Financial Statements

Notes forming part of the Financial Statements

For the year ended 30 June 2014

    Page
     
Summary of significant accounting policies 116
     
Note    
1 Revenue from rates 127
2 Revenue from operating activities 128
3 Revenue from investments 130
4 Other income 130
5 Finance income and expense 131
6 Expenditure on operating activities 132
7 Depreciation and amortisation 133
8 Income tax expense 134
9 Deferred tax assets and liabilities 135
10 Cash and cash equivalents 135
11 Derivative financial instruments 136
12 Trade and other receivables 137
13 Other financial assets 139
14 Inventories 141
15 Non-current assets classified as held for sale 141
16 Intangibles 142
17 Investment properties 143
18 Property, plant and equipment 144
19 Trade and other payables 150
20 Revenue in advance 150
21 Borrowings 151
22 Employee benefit liabilities and provisions 154
23 Provision for other liabilities 156
24 Accumulated funds and retained earnings 159
25 Revaluation reserves 160
26 Hedging reserve 161
27 Fair value through other comprehensive income reserve 161
28 Restricted funds 161
29 Special reserves and funds 162
30 Trusts and bequests 163
31 Financial instruments 164
32 Analysis of operating surplus by activity 171
33 Major budget variations 173
34 Analysis of capital expenditure by activity 175
35 Capital expenditure performance 177
36 Commitments 179
37 Contingencies 181
38 Group structure 183
39 Joint ventures 184
40 Investment in subsidiaries 185
41 Investment in associates 186
42 Related party disclosures 190
43 Remuneration and staffing levels 193
44 Events after the end of the reporting period 198

Summary of Significant Accounting Policies


 

Reporting entityTop

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.

Basis of preparationTop

The financial statements of the Council and Group are for the year ended 30 June 2014 and were authorised for issue by Council on 27 August 2014.

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 accounting standards appropriate for Public Sector Public Benefit Entities (NZ IFRS PBE) for periods beginning on or after 1 December 2012.

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 Business Economic Research Ltd (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 NZ IFRS PBE suite of accounting standards currently applicable for Public Benefit Entities is interim, pending the introduction of a new set of New Zealand Public Benefit Entity Accounting Standards (PBE standards). The transition date to the PBE standards is 1 July 2014.

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

Judgements and estimationsTop

The preparation of financial statements using NZ IFRS PBE 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 consolidationTop

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.

IncomeTop

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.

ExpensesTop

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.

TaxationTop

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)Top

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 instrumentsTop

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 three months or less.

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, 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.

InventoriesTop

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 propertiesTop

Investment properties are properties which are held primarily to earn rental income and/or for capital growth. These properties 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 saleTop

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:

Property, plant and equipmentTop

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.

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:

Asset Category 2014
  Useful Life
(years)
Depreciation
Rate
     
Land unlimited not depreciated
Buildings 1 ~ 75 1.33% ~ 100%
Civic Centre complex 10 ~ 78 1.28% ~ 10%
Plant and equipment 3 ~ 100 1% ~ 33.3%
Library collections 3 ~ 11 9.1% ~ 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 ~ 40 2.5% ~ 7.7%
Traffic islands 80 1.25%
Bridges and tunnels 3 ~ 175 0.57% ~ 33.3%
Drainage 60 ~ 130 0.8% ~ 130%
Retaining walls 30 ~ 75 1.33% ~ 3.33%
Pedestrian walkways 10 ~ 50 2% ~ 10%
Pedestrian furniture 10 ~ 25 4% ~ 10%
Barriers (handrails, guardrails) 25 4%
Lighting 3 ~ 50 2% ~ 33.3%
Cycleway network 25 4%
Parking equipment 8 ~ 10 10% ~ 12.5%
Passenger transport facilities 25 4%
Traffic infrastructure 5 ~ 40 2.5% ~ 20%
Drainage, waste and water:    
Pipework 50 ~ 130 0.77% ~ 2%
Fittings 25 ~ 110 0.91% ~ 4%
Water pump stations 20 ~ 100 1% ~ 5%
Water reservoirs 25 ~ 100 1% ~ 4%
Equipment 20 5%
Sewer pump stations 20 ~ 80 1.25% ~ 5%
Tunnels 3 ~ 175 0.57% ~ 33.3%
Treatment plants 3 ~ 100 1% ~ 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.

