Provisions) Act 2010. Thisinformation may not be suitable for use in any other context. In accordance with the LGA 2002, the draft annualplan financial statements are required to comply with New Zealand Generally Accepted Accounting Practice (NZGAAP) and other requirements contained in the LGA 2002.

The forecast financial information has been prepared on the basis of the underlying assumptions consideredreasonable and appropriate for the group. This includes an assumption regarding future price changes on theforecast financial information. All assumptions are based on the best information currently available to thecouncil. Since the forecast financial information is for the period 1 July 2013 to 30 June 2014, actual results arenot reflected. The actual results achieved for the period covered by this draft annual plan are likely to vary from

the information presented in this document, and these variations may be material.

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Contents of this volume


Contents of this volume

How to have your say 4

Part I: Financial information

Prospective financial statements and notes 5

Prospective funding impact statement for 2013/2014 35

Significant forecasting assumptions 78

Part II: Rates related policies

Rating policy 81

Application of early payment of rates policy 95

Application of rates transition management policy 96

Part III: Changes and amendments to the financial policies in the long-term plan

Revenue and financing policy 99

Schedule of changes to regulatory fees and charges 112

Rates remission and postponement policy 163

Mori Freehold Land rates remission and postponement policy 166

Part IV: Statement of proposal for TelstraClear Pacific Events Centre developmentStatement of proposal to amend the Long-term Plan 2012-2022 for Regional Facilities Auckland

to grant proceeds of a land sale to Counties Manukau Pacific Trust to fund stage two of theTelstraClear Pacific Events Centre development

171

Part V: Appendix

Auditor-Generals opinion 173

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How to have your say



Draft Annual Plan 2013/2014 consultation process

This is your opportunity to ensure the mayor, councillors and local board members hear your views about thedraft Annual Plan 2013/2014, draft local board agreements and proposed changes and amendments to theLong-term Plan 2012-2022. The consultation and submission process is part of the special consultativeprocedure outlined within the Local Government Act 2002.


Have your say on any part of this draft Annual Plan and your local board's draft agreement. Submissions will beaccepted between 24 January and 25 February 2013.

You can make a submission in the following ways:

Online We recommend you make your submissions online at: www.aucklandcouncil.govt.nz/annualplanYou can use the internet free of charge at any Auckland Council library.

Email You can also send us your submission form via email. Simply complete the submission form, scan it(PDF), attach to your email and send it to: [email protected]

By post The submission form is available to download from our website or on request at any Aucklandlibrary or service centre. Post your completed submission to us using the freepost details on theback of your submission form to:

Draft Annual Plan 2013/2014Auckland CouncilFreepost Authority 239296Private Bag 92 300Auckland 1142

In person You can deliver your submission form in person to your nearest local library, council service centreor a local board office. A list of our service centres and contact information can be found in part IV of

this volume.The closing date for submissions is 4pm on Monday 25 February 2013. Please ensure we have yoursubmissions before this time as we will not accept late submissions.

Please note that all submissions (including personal details names and addresses) will be made public.

Hearings

Auckland Council provides opportunities for residents to have a say in shaping plans that affect them, consistentwith legislative requirements. Making an oral submission provides you with the opportunity to reinforce what youhave said in your written submission. It also allows elected representatives the opportunity to clarify pointsraised in your submission. This may result in changes to the draft Annual Plan.

Your submission form will ask you to indicate whether you want to be heard, i.e. speak to your submission. If

you indicate that you wish to be heard, you will be contacted regarding a time and place for you to speak to yoursubmission. Notification may be at short notice and hearings are generally open to the public and the newsmedia.

In order to help coordinate the hearings schedule, we need you to provide as much information as possible onyour submission form, including:

An indication of the most important topic from your submission

your local board area

an indication of which submitter group and/or organisation you are submitting on behalf of

make sure you provide us with clearly legible contact details

To obtain further information or copies of this draft plan download from:

www.aucklandcouncil.govt.nz/annualplan. If you have any further queries about the draft Annual Plan2013/2014 or the submission process, please call (09) 301 0101 or email [email protected]

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Prospective financial statements and notes




Prospective statement of financial position

Auckland Council group as at 30 June

$000 Budget 2013 LTP 2014 Draft Annual

Plan 2014

Variance 2014 Note

ASSETS

Current assets

Cash and cash equivalents 1,090 35,899 8,090 (27,809) 1

Receivables and prepayments 294,106 406,072 313,069 (93,003) 2

Other financial assets 286,000 283,000 286,000 3,000Derivative financial instruments 1,000 1,000 1,000 0

Inventories 18,000 20,000 18,000 (2,000)

Non-current assets held for sale 57,684 38,581 38,581 0

Total current assets 657,880 784,552 664,740 (119,812)

Non-current assets

Receivables and prepayments 100,477 28,923 106,956 78,033 2

Other financial assets 85,080 91,019 94,707 3,688

Derivative financial instruments 39,000 33,000 39,000 6,000

Property, plant and equipment 35,204,846 37,218,369 36,793,060 (425,309) 3

Intangible assets 341,388 323,083 350,985 27,902

Biological assets 4,000 5,000 4,000 (1,000)

Investment properties 371,000 268,000 371,000 103,000 4

Investments in associates and joint

ventures

721,000 674,727 721,000 46,273 5

Investments in subsidiaries 0 0 0 0

Deferred tax asset 0 0 0 0

Total non-current assets 36,866,791 38,642,121 38,480,708 (161,413)

TOTAL ASSETS 37,524,671 39,426,673 39,145,448 (281,225)

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Plan 2014

Variance 2014 Note

LIABILITIES

Current liabilities

Employee entitlements 67,864 71,554 69,661 (1,893)

Payables and accruals 561,538 620,693 582,262 (38,431)Borrowings 785,268 1,370,496 742,252 (628,244) 6

Derivative financial instruments 6,000 11,000 6,000 (5,000)

Tax payable 2,000 1,000 2,000 1,000

Provisions 88,260 67,594 71,435 3,841

Other current liabilities 0 186 186 (0)

Total current liabilities 1,510,930 2,142,523 1,473,796 (668,727)

Non-current liabilities


Derivative financial instruments 355,000 162,365 355,000 192,635 7

Payables and accruals 10,595 10,721 10,986 265

Borrowings 4,957,963 5,321,763 5,957,768 636,005 6

Provisions 404,339 325,335 348,262 22,927

Other non-current liabilities - 15,298 (372) (15,670)

Deferred tax liabilities 1,068,132 1,062,132 1,068,132 6,000

Total non-current liabilities 6,801,846 6,905,203 7,745,747 840,544

TOTAL LIABILITIES 8,312,776 9,047,726 9,219,543 171,817

NET ASSETS 29,211,895 30,378,947 29,925,905 (453,042)

Equity

Contributed equity 26,354,000 26,354,000 26,354,000 0

Accumulated funds (297,872) (23,597) (249,166) (225,569)

Reserves 3,154,767 4,047,544 3,820,071 (227,473)

Total ratepayers equity 29,210,895 30,377,947 29,924,905 (453,042)

Non-controlling interest 1,000 1,000 1,000 0

TOTAL EQUITY 29,211,895 30,378,947 29,925,905 (453,042)

Notes

1. The decrease in cash and cash equivalents is due mainly to the revision of working capital assumptions

2. The split between current and term receivables has been updated to reflect balances in the audited 2011/2012 annual accounts

3. The variance in property plant and equipment is due to a lower closing balance in the 2011/2012 annual accounts than forecast,

resulting from a combination of lower capex spend and lower impact of asset revaluation

4. The variance in investment property value is due a higher closing balance in the 2011/2012 annual accounts than originally forecast,

primarily as a result of investment property revaluation

5. The variance in investment in associates relates to the increase in the fair value of the Council's shareholding in Auckland International

Airport as recording in the 2011/2012 annual accounts

6. The variance in borrowings is due primarily to a change in the mix of short and longer borrowings in 2011/2012, with a decrease in

current borrowings in the 2011/2012 annual accounts, offset by increase in term borrowings

7. The variance in derivative financial instruments is due to an increase in the value of interest rate swap liability recorded in the

2011/2012 annual accounts.

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Prospective statement of comprehensive income

Auckland Council group consolidated


Plan 2014

Variance

2014

Note

Financial year ending 30 June

Income

Rates 1,385,647 1,464,179 1,437,120 (27,059) 1

Service and other 1,640,824 1,786,977 1,783,526 (3,451)

Finance 1,453 2,628 2,516 (112)

Other gains 0 0 0 0

Total income 3,027,924 3,253,784 3,223,162 (30,622)

Expenditure

Personnel 653,699 666,755 667,174 419

Depreciation and amortisation 650,165 702,653 705,143 2,490

Finance 352,668 392,966 394,446 1,480 2

Other 1,397,202 1,458,140 1,431,544 (26,596) 3

Total expenditure 3,053,734 3,220,514 3,198,307 (22,207)

Operating surplus/(deficit) before tax and share

of equity accounted investments

(25,810) 33,270 24,855 (8,415) 4

Share of equity accounted investments' surplus 33,011 35,307 35,307 0

Surplus/(deficit) before tax 7,201 68,577 60,162 (8,415)

Income tax expense 10,046 16,905 11,023 (5,882) 5

Surplus/(deficit) after tax (2,845) 51,672 49,139 (2,533)

Surplus/(Deficit) after tax is attributable to:

Auckland Council (2,845) 51,672 49,139 (2,533)

Non controlling interest 0 0 0 0

(2,845) 51,672 49,139 (2,533)

Other comprehensive income

Gain on asset revaluations 951,740 664,871 664,871 0

Cashflow hedges 0 0 0 0

Share of revaluation gains of associates 0 0 0 0

Total other comprehensive income 951,740 664,871 664,871 0

Total comprehensive income 948,895 716,543 714,010 (2,533)

Total comprehensive income is attributable to:

Auckland Council 948,895 716,543 714,010 (2,533)


948,895 716,543 714,010 (2,533)

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Notes to previous table:

1. The decrease in the prospective rates for 2013/2014 is due to a range of specific savings initiatives, lower interest expenditure (as a

result of lower interest rates) and lower inflation projections.

2. The decrease in interest expense for 2013/2014 is offset by an increase in the non-cash adjustment for the unwinding of discount rate

(time value of money) in relation to the Council's weathertightness provision. The latter does not impact on the rates requirement

3. The decrease in other operating expenditure for 2013/2014 is due to a range of specific savings initiatives and lower average rate of

inflation than forecast in the long-term plan

4. The 2012/2013 amended budget shows an operating deficit due mainly to the introduction during the year of property grants for

'changed properties' that met certain criteria but did not qualify under the council's rates transition policy; and, to a change in the

accounting treatment for the councils weathertightness provision. This is a non-cash related transaction and therefore does not impact

on the council's rates requirement.

5. The decrease in income tax expense is due to an adjustment of income tax forecasts relating to CCOs.

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Prospective statement of cash flow

Auckland Council Group

$000 Budget2013

LTP 2014 Draft AnnualPlan 2014

Variance2014

Note

Cash flows from operating activities

Receipts from rates revenue 1,377,597 1,449,881 1,425,767 (24,114) 1

Receipts from customers and other services 1,631,291 1,769,341 1,769,251 (90)

Interest received 1,453 2,628 2,516 (112)

Dividends received 33,011 30,743 35,307 4,564 2

Payments to suppliers and employees (2,094,362) (2,166,150) (2,166,459) (309)

Interest paid (330,794) (392,966) (376,541) 16,425 3

Income tax refund/(paid) (10,046) (16,905) (11,023) 5,882

Other 8,000 0 0 0

Net cash from operating activities 616,150 676,572 678,818 2,246

Cash flows from investing activities

Proceeds from medium term investments 0 0 0 0

Repayments of loans from subsidiaries 0 0 0 0

Proceeds from sale of property, plant and equipment 80,275 42,684 57,684 15,000 4

Proceeds from loan repayments 0 0 0 0

Proceeds from community loan repayments 711 1,401 1,393 (8)

Purchase of property, plant and equipment (1,584,675) (1,669,876) (1,660,101) 9,775

Investment in subsidiaries 0 0 0 0

Purchase of intangible assets (15,811) (15,487) (16,563) (1,076)

Purchase of shares in subsidiary 0 0 0 0

Purchase of other investments (7,769) (5,020) (5,020) 0

Community loans (11,022) (6,000) (6,000) 0

Net cash from investing activities (1,538,291) (1,652,298) (1,628,607) 23,691

Cash flows from financing activities

Proceeds from borrowings 1,557,231 2,249,530 1,742,057 (507,473) 5

Repayment of borrowings (663,000) (1,265,000) (785,268) 479,732 5

Payments of finance leases 0 0 0 0

Net cash from financing activities 894,231 984,530 956,789 (27,741)

Net increase/(decrease) in cash and cash

equivalents and bank overdraft

(27,910) 8,804 7,000 (1,804)

Cash and cash equivalents and bank overdraft at

beginning of the year

29,000 27,095 1,090 (26,005)

Cash and cash equivalents and bank overdrafts at

end of the year

1,090 35,899 8,090 (27,809)

Notes:

1. The decrease in prospective rates for 2013/2014 is due to a range of specific savings initiatives, lower interest expenditure (as a result

of lower interest rates) and lower inflation projections.

2. The increase in dividends received for 2013/2014 is due to change in the dividend distribution policy of Auckland International AirportLimited from 90 per cent to 100 per cent of profit.

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3. The decrease in interest expense for 2013/2014 is due to a lower average interest rate being budgeted on council borrowing compared

to that forecast in the long-term plan

4. The increase in proceeds from sale of property, plant and equipment is due to the inclusion of forecast proceeds from disposal of

surplus land by Auckland Transport

5. For the purposes of this statement it is assumed that current borrowings in one year are repaid the following year and refinanced. The

movements in proceeds from and repayments of borrowing for 2013/2014 are indicative of the lower proportion of short-term (current)

borrowing in the 2011/2012 annual accounts. This impact has been carried through to subsequent years.

Prospective statement of changes in equity

Auckland Council Group for year ended 30 June


Plan 2014

Variance

2014

Note

Equity at 1 July 28,263,000 29,662,404 29,211,895 (450,509) 1


Movements in non-controlling interest 0 0 0 0

Equity at 30 June 29,211,895 30,378,947 29,925,905 266,034



Non-controlling interest 0 0 0 0

948,895 716,543 714,010 (2,533)

Note:

1. The reduction in opening equity for 2013/2014 reflects a lower closing equity position in the 2011/2012 annual accounts than was

anticipated when the long-term plan was prepared. This was due mainly to the reduced impact of asset revaluations, lower service and

other income and higher expenses to operate and maintain council assets as detailed in the 2011/2012 annual report.

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Notes to the financial statements

Note 1 - General information

Auckland Council (Council) is a territorial local authority domiciled in New Zealand. The council together withsix1

Basis of preparation

council-controlled organisations were established on 1 November 2010 as a result of the Local Government(Tmaki Makaurau Reorganisation) Act 2009 that was enacted 23 May 2009.