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.

Intangible assetsTop

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:

  2014
Asset Category Useful Life
(years)
Depreciation
​Rate
     
Computer software 1 ~ 7 14.29% ~ 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 DevelopmentTop

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.

LeasesTop

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 liabilitiesTop

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.

ProvisionsTop

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.

EquityTop

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 liabilitiesTop

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 flowsTop

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 partiesTop

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 cell phones and laptops.

Budget figuresTop

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 allocationTop

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.

ComparativesTop

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

New Public Benefit Entity StandardsTop

From 1 July 2014 the public sector in New Zealand moves to new Public Benefit Entity accounting standards (PBE standards). These standards are issued by the New Zealand Accounting Standards Board (NZASB) of the External Reporting Board comprising:

There are new standards that have not been part of the current NZ IFRS PBE suite. In particular there are new standards that deal with exchange and non-exchange revenue and service concession assets.

Other changes resulting from the adoption of the new standards include the possible de-recognition of the Basin Reserve Trust and the Wellington Regional Stadium Trust as associates. This is due to Council not having an equity interest in the two entities in the form of a formal shareholding investment, this being a necessary condition for an associate under the new accounting standards. This change would only affect the Group results and the effect of the change is not considered significant.

The financial impacts of any changes at 1 July 2014 will be accounted for through opening retained earnings and will not have a material effect on Council’s financial performance in the 2014/15 year.

 

Note 1: Revenue from ratesTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
General rates        
Base sector 71,280 68,202 71,280 68,202
Commercial, industrial and business sector 59,325 58,723 59,325 58,723
Targeted rates -   -  
Base sector 6,505 6,579 6,505 6,579
Commercial, industrial and business sector 4,900 5,163 4,900 5,163
Sewerage 35,463 33,518 35,463 33,518
Stormwater 18,145 17,397 18,145 17,397
Water 24,461 22,648 24,461 22,648
Downtown 13,881 13,745 13,881 13,745
Marsden Village 14 14 14 14
Tawa driveways 33 33 33 33
Total revenue from rates (excluding metered water) 234,007 226,022 234,007 226,022
Revenue from water rates by meter 12,329 11,366 12,329 11,366
Total revenue from rates for Wellington City Council 246,336 237,388 246,336 237,388
         
Total rates billed 294,450 284,043 294,450 284,043
less Greater Wellington Regional Council component (48,114) (46,655) (48,114) (46,655)
         
Total revenue from rates for Wellington City Council 246,336 237,388 246,336 237,388

The total amount of rates charged on Council owned properties that have not been eliminated from revenue and expenditure is $11.333m (2013: $10.419m). For the Group rates of $11.378m (2013: $10.455m) 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 2014 totalled $0.215m (2013: $0.260m).

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Total revenue from rates 246,551 237,648 246,551 237,648
         
less Council policy remissions        
Rural open space 134 129 134 129
Land used principally for games or sport 81 80 81 80
Downtown levy - 51 - 51
Total remissions 215 260 215 260
         
Total revenue from rates (net of remissions) 246,336 237,388 246,336 237,388

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.

Ratings base

The revenue from rates for Wellington City Council was billed on the following rating information held as at 30 June 2013.

The number of rating units – 76,021.