The council is governed by the Local Government Act 2002 (LGA 2002) and the Local Government (AucklandCouncil) Act 2009 (the 2009 Act). The LGA 2002 requires the council to prepare its long-term and annual plansbased on the activities and funding requirements of the Auckland Council. Given the significance and economicsubstance of activities provided through CCOs within the broader council group (e.g., Auckland Transport,Watercare Services Limited) and the relevance and importance of information related to these activities forAuckland ratepayers, the council decided to prepare its Long-term Plan 2012-2022 on a full group basis. Thegroup comprises the ultimate parent entity, being the Auckland Council, and its subsidiaries, associates andjoint ventures. All subsidiaries and associates are domiciled in New Zealand. The council considers that fullgroup information enhances the transparency of information about the cost of services provided to Auckland

ratepayers and enables ratepayers to make more informed decisions about the impact of delivering on theAuckland Plan.

This draft annual plan is based on the Auckland Councils Long-term Plan 2012-2022, updated for newinformation arising since 28 June 2012.

The council is responsible for the prospective financial statements included in the Draft Annual Plan 2013/2014,including the appropriateness of the significant financial assumptions these are based on, and the otherdisclosures included in the document.

The prospective financial information has been prepared for the purposes of meeting councils requirementsunder the LGA 2002, the 2009 Act and the Local Government (Auckland Transitional Provisions) Act 2010. Thisinformation may not be suitable for use in any other context.

Since these prospective financial statements are for the period 1 July 2013 to 30 June 2014, actual results arenot reflected. The actual results achieved for the period covered by this plan are likely to vary from theinformation presented in this document, and these variations may be material. The council does not intend toupdate the prospective financial statements after publication.

Comparator information for 2012/2013 has been updated to reflect any new information arising since adoptionof the Long-term Plan 2012-2022 including opening balances and capital expenditure deferrals. The GroupStatement of Financial Position as at 30 June 2013 has also been updated to provide an opening position forthe prospective Statement of Financial Position for the period covered by the Draft Annual Plan 2013/2014.

The primary objective of the council and the group is to provide goods and services for community or socialbenefit rather than to make a financial return. Accordingly, the council has designated itself and the group as apublic benefit entity for the purposes of New Zealand equivalents to International Financial Reporting Standards(NZ IFRS).

Statement of compliance

The prospective financial statements of the Council and Group have been prepared in accordance with therequirements of the LGA 2002, which includes the requirement to comply with New Zealand Generally AcceptedAccounting Practice (NZ GAAP).

These prospective financial statements have been prepared in accordance with NZ GAAP. They comply withNZ IFRS, and other applicable Financial Reporting Standards, as appropriate for public benefit entities. In

1 Watercare Services Ltd became a CCO on 1 July 2012

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particular, these prospective funding statements have been prepared in accordance with FRS-42: ProspectiveFinancial Statements.

Measurement base

The prospective financial statements have been prepared on a historical cost basis, modified by the revaluation

of certain infrastructural assets, investment properties, land and buildings, biological assets and certain financialinstruments (including derivative instruments).

Functional and presentation currency

The prospective financial statements are presented in New Zealand dollars and all values are rounded to thenearest million dollars ($million) unless otherwise stated. The functional currency of the council and group isNew Zealand dollars.

Cost allocation

Cost of service for each significant activity is calculated as follows: Direct costs are charged directly tosignificant activities.

Direct costs are those costs directly attributable to a significant activity. Indirect costs are charged tosignificant activities using appropriate cost drivers such as actual usage, staff numbers and floor area.

Indirect costs are those costs that cannot be identified in an economically feasible manner with a specificsignificant activity.

Note 2 - summary of significant accounting policies

The principal accounting policies applied in the preparation of these prospective financial statements are set outbelow.

Basis of combinationThe Group financial statements include those of the Council and its subsidiaries, accounted for using theacquisition method of combination, together with the results of its associates, accounted for using the equitymethod.

Transactions and balances between the Council and its subsidiaries are eliminated on combination. Non-controlling interest and their movements are shown separately.

The basis of combination for joint ventures depends on the form of the joint venture:

For jointly controlled operations, the Group recognises the assets it controls, the liabilities and expenses itincurs and the share of income that it earns from the joint venture.

For jointly controlled assets, the Group recognises its share of the jointly controlled assets, its share of any

liabilities and expenses incurred jointly, any other liabilities and expenses it has incurred in respect of thejointly controlled asset and any income from the sale or use of its share of the output of the joint venture.

For jointly controlled entities, the Group recognises its share of the entities' net assets at cost andsubsequently adjusts the cost for changes in the net assets. The Group's share of the entities' surplus ordeficit is recognised in the statement of comprehensive income as a component of surplus or deficit(surplus or deficit).

In the Council's financial statements investment in subsidiaries and jointly controlled operations are carried atcost less any accumulated impairment.

Where necessary, adjustments are made to the financial statements of subsidiaries, associates and joint

ventures to bring their accounting policies in line with those of the Group.

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Foreign currency translation

Foreign currency transactions are translated into the NZD using estimated exchange rates prevailing at thedates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to thefunctional currency at the exchange rate at the reporting date. Foreign currency differences arising ontranslation are recognised in surplus or deficit.

Income

Income is measured at the fair value of the consideration received or receivable. Income is recognised when theamount of income can be reliably measured and when it is probable that future economic benefits will flow to theentity.

Rates

Rates income is recognised when invoiced.

Service and other income

Significant items of service and other income include:

Water supply and wastewater Water and wastewater income is recognised upon invoicing for the services. Unbilled

amounts are accrued on an average usage basis.

Grants Grants are recognised as income when conditions have been met.

Supply of goods and services Income from the supply of services, including port operations, is recognised on a

straight-line basis over the specified period of the service unless an alternative

method better represents the stage of completion of the transaction.

Vested assets Assets vested to the Group are recognised as income when control over the asset is

obtained.

Consents, licenses and permits Income derived from consents is recognised by reference to the stage of completion

of the transaction at balance date based on the actual service provided as a

percentage of the total services to be provided. Income from licenses and permits is

recognised on application.

Financial and development

contributions

Financial contributions received by the Council are recognised as income when they

are expended on the activity for which the contribution was levied. Developmentcontributions are recognised as income when the Council is capable of providing the

service for which the contribution was levied.

Finance income and expense

Interest income and expense are recognised in surplus or deficit using the effective interest rate method.Interest expense includes amortisation of borrowing costs recognised over the borrowing term.

Grant expense

Where grants and subsidies are discretionary, the expense is recognised when the Group has advised of itsdecision to pay. Non-discretionary grants are recognised on receipt of application and when the specifiedcriteria have been met.

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Income tax (benefit) expense

Comprises current tax and deferred tax and is calculated using tax rates (and tax laws) that have been enactedor substantively enacted by the reporting date. Income tax (benefit) expense is charged or credited to thesurplus or deficit, except when it relates to items charged or credited directly to equity or to the statement ofcomprehensive income as a component of other comprehensive income (other comprehensive income).

Current tax is the amount of income tax payable for the current period, plus any adjustments to income taxpayable in respect of prior periods.

Deferred tax is the amount of income tax payable or recoverable in future periods in respect of temporarydifferences and unused tax losses.

Leases

Lessee

The Group leases certain property, plant and equipment.

Payments made under operating leases (net of any incentives received from the lessor) are expensed on astraight-line basis over the lease term.

Finance leases are capitalised at commencement of the lease. The leased property and corresponding liabilitiesare recognised in the statement of financial position. Interest on finance leases is expensed over the lease term.The leased property is depreciated over the lease term.

Lessor

Assets leased to third parties under operating leases are included in investment property in the statement offinancial position. Rental income (net of any incentives given to lessees) is recognised as income on a straight-line basis over the lease term.

Cash and cash equivalentsCash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highlyliquid investments with original maturities of three months or less.

Bank overdrafts are shown in borrowings in current liabilities within the statement of financial position and as acomponent of cash and cash equivalents in the statement of cash flows.

Receivables

Receivables are initially measured at nominal or face value. Receivables are subsequently adjusted forpenalties and interest as they are charged and impairment losses. Non-current receivables are measured at thepresent value of the expected future cash inflows.

Inventories

Inventories are recorded at the lower of cost (using the first-in-first-out method ("FIFO")) and net realisable valueunless they are held for consumption in the provision of non-commercial services, which are recorded at thelower of cost using FIFO, adjusted for any loss in service potential.

Biological assets

Biological assets are measured at fair value less estimated cost to sell with any realised and unrealised gains orlosses reported in surplus or deficit.

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Property, plant and equipment (PP and E)

Initial recognition

Property, plant and equipment is initially recognised at cost or at fair value when an asset is acquired at no costor for a nominal cost.

Capital work in progress is recognised at cost less impairment and is not depreciated.

Subsequent costs

The cost of replacing or improving part of an item of property, plant and equipment is recognised in the carryingamount of the item. The costs of day-to-day servicing of Property, plant and equipment are recognised insurplus or deficit as incurred.

Transfers

When the use of a property changes from owner-occupied to investment property, the property is reclassified toinvestment property at its fair value at the date of the transfer.

Subsequent measurement

Subsequent to initial recognition, classes of Property, plant and equipment are accounted for as set out below.Depreciation is charged on a straight-line basis at rates calculated to allocate the cost or valuation of an item ofProperty, plant and equipment less any residual value over its remaining useful life.

Class of Property, plant

and equipment

Description and subsequent measurement policy Estimated useful

life

Infrastructural Include systems and networks integral to the Auckland infrastructure and

intended to be maintained indefinitely, even if individual assets or

components are replaced or upgraded.

Land Land is held at cost. It includes land under roads, land intended for roadsand associated roading infrastructure.

Indefinite

Roads Roads are held at fair value less depreciation and impairment losses

accumulated since last revalued.

6-120 years

Water and wastewater Water and wastewater assets are held at fair value less depreciation and

impairment losses accumulated since last revalued.

2-389 years

Stormwater Stormwater assets are held at fair value less depreciation and impairment

losses accumulated since last revalued.

15-200 years

Machinery Machinery is held at fair value less depreciation and impairment losses


2-175 years

Restricted Includes property, plant and equipment where the use or transfer of titleoutside of the Group is legally restricted.

Parks and reserves Parks and reserves are held at fair value less impairment losses. Indefinite

Improvements and

buildings

Improvements and buildings are held at fair value less depreciation and

impairment losses accumulated since last revalued.

3-100 years

Operational Includes property, plant and equipment used to provide core Council

services, either for administration, as a community service or as a business

activity (but not infrastructural or restricted property, plant and equipment).

Land Land is recorded at fair value less impairment losses accumulated since last

revalued.

Indefinite

Buildings Buildings are recorded at fair value less depreciation and impairment lossesaccumulated since last revalued.

10-100 years

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Class of Property, plant

and equipment

Description and subsequent measurement policy Estimated useful

life

Marina structures Marina structures are held at fair value less depreciation and impairment

losses accumulated since last revalued.

40-100 years

Landfills Landfills are recorded at fair value less depreciation and impairment losses


2-30 years

Works of art Works of art are recorded at fair value less impairment losses accumulated

since last revalued.

Indefinite

Specified cultural and

heritage assets

Specified cultural and heritage assets are recorded at fair value less

subsequent impairment losses. These are not reported with a financial value

in cases where they are not realistically able to be reproduced or replaced,

when they do not generate cash flows and where no active market exists to

provide a valuation.

Indefinite

Wharves Wharves are recorded at fair value less depreciation and impairment losses


2-100 years

Rolling stock Rolling stock is recorded at fair value less depreciation and impairmentlosses accumulated since last revalued.

2-50 years

Other operational Other operational property, plant and equipment include motor vehicles,

office equipment, library books and furniture and fittings and are recorded at

cost less accumulated depreciation and impairment losses.

3-50 years

For the assumptions used when applying the measurement principles above, see the property, plant andequipment note.

Revaluation

Property, plant and equipment is revalued on a class of asset basis. Net revaluation results are credited ordebited to other comprehensive income and are accumulated to the property, plant and equipment revaluationreserve in equity for that class of asset. Where this would result in a debit balance in the property, plant andequipment revaluation reserve, the debit balance is recognised in surplus or deficit. Any subsequent increase onrevaluation is recognised first in the surplus or deficit up to the amount previously expensed and thenrecognised in other comprehensive income.

Disposals

Realised gains and losses on disposal of property, plant and equipment are recognised in surplus or deficit. Anyamounts included in property, plant and equipment revaluation reserve in respect of the disposed property, plantand equipment are transferred from the reserve to accumulated funds.

Investment property

Investment property is initially recognised at cost. After initial recognition, investment property is carried at fairvalue. Gains or losses arising from fair value changes are included in surplus or deficit.

Intangible assets

Initial recognition

Intangible assets are initially recognised at cost. The cost of an internally generated intangible asset representsexpenses incurred in the development phase of the asset only. Intangible assets acquired at no cost are initiallyrecognised at fair value where that is reliably measurable.

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Subsequent measurement

Subsequent to initial recognition, intangible assets are accounted for as set out below. Amortisation is chargedon a straight-line basis at rates calculated to allocate the cost of the intangible asset to estimated residual valueover its useful life. The estimated useful lives of intangible assets are listed by class below. Intangible assetswith indefinite useful lives are not amortised but are tested at least annually for impairment and are carried at

cost less accumulated impairment.

Class of intangible

asset

Subsequent measurement policy Estimated useful

life

Computer software Computer software is held at cost less accumulated amortisation and

impairment losses.

1-10 years

Rights to acquire Rights to acquire are recorded at cost and tested annually for impairment.

Rights to acquire are for periods ranging from 4 to 40 years.

-

Integrated catchment data

and network models

Integrated catchment data and network model assets are held at cost less

accumulated amortisation and impairment losses.

4-12 years

Rights to occupy Rights to occupy are recorded at cost and tested annually for impairment. IndefiniteGoodwill Goodwill is held at cost and tested annually for impairment. Indefinite

Other intangible assets Other intangible assets are held at cost less accumulated amortisation and

impairment losses.

2 63 years

Disposals

Realised gains and losses from the disposal of intangible assets are recognised in surplus or deficit.

Impairment

Impairment of non-financial assets

Non-financial assets are assessed at each reporting period for impairment. Impairment is first recognised as areversal of previously recorded revaluation reserves for that class of asset. Where no reserve is available, theimpairment is recognised in surplus or deficit.

Impairment of financial assets

Financial assets are assessed at each reporting period for impairment. Impairment is recognised in surplus ordeficit.

Payables and accruals

Payables and accruals are stated at cost. Non-current payables and accruals are measured at the present valueof the expected future cash outflows.

Employee entitlements

Pension liabilities

Contributions to defined contribution retirement plans are recognised in surplus or deficit as they fall due.

Contributions to the Defined Benefit Contributors Scheme, a multi-employer defined benefit scheme are treatedin the same way as contributions to defined contribution retirement plans. This is because it is not possible todetermine the extent to which the surplus or deficit of the plan will affect future contributions by individual

employers as there is no prescribed basis for allocation.

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Other employee entitlements

Employee entitlements for salaries and wages, annual leave, long service leave and other similar benefits arerecognised in surplus or deficit when they accrue to employees. Employee entitlements to be settled within 12months are reported at the amount expected to be paid. The liability for long-term employee entitlements isreported at the present value of estimated future cash outflows.

Provisions

Provisions are measured at the present value of the expected future cash outflows required to settle theobligation. The increase in the provision due to the passage of time is recognised as finance costs in surplus ordeficit.

Financial guarantee contracts

Where the Group enters into contracts to guarantee the indebtedness of other entities, the contract is initiallyrecognised at its fair value based on actuarial assumptions. Assumptions are reviewed annually with anychange of the fair value recognised in surplus or deficit as other gains or losses.