  Council
  2014
$000
   
Total capital value of rating units 50,540,014
Total land value of rating units 22,127,973

Note 2: Revenue from operating activitiesTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Grants, subsidies and reimbursements        
Operating 7,284 7,192 12,317 12,237
Capital 36,031 39,603 37,280 38,839
Total grants, subsidies and reimbursements 43,315 46,795 49,597 51,076
         
Development contributions 5,873 4,356 5,873 4,356
         
Other operating activities        
Fines and penalties 8,411 10,132 8,411 10,132
Rendering of services 100,539 94,888 109,744 104,687
Sale of goods 6,263 6,036 7,285 7,789
Total other operating activities 115,213 111,056 125,440 122,608
         
Total revenue from operating activities 164,401 162,207 180,910 178,040

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 $10.491m (2013: $10.641m) and operating reimbursements of $4.555m (2013: $4.471m) 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 $24.514m (2013: $28.088m) 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 $5.261m (2013: $3.814m) from Greater Wellington Regional Council to Wellington Cable Car Limited for the maintenance and upgrade 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
  2014
$000
2013
$000
2014
$000
2013
$000
         
Animal control 1,041 1,128 1,041 1,128
Berths and boat sheds 581 578 581 578
Building consents and licensing services 11,814 11,591 11,814 11,591
Community programmes and facilities hire 2,622 2,403 2,622 2,403
Community housing 19,808 17,992 19,808 17,992
Convention and conference centre 13,865 14,441 13,865 14,441
Encroachments and reserve land contributions 1,768 1,702 1,768 1,702
Green spaces 2,025 1,967 2,025 1,967
Landfill operations and recycling 8,407 7,673 8,407 7,673
Lease revenue from property, plant and equipment 4,332 4,744 4,332 4,744
Libraries - hireage 952 1,095 952 1,095
Parking fees and permits 18,015 17,042 18,015 17,042
Rendering of services recognised in subsidiaries - - 9,205 9,799
Roading infrastructure projects 1,388 1,261 1,388 1,261
Services to Greater Wellington Regional Council 989 751 989 751
Swimming pools 6,519 6,382 6,519 6,382
Trade waste 571 565 571 565
Other 5,842 3,573 5,842 3,573
         
Total rendering of services 100,539 94,888 109,744 104,687

Rendering of services contains unbudgeted revenue from Wellington Waterfront Project ($1.241m), Wellington Venues Project ($13.601m) and the Porirua City Joint Ventures ($0.490m).

 

 

Note 3: Revenue from investmentsTop

    Council Group
  Note 2014
$000
2013
$000
2014
$000
2013
$000
           
Dividend from investment in associates 41 11,966 10,828 - -
Dividend from investment in subsidiary   - 94 - -
Dividend from investment in other entities   113 - 113 -
Investment property lease rentals 17 11,174 12,668 11,174 12,668
           
Total revenue from investments   23,253 23,590 11,287 12,668

The primary investment dividend was from Council’s 34% holding in Wellington International Airport Limited. Council also received its first dividend ($0.113m) from its investment in the Local Government Funding Agency (LGFA).

Note 4: Other incomeTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Gain on disposal of property, plant and equipment 2,786 360 2,786 361
Release of provisions 1,593 2,403 1,603 2,415
Petrol tax 1,074 1,102 1,074 1,102
Restricted funds 1,028 322 1,028 322
Vested assets 8,468 10,519 8,468 10,519
         
Total other income 14,949 14,706 14,959 14,719

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. Vested assets are non-cash in nature and represent a future obligation to the Council, as the Council will have the on-going costs associated with maintaining the assets.

The values of principal vested assets received were: Roading ($3.346m) and Drainage, waste and water ($4.183m).