Non-derivative financial instruments

Non-derivative financial instruments include cash and cash equivalents, receivables (net of prepayments),community loans, unit trusts, other interest-bearing assets, investment in listed and unlisted shares, payablesand accruals, certain employee entitlements, tax payable and borrowings. These are recognised initially at fairvalue plus or minus any directly attributable transaction costs.

Community loans made at nil or below market value are initially recognised at the present value of theirexpected future cash flows. The difference between the face value and present value of expected future cashflows of the loan is recognised as a grant in surplus or deficit.

Subsequent to initial recognition, non-derivative financial instruments are recognised as described below.

Financial assets

Cash and cash equivalents and receivables are described above under 2.8 and 2.9, respectively.

Unit trusts

Unit trusts are subsequently measured at fair value. Changes in the fair value are recognised through othercomprehensive income. Cumulative gains or losses held in other comprehensive income are transferred tosurplus or deficit on de-recognition.

Listed and unlisted shares

Listed and unlisted shares are subsequently measured at fair value. Positive changes in the fair value arerecognised through other comprehensive income with any net losses transferred to surplus or deficit. On de-recognition, cumulative gains or losses held in other comprehensive income are transferred to accumulatedfunds.

Other interest-bearing assets

Other interest-bearing assets include bonds, loans to related parties and community loans. They aresubsequently measured at amortised cost using the effective interest method less any impairment losses, whichare recognised in surplus or deficit as incurred.

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Financial liabilities

Payables and accruals, employee entitlements and tax payable are described above under 2.16, 2.17 and 2.6,respectively.

Borrowings

Borrowings are subsequently measured at amortised cost using the effective interest rate method, whereappropriate. Borrowings are classified as current liabilities unless the Group has an unconditional right to defersettlement of the liability for more than 12 months after the balance date.

Derivative financial instruments

The Group uses derivative financial instruments to hedge exchange rate and interest rate risks. The Group doesnot hold or issue derivative financial instruments for trading purposes.

Derivatives are initially recognised at fair value and subsequently measured at fair value. Any resulting gains orlosses are recognised in surplus or deficit unless the derivative has been designated into a hedge relationshipthat qualifies for hedge accounting.

Cash flow hedges

The Group recognises the effective portion of changes in the fair value of derivatives that qualify as cash flowhedges in other comprehensive income. Gains or losses relating to the ineffective portion are recognised insurplus or deficit.

On de-recognition, cumulative gains or losses held in other comprehensive income are transferred from equityto surplus or deficit.

When a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability then the associated gains and losses that were recognised in other comprehensive income aretransferred to the initial cost or carrying amount of the asset or liability.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position whenit is legally enforceable and there is an intention to settle on a net basis. Income and expenses arising as aresult of financial instrument earnings or fair value adjustments are recognised as a net result for like items.

Commitments

Commitments are classified as:

Capital commitments, which include capital expenditure contracted for but not recognised as paid or

provided for at balance date, and Operating lease commitments.

Cancellable commitments that have penalty or exit costs explicit in the agreement are reported at the value ofthat penalty or exit cost if such costs are less than the commitment.

Ratepayer equity

Ratepayer equity is the Auckland communitys interest in the Group. Ratepayer equity has been classified intovarious components to identify those portions of equity held for specific purposes.

These components of equity include: Contributed equity

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Contributed equity is the net asset and liability position at the time the Council was formed.

Accumulated funds

Accumulated funds are the Groups accumulated surplus or deficit since formation.

Reserves

Revaluation reserves are for the revaluation of certain assets to fair value.

Cash flow hedge reserves comprise the effective portion of the cumulative net change in the fair value ofderivatives designated as cash flow hedges.

Restricted equity includes targeted rates and reserves, where use of the funds is specified by statute, trustdeed or contract.

Related parties

Related parties include key management personnel, the elected representatives of the Council and their closefamily members and entities controlled by them. Key management personnel are the Chief executive andexecutive leadership team. The elected representatives of the Council are the Mayor and Councillors. Close

family members are spouses or domestic partners, children and dependants.

Transactions with related parties are only those transactions that have taken place as a result of the relatedparty's position with the Council. Related party transactions do not include income from rates, water supply andwastewater, the supply of services and consents, licenses and permits.

Subsidiaries, associates and joint ventures are also related parties. This is due to the Council's influence overthese entities.

Future changes to financial reporting standards

The External Reporting Board ("XRB") has introduced a revised Accounting Standards Framework. The revisedframework intends to introduce Public Benefit Entity Accounting Standards ("PAS") comprising International

Public Sector Accounting Standards ("IPSAS"), modified as appropriate for New Zealand circumstances. Thismeans that financial reporting requirements for public benefit entities are frozen in the short-term and that allnew NZ IFRS and amendments to existing NZ IFRS with a mandatory effective date for annual reporting periodscommencing on or after 1 January 2012 are not applicable to public benefit entities. Accordingly, no provisionhas been made for new or amended NZ IFRS that exclude public benefit entities from their scope.

New and amended standards adopted by the Group

FRS 44: New Zealand Additional Disclosuresprescribes New Zealand specific disclosure requirements whichhave been relocated from existing NZ IFRSs and retained because they are considered important in the NewZealand environment. The disclosure requirements of FRS 44 have been considered and where significant therevised disclosure is included under the relevant note to the financial statements.

Standards, amendments and interpretations to existingstandards that are not yet effective

Certain new standards, amendments and interpretations to existing standards have been published that aremandatory for the Council and Groups accounting periods beginning on or after 1 July 2012 or later periods butwhich the Council and Group has not early adopted:

NZ IFRS 9, Financial Instruments This standard will eventually replace NZ IAS 39 Financial Instruments Recognition and Measurement and is expected to be adopted by the Group in the consolidated financialstatements for the year ending 30 June 2016. However, as a new Accounting Standards Framework will applybefore this date, there is no certainty when an equivalent standard to NZ IFRS 9 will be applied by public benefit

entities.

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Note 3 - sources of income


Plan 2014

Variance 2014 Notes

1. Rates revenue

For the year ended 30 June

Rates

General Rates 1,287,615 1,363,128 1,339,424 (23,704)

Targeted Rates 98,031 101,051 97,696 (3,355)

Total rates revenue after remissions 1,385,646 1,464,179 1,437,120 (27,059) 1

Less:

Internal rates on Council properties 27,470 28,840 28,801 (39)

Total rates revenue after remissions &

internal rates

1,358,176 1,435,339 1,408,319 (27,020)

2. Other revenue

Revenue from activities 1,359,514 1,425,891 1,419,510 (6,381)

Revenue from other operating activities

Finance Income 1,453 2,628 2,516 (112)

Dividends 35,371 34,139 37,555 3,416

Petrol tax 8,677 8,964 8,895 (70)

Other 2,751 2,843 2,820 (23)

Total revenue from other operating

activities

48,252 48,574 51,786 3,211

Other revenue

Development and financial contributions 88,242 129,320 129,320 0

Capital subsidies 146,269 185,820 185,426 (394)

Revenue from vested assets 0 0 0 0

Gain on sale of fixed assets 0 0 0 0

Other 0 0 0 0

Total other revenue 234,511 315,140 314,746 (394)

Note:


of lower interest rates) and lower inflation projections. The Council's proposed rates increase for 2013/2014 (after growth in the

ratepayer base) is 2.9 per cent down from 4.8 per cent in the long-term plan.

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Note 4 - Reconciliation between prospective statement ofcomprehensive income and prospective consolidated activitiesstatement

This annual plan is prepared on a group basis. Under section 4(2) of the Local Government (FinancialReporting) Regulations 2011 (LG(FR)R 2011), the council is required to provide information outlining differencesbetween its statement of comprehensive income and its funding impact statement. To meet this requirement thisstatement should be read in conjunction with the Prospective Funding Impact Statement (Whole of council) inthis volume.


Plan 2014

Variance

2014

Notes


Operating surplus per Prospective Statement of

Comprehensive Income Statement

(2,845) 51,672 49,139 (2,533)

Items recognised as income in Statement of

Comprehensive Income as capital expenditure

funding sources in Consolidated Activities

Statement:

Capital subsidies (146,269) (185,820) (185,426) 394

Development contributions (61,936) (97,601) (98,347) (746)

Recognition of revenue from vested assets 0 0 0 0

0

Non-cash items recognised in Statement of

Comprehensive Income and not included in the

Consolidated Activities Statement:

0

Discounting of weathertightness provision 21,876 12,716 17,906 5,190

Amortisation of prepaid leases (186) (186) (186) 0

Local government funding agency guarantee 347 247 247 0

Fair value movement in derivatives 0 0 0 0

0

Other reconciling items: 0

Borrowing to fund operating expenditure 35,551 52,809 54,700 1,891

Prepaid lease revenue recognised in consolidated

funding statement

15,856 0 0 0

Share of equity accounted surplus from associates

not distributed by way of dividends to Auckland

Council

(1,037) (4,564) (1,148) 3,416

Income tax recognised as an expense in the Income

Statement and as part of the surplus in the

consolidated Activities Statement

10,046 16,905 11,023 (5,882)

Operating funding surplus / (deficit) per

Prospective Consolidated Activities Statement

(128,597) (153,822) (152,092) 1,730

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Note 5 - Prospective prudential financial ratios

This annual plan is prepared on a group basis. For the purposes of calculating the ratios under its TreasuryManagement Policy, Auckland Council removes Watercare from the group financial information. The information

below summarised how each of these prudential ratios is calculated based on the prospective financialinformation contained in this plan and provides a year by year comparison against the ratio limits.

Borrowing

$000 Notes Budget LTP Draft

Annual Plan

Variance

2013 2014 2014 2014

Auckland Council Group borrowing 5,743,231 6,692,259 6,700,020 7,761

Less Watercare Services Limited 1 (1,393,893) (1,543,518) (1,549,434) (5,916)

Other adjustments

Liquid assets (Diversified Assets Portfolio) 2 (283,000) (283,000) (283,000) 0

Electric Motor Units (trains) borrowing (NZTA share) 3 (98,349) (163,406) (163,406) 0

Cash and cash equivalents (27,095) (35,899) (35,899) 0

Net borrowing 3,940,894 4,666,436 4,668,281 1,845

Net borrowing to total revenue limit (less than 275%) 6,593,506 6,854,013 6,778,229 (75,785)

Revenue

$000 Notes Forecast LTP Draft

Annual Plan

Variance

2013 2014 2014 2014

General rates 1,287,616 1,363,128 1,339,424 (23,704)

Targeted rates 98,031 101,051 97,696 (3,355)

Activity user charges and fees 1,164,438 1,230,598 1,228,982 (1,616)

Operating grants and subsidies 226,865 225,850 224,501 (1,349)

Other revenue 64,107 48,574 51,786 3,212

Development Contributions to fund operating expenditure 4 26,307 31,719 30,973 (746)

Gross Group Operating Revenue 2,867,364 3,000,920 2,973,362 (27,558)

Less Watercare Services Limited 1 (461,799) (496,954) (496,954) 0

Other adjustments

Electric Motor Units (trains) Revenue (NZTA payments) 3 (7,927) (11,597) (11,597) 0

Adjusted revenue for ratio calculation 2,397,639 2,492,369 2,464,811 (27,558)

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Interest

$000 Notes Budget LTP Draft Annual

Plan

Variance

2013 2014 2014 2014

Auckland Council Group interest expense 324,918 374,483 370,773 (3,710)

Auckland Council Group interest income (1,453) (2,628) (2,516) 112

Less Watercare Services Limited 1 (92,087) (100,702) (100,702) 0

Other adjustments

Electric Motor Units (trains) Interest (NZTA funded) 3 (7,234) (10,605) (10,605) 0

Net interest expense 224,144 260,548 256,950 (3,598)

Net interest to total revenue limit (less than 15%) 359,646 373,855 369,722 (4,133)

Net interest to total rates limit (less than 25%) 346,412 366,045 359,280 (6,765)

Ratios

Measure Limit Budget LTP Draft Annual

Plan

Variance

2013 2014 2014 2014

Net debt as a percentage of total revenue


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Note 6 Reserve funds

The Local Government Act 2002 requires the annual plan to identify each reserve set aside by the council, thepurpose of each fund and funding flows through the period of the plan.

$000 Balance at Purpose

1 July 2014

Reserves

Property, plant and equipment revaluation

reserve

3,466,238 Accumulated gains from asset revaluation

Restricted equity 283,790 See detail below

Targeted rates reserves 11,755 See detail below

Cash flow hedge reserve (48,207) Losses recognised as balance date revaluation of hedged

funds

Available-for-sale investment revaluation reserve 5,587 Gains from revaluation of the Diversified Financial Assets

portfolio

Share of associates' reserves 100,909 Recognition in group accounts of associates' reserves

Other reserves 353,833

Total reserves 3,820,071

The funding flows for these reserves are:

$000 Balance Income Expenditure Transfers Balance Income Expenditure Transfers Balance

at 1 July

2012

at 1 July

2013

at 1 July

2014

ReservesProperty, plant and

equipment

revaluation reserve

1,849,627 951,740 2,801,367 664,871 3,466,238

Restricted equity 290,272 1,685 (3,979) (2,370) 285,608 1,635 (3,453) 0 283,790

Targeted rates reserves 8,429 20,360 (19,227) (58) 9,504 20,747 (18,496) 0 11,755

Cash flow hedge

reserve

(48,207) (48,207) (48,207)

Available-for-sale

investment revaluation

reserve

5,587 5,587 5,587

Share of associates'

reserves

100,909 100,909 100,909

Other reserves 356,989 22,045 (23,206) (2,428) 353,400 22,382 (21,949) 0 353,833

Total reserves 2,206,616 973,785 (23,206) (2,428) 3,154,767 687,253 (21,949) 0 3,820,071

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Further details of restricted equity and targeted rates reserves are shown below.

$000 Balance at Purpose

1 July 2014

Restricted equity

Statutory funds 29,069 Funds accumulated under legislation (primarily related to subdivisions

or off-street parking).

Trust and bequests 167,075 These trusts are primarily related to assets held by council. The trust

deeds restrict council's action in relation to these assets.

Other restricted equity 87,646 Reserve funds related to particular projects or assets whereby council

is restricted in its decision-making ability.

Total 283,790

Targeted rates

City Centre targeted rate reserve (819) Targeted rate collected for enhancement of central business district as

a place to work, live, visit and do business

Glorit Flood Gate Restoration

targeted rate reserve

(156) Targeted rate being collected to recover the costs of the restoration of

the Glorit flood gate

Araparera forestry targeted ratereserve

32 Targeted rate being collected to recover the costs of theestablishment of the Araparera forest joint venture

Riverhaven Drive targeted rate

reserve

(1,966) Targeted rate being collected to recover the costs of the construction

of a road

Jackson Crescent wastewater


(3) Targeted rate collected to recover the cost of the council providing

financial assistance to connect to a wastewater scheme

Point Wells wastewater targeted rate

reserve

(181) Targeted rate collected to recover the cost of the council providing


Kumeu Riverhead Huapai

wastewater targeted rate reserve

(2,678) Targeted rate collected to recover the cost of the council providing


Targeted Rate - Refuse 11,410 Targeted rate collected for delivery of refuse collection and disposal

services, refuse recycling and waste transfer stations (ACC)

Targeted Rate Open Spaces 2,506 Targeted rate collected for purchase of open space and maintenance

and enhancement of volcanic cones (ACC)