Note 5: Finance income and expenseTop

    Council Group
  Note 2014
$000
2013
$000
2014
$000
2013
$000
Finance income          
Amortisation of loans to related parties 13 512 465 512 465
Cash flow hedge movements reclassified from hedging reserve 26 - 163 - 163
Fair value hedge adjustments to borrowings   - 648 - 648
Interest on deposits, loans and receivables   2,240 1,641 2,573 1,999
Movements on derivatives at fair value through surplus or deficit 11 - 222 - 222
           
Total finance income   2,752 3,139 3,085 3,497
           
Less          
Finance expense          
Fair value hedge movements   - 648 - 648
Interest on borrowings   21,466 21,269 21,468 21,269
Interest on finance leases   41 62 41 64
Movements on derivatives at fair value through surplus or deficit   137 - 137 -
Re-discounting of interest on provisions   1,110 1,171 1,110 1,171
           
Total finance expense   22,754 23,150 22,756 23,152
           
Net finance cost   20,002 20,011 19,671 19,655

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 2014
$000
2013
$000
2014
$000
2013
$000
Auditor's remuneration:          
Audit services - Audit New Zealand - Financial Statements   337 301 411 390
Audit services - Audit New Zealand - other   7 7 7 7
Audit services - Other Auditors   - - 52 50
           
Impairments          
Bad debts written off not previously provided for   101 46 101 46
Increase in provision for impairment of trade and other receivables 12 218 803 218 803
Impairment loss from property, plant and equipment 18 458 - 1,246 -
           
Governance and employment          
Councillor remuneration as directors/trustees 43 1,341 1,317 1,368 1,407
Directors/trustees of subsidiaries - remuneration   - - 442 467
Other elected members' remuneration (Community Boards) 43 95 105 95 105
Employee benefits expense:          
- Remuneration   71,268 73,666 89,175 91,320
- Superannuation contributions (including Kiwisaver)   1,897 1,380 2,272 1,644
- Termination benefits (including severances)   924 1,781 974 1,862
Other personnel costs   3,515 2,894 3,950 3,339
           
Insurance          
Insurance premiums   12,142 11,482 12,613 11,910
Insurance reserve costs - net 29 1,163 451 1,163 451
           
General          
Advertising, printing and publications   2,380 2,146 8,173 8,189
Consultants and legal fees   7,497 5,961 7,720 6,157
Contractors   3,260 2,701 4,982 3,815
Direct costs   106,095 105,644 115,090 113,871
Grants - general   10,827 13,182 10,624 13,082
Grants to subsidiaries 42 18,275 18,274 - -
Grants to associates 42 355 1,355 355 1,355
Information and communication technology   6,062 6,012 6,818 6,748
Loss on disposal of property, plant and equipment   2,565 1,357 2,486 1,393
Loss on disposal of intangibles   2,082 130 2,082 130
Operating lease - minimum lease payments   1,116 1,174 1,864 1,706
Reassessment of provisions 23 2,979 15,945 2,979 15,945
Utility costs   18,316 17,861 18,710 18,355
Other general costs   22,676 17,955 18,775 14,193
           
Total expenditure on operating activities   297,951 303,930 314,745 318,740

Auditor’s remuneration

During the period Audit New Zealand provided other services to the Council, namely assurance services relating to the Clifton Terrace Carpark managed by the Council on behalf of the New Zealand Transport Agency.

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 the Museum of New Zealand Te Papa Tongarewa.

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 and water meter charges of $11.333m on Council owned properties.

Note 7: Depreciation and amortisationTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Depreciation        
Buildings 21,879 17,780 21,879 17,780
Civic Centre complex 2,962 2,866 2,962 2,866
Restricted buildings 1,302 1,240 1,302 1,240
Drainage, waste and water infrastructure 33,153 33,176 33,153 33,176
Landfill post closure 202 250 202 250
Library collections 2,438 2,307 2,438 2,307
Plant and equipment 9,797 10,243 10,500 10,994
Roading infrastructure 20,201 19,418 20,201 19,418
         
Total depreciation 91,934 87,280 92,637 88,031
         
Amortisation        
Computer software 3,926 3,868 3,974 3,946
         
Total amortisation 3,926 3,868 3,974 3,946
         
Total depreciation and amortisation 95,860 91,148 96,611 91,977

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
  2014
$000
2013
$000
2014
$000
2013
$000
Current tax expense        
Current year - - - 47
Prior period adjustment - - - -
         