Parkland Purchases Reserve 2,356 Targeted rate collected for purchase of parkland (ARC)

Harbourview Orangihina Park


1,255 Targeted rate collected for development of Harbourview Orangihina

Park

Total 11,755

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The funding flows for these reserves are:

$000 Balance Income Expenditure Transfers Balance Income Expenditure Transfers Balance

at 1 July

2012

at 1 July

2013

at 1 July

2014

Restricted equityStatutory funds 26,001 1,511 27,512 1,557 29,069

Trust and bequests 168,738 82 (82) (1,663) 167,075 78 (78) 167,075

Other restricted equity 95,533 92 (3,897) (707) 91,021 (3,375) 87,646

Total 290,272 1,685 (3,979) (2,370) 285,608 1,635 (3,453) 0 283,790

Targeted rates

City Centre targeted rate

reserve

(6,676) 20,071 (16,266) (2,871) 20,211 (18,159) (819)

Glorit Flood Gate Restoration


(214) 42 (15) (187) 42 (11) (156)

Araparera forestry targeted

rate reserve

32 66 (66) 32 66 (66) 32

Riverhaven Drive targeted

rate reserve

(2,089) 164 (83) (2,008) 117 (75) (1,966)

Jackson Crescent

wastewater targeted rate

reserve

(5) 1 (4) 1 (3)

Point Wells wastewater


(203) 16 (5) (192) 16 (5) (181)

Kumeu Riverhead Huapai

wastewater targeted rate

reserve

58 (2,792) (58) (2,792) 294 (180) (2,678)

Targeted Rate - Refuse 11,410 11,410 11,410

Targeted Rate Open Spaces 2,506 2,506 2,506

Parkland Purchases Reserve 2,356 2,356 2,356

Harbourview Orangihina Park


1,255 1,255 1,255

Total 8,429 20,360 (19,227) (58) 9,504 20,747 (18,496) 0 11,755

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Note 7 - Auckland Council (parent) financial statements

Prospective statement of comprehensive income

Auckland Council - Parent

$000 Budget 2013 LTP 2014 Draft AnnualPlan 2014

Variance2014

NoteFinancial year ending 30 June

Income

Rates 1,385,647 1,464,179 1,437,120 (27,059) 1

Service and other 480,340 559,293 529,982 (29,311) 2

Finance 55,692 60,104 58,042 (2,062)

Other gains 0 0 0 0

Total income 1,921,679 2,083,576 2,025,144 (58,432)

Expenditure

Personnel 447,195 453,215 454,938 1,723Depreciation and amortisation 191,436 205,952 206,164 212

Finance 258,949 286,850 288,240 1,390 3

Other 1,037,391 1,125,331 1,067,168 (58,163) 4

Total expenditure 1,934,971 2,071,348 2,016,510 (54,838)

Operating surplus/(deficit) before tax and share

of equity accounted investments(13,292) 12,228 8,634 (3,594) 5

Share of equity accounted investments' surplus

Surplus/(deficit) before tax (13,292) 12,228 8,634 (3,594)

Income tax expense 0 0 0 0

Surplus/(deficit) after tax (13,292) 12,228 8,634 (3,594)

Surplus/(Deficit) after tax is attributable to:

Auckland Council (13,292) 12,228 8,634 (3,594)


(13,292) 12,228 8,634 (3,594)

Other comprehensive income

Gain on asset revaluations 325,114 340,914 340,914 0

Cashflow hedges 0 0 0 0

Share of revaluation gains of associates 0 0 0 0

Total other comprehensive income 325,114 340,914 340,914 0





311,822 353,142 349,548 (3,594)

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Notes to previous table

1. The decrease in the prospective rates for 2013/2014 is due to a range of specific savings initiatives, lower interest expenditure (as a

result of lower interest rates) and lower inflation projections.

2. The decrease in interest expense for 2013/2014 is offset by an increase in the non-cash adjustment for the unwinding of discount rate

(time value of money) in relation to the Council's weathertightness provision. The latter does not impact on the rates requirement

3. The decrease in other operating expenditure for 2013/2014 is due to a range of specific savings initiatives and lower average rate of

inflation than forecast in the long-term plan

4. The 2012/2013 amended budget shows an operating deficit due mainly to the introduction during the year of property grants for

'changed properties' that met certain criteria but did not qualify under the council's rates transition policy; and, to a change in the

accounting treatment for the councils weathertightness provision. This is non-cash related transaction and therefore does not impact

on the council's rates requirement.

5. The decrease in income tax expense is due to an adjustment of income tax forecasts relating to CCOs.

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Prospective Statement of Financial Position

Auckland Council Parent


Plan 2014

Variance 2014 Note


ASSETS

Current assets

Cash and cash equivalents 19,801 67,932 15,368 (52,564) 1

Receivables and prepayments 151,106 242,072 170,069 (72,003) 2

Other financial assets 371,000 275,000 371,000 96,000 3

Derivative financial instruments 5,000 0 5,000 5,000

Inventories 5,000 2,000 5,000 3,000

Non-current assets held for sale 57,684 38,581 38,581 0

Total current assets 609,591 625,585 605,018 (20,567)

Non-current assets

Receivables and prepayments 61,477 28,923 67,956 39,033 2

Other financial assets 854,971 1,102,959 953,653 (149,306) 3


Property, plant and equipment 10,593,138 11,349,123 11,056,851 (292,273) 5

Intangible assets 184,277 152,463 187,135 34,673

Biological assets 4,000 3,000 4,000 1,000

Investment properties 65,000 68,000 65,000 (3,000) 6

Equity accounted investments 0 0 0 0

Investments in associates and joint ventures 20,110,643 20,420,636 20,582,206 161,570

Deferred tax asset 0 0 0 0

Total non-current assets 31,943,506 33,146,104 32,986,801 (159,303)

TOTAL ASSETS 32,553,097 33,771,689 33,591,819 (179,870)

LIABILITIES

Current liabilities


Payables and accruals 429,538 517,693 450,262 (67,431)

Borrowings 623,217 994,402 448,488 (545,914) 7

Derivative financial instruments 5,000 4,000 5,000 1,000

Tax payable 0 4,000 0 (4,000)

Provisions 86,455 66,594 69,972 3,378

Other current liabilities 0 0 0 0

Total current liabilities 1,187,074 1,636,243 1,018,383 (617,860)

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Plan 2014

Variance 2014 Note


Non-current liabilities


Payables and accruals 46,595 1,721 46,986 45,265

Borrowings 3,783,645 4,118,415 4,697,284 578,869 7


Provisions 403,144 323,335 346,825 23,490

Deferred tax liabilities 0 0 0 0

Other non-current liabilities 0 0 0 0

Total non-current liabilities 4,451,201 4,505,060 5,309,066 804,006

TOTAL LIABILITIES 5,638,275 6,141,303 6,327,449 186,146

NET ASSETS 26,914,822 27,630,386 27,264,370 (366,016)

Equity

Contributed equity 26,150,000 26,150,000 26,150,000 0

Accumulated funds (172,752) 123,954 (164,118) (288,072)

Reserves 937,574 1,356,432 1,278,488 (77,944)

Total ratepayers equity 26,914,822 27,630,386 27,264,370 (366,016)


TOTAL EQUITY 26,914,822 27,630,386 27,264,370 (366,016)

Notes:

1. The decrease in cash and cash equivalents held is due mainly to the revision of working capital assumptions

2. The split between current and term receivables has been updated to reflect relative balances in the audited 2011/2012 annual accounts

3. For the purposes of the long-tem plan, the current portion of the councils loans to CCOs was kept constant with changes flowing

through the non-current portion. The variance in other financial assets is due primarily to opening values being updated to reflect the

actual balances recorded in the 2011/2012 annual accounts

4. This variance is due to the increased value of interest rate swap assets recorded in the 2011/2012 annual accounts

5. The variance in property plant and equipment is due to a lower closing balance in the 2011/2012 annual accounts than forecast,

resulting from a combination of lower capex spend and lower impact of asset revaluation

6. The variance in investment property value is due a higher closing balance in the 2011/2012 annual accounts than originally forecast,

primarily as a result of investment property revaluation

7. The variance in borrowings is due mainly to a change in the mix of short and longer borrowings in 2011/2012, with a decrease incurrent borrowings in the 2011/2012 annual accounts, offset by increase in term borrowings

8. This variance is due to the increased value of interest rate swap liability recorded in the 2011/2012 annual accounts.

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Prospective Statement of Changes in Equity



Plan 2014

Variance 2014 Note

Equity at 1 July 26,603,000 27,277,244 26,914,822 (362,422) 1


Movements in non-controlling interest 0 0 0 0

Equity at 30 June 26,914,822 27,630,386 27,264,370 (366,016)

Total comprehensive income is

attributable to:



311,822 353,142 349,548 (3,594)Note:

1. The reduction in opening equity for 2013/2014 reflects a lower closing equity position in the 2011/2012 annual accounts than was

anticipated when the long-term plan was prepared. This was due mainly to the reduced impact of asset revaluations, lower service and

other income and higher expenses to operate and maintain council assets as detailed in the 2011/2012 annual report.

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Prospective Statement of Cash Flows



Plan 2014

Variance 2014 Note

Cash flows from operating activities

Receipts from rates revenue 1,372,590 1,441,206 1,418,533 (22,674) 1

Receipts from customers and other

services 475,814 550,518 523,127 (27,390) 2

Interest received 55,692 60,104 58,042 (2,062)

Dividends received 0 0 0 0

Payments to suppliers and employees (1,528,047) (1,619,801) (1,589,747) 30,054 3

Interest paid (237,075) (286,850) (270,335) 16,515 4

Income tax refund/(paid) 0 0 0 0

Goods and services tax paid (net) 0 0 0 0Other 8,000 0 0 0

Net cash from operating activities 146,974 145,177 139,620 (5,557)

Cash flows from investing activities

Proceeds from medium term investments 0 0 0 0

Repayments of loans from subsidiaries 103,335 78,092 78,092 0

Proceeds from sale of property, plant and

equipment 80,275 42,684 57,684 15,000 5

Proceeds from loan repayments 0 0 0 0

Proceeds from community loan

repayments 711 1,401 1,393 (8)Purchase of property, plant and

equipment (486,088) (395,994) (363,957) 32,037

Investment in subsidiaries (420,643) (448,479) (471,563) (23,084)

Loans to subsidiaries (107,225) (167,680) (167,147) 533

Purchase of intangible assets (8,608) (5,791) (6,445) (654)

Purchase of shares in subsidiary 0 0 0 0

Purchase of other investments (7,769) (5,020) (5,020) 0

Community loans (11,023) (6,000) (6,000) 0

Net cash from investing activities (857,035) (906,787) (882,963) 23,824

Cash flows from financing activities

Proceeds from borrowings 1,249,862 1,764,142 1,362,127 (402,016) 6

Repayment of borrowings (520,000) (998,036) (623,217) 374,820 6

Payments of finance leases 0 0 0 0

Net cash from financing activities 729,862 766,106 738,910 (27,196)

Net increase/(decrease) in cash and

cash equivalents and bank overdraft 19,801 4,496 (4,433) (8,929)

Cash and cash equivalents and bank

overdraft at beginning of the year 0 63,436 19,801 (43,635)

Cash and cash equivalents and bank

overdrafts at end of the year 19,801 67,932 15,368 (52,564)

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Notes to previous table:


of lower interest rates) and lower inflation projections

2. The decrease in other receipts is due to the reclassification of the treatment of parking activity surpluses in Auckland Transport. These

were previously shown as revenue in the parent financial statements but now reduce the operating grant to the CCO

3. The decrease in the payment to suppliers is due savings initiatives and the reclassification of the treatment of parking activity surpluses

in Auckland Transport

4. The decrease in interest expense for 2013/2014 is due to a lower average interest rate being budgeted on council borrowing compared

to that forecast in the long-term plan

5. The increase in proceeds from sale of property, plant and equipment is due to the inclusion of forecast proceeds from disposal of

surplus land by Auckland Transport

6. For the purposes of this statement it is assumed that current borrowings in one year are repaid the following year and refinanced. The

movements in proceeds from and repayments of borrowing for 2013/2014, are indicative of the lower proportion of short-term (current)

borrowing reflected in the 2011/2012 annual accounts. This impact has been carried through to subsequent years.

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Prospective funding impact statement for 2013/2014


Prospective funding impact statement for2013/2014

IntroductionThe council has prepared these prospective funding impact statements to meet the requirements of Clause 5 ofthe LG (FR) R 2011. They cover the year from 1 July 2013 to 30 June 2014 and outline the council's sources offunding and our plan to apply them. The statements proposed are for the whole council (group) and one foreach group of activity.

Please refer to Chapter 1.9 Council's financial overview in Volume 1 and financial policies in Part II and III of thisvolume for more detailed information on the council's general approach towards handling of funds.

The Prospective Group of Activities Funding Impact Statements have been prepared on a full group basis. Theyinclude the activities and services provided by the Auckland Council, being the Parent entity, and, whereappropriate, the activities and services provided by those entities that comprise the Auckland Council Group(including all subsidiaries, associates and joint venture arrangements). A full outline of the Auckland CouncilGroup and the basis for consolidation is set out in the prospective financial statements.

Group reporting entity

Within each individual Prospective Group of Activities Funding Impact Statement, those group entities thatcontribute to the activities and services provided as part of the Group of Activities have been separatelyidentified by way of note reference.

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Prospective funding impact statement for 2013/2014


Whole of council prospective funding impact statement

Auckland Council group consolidated

$000 Budget

2013

LTP

2014

Draft Annual

Plan 2014

Variance Notes

Financial year ending 30 JuneSources of operating funding:

General rates, UAGCs, rates penalties 1,287,616 1,363,126 1,339,424 (23,702)

Targeted rates 98,031 101,053 97,696 (3,357)

Subsidies and grants for operating purposes 226,865 225,847 224,501 (1,346)

Fees, charges and targeted rates for water supply 1,141,006 1,206,858 1,204,967 (1,891)

Interest and dividends from investments 60,255 60,508 64,089 3,581

Local authorities fuel tax, fines, infringement fees and other

receipts27,284 11,806 11,711 (95)

Total operating funding 2,841,057 2,969,198 2,942,388 (26,810) 1

Applications of operating funding:

Payment to staff and suppliers 2,050,551 2,124,650 2,098,470 (26,180)

Finance costs 330,795 380,248 376,542 (3,706)

Other operating funding applications 34,239 49,491 41,641 (7,850)

Total applications of operating funding 2,415,585 2,554,389 2,516,653 (37,736) 1

Surplus (deficit) of operating funding 425,472 414,809 425,735 10,926

Sources of capital funding:

Subsidies and grants for capital expenditure 146,269 185,820 185,426 (394)

Development and financial contributions 61,936 97,601 98,347 746 2

Increase (decrease) in debt 978,600 1,047,882 1,011,545 (36,337) 3

Gross proceeds from sale of assets 80,275 42,683 57,684 15,001 4

Lump sum contributions 0 0 0 0

Total capital expenditure and other funding outflows 1,267,080 1,373,986 1,353,002 (20,984)

Application of capital funding:

Capital expenditure:

- to meet additional demand 323,394 413,343 424,008 10,665 3

- to improve the level of service 725,912 755,753 728,558 (27,195) 3

- to replace existing asse

Documents

Volume Three of the Draft Annual Plan