Total current tax expense - - - 47
         
Deferred tax expense        
Origination and reversal of temporary differences (75) (270) - -
Change in unrecognised temporary differences - - - 44
Recognition of previously unrecognised tax losses 75 270 - -
         
Total deferred tax expense - - - 44
Reconciliation of tax on the surplus and tax expense Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Surplus for the period before taxation 27,465 28,187 30,924 30,533
         
Prima facie income tax based on domestic tax rate - 28% 7,690 7,892 8,658 8,549
Effect of non-deductible expenses and tax exempt income (7,710) (8,169) (9,944) (8,013)
Effect of tax losses utilised 75 270 - -
Current years loss for which no deferred tax asset was recognised 20 7 30 7
Recognition of prior year loss (75) - (75) (51)
Change in unrecognised temporary differences - - 92 103
Prior period adjustment - - 12 22
Share of income tax of equity accounted associates - - 1,163 (526)
         
Tax Expense/ (Credit) - - (64) 91
Imputation credits Group
  2014
$000
2013
$000
     
Imputation credits available in subsequent periods 98 101

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
  2014
$000
2013
$000
2014
$000
2013
$000
         
Deductible temporary differences - - 971 463
Tax losses 1,882 2,003 1,921 2,005
Total 1,882 2,003 2,892 2,468

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 $0.527m (2013: $0.561m) and for the Group $0.810m (2013: $0.691m).

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 2014 $0.270m (2013: $0.964m) previously unrecognised tax losses, with a tax effect of $0.076m (2013: $0.270m) were recognised by the Group by way of loss transfer arrangement.

As at 30 June 2014, the Group had a deferred tax liability of $1.279m (2013: $1.427m).

Note 10: Cash and cash equivalentsTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Cash at bank 4,434 7,284 5,600 10,105
Cash on hand 41 105 56 115
Short term bank deposits up to 3 months 48,098 37,000 51,197 40,298
         
Total cash and cash equivalents 52,573 44,389 56,853 50,518

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.

Council holds short term deposits as part of its overall liquidity risk management programme. This enables 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 Council’s cost of funds.

Note 11: Derivative financial instrumentsTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Current assets        
Interest rate swaps - fair value hedges - 409 - 409
         
Total current assets - 409 - 409
         
Non-current assets        
Interest rate swaps - cash flow hedges 4,428 3,280 4,428 3,280
         
Total non-current assets 4,428 3,280 4,428 3,280
         
TOTAL DERIVATIVE FINANCIAL INSTRUMENT ASSETS 4,428 3,689 4,428 3,689
         
Current liabilities        
Interest rate swaps - cash flow hedges 180 404 180 404
         
Total current liabilities 180 404 180 404
         
Non-current liabilities        
Interest rate swaps - cash flow hedges 4,651 12,831 4,651 12,831
Interest rate swaps - non-hedged 137 - 137 -
         
Total non-current liabilities 4,788 12,831 4,788 12,831
         
Total derivative financial instrument liabilities 4,968 13,235 4,968 13,235

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 2014
$000
2013
$000
2014
$000
2013
$000
           
Trade receivables - debtors   11,027 10,959 13,255 13,048
Provision for impairment - debtors   (256) (241) (256) (532)
Net trade receivables - debtors   10,771 10,718 12,999 12,516
           
Trade receivables - fines   9,773 10,703 9,773 10,703
Provision for impairment - fines   (6,286) (6,623) (6,286) (6,623)
Net trade receivables - fines   3,487 4,080 3,487 4,080
           
Trade receivables from related parties          
- Subsidiaries 42 976 671 - -
- Associates 42 34 13 34 13
Total trade receivables from related parties   1,010 684 34 13
           
Total net trade receivables   15,268 15,482 16,520 16,609
           
Accrued income   7,096 6,099 7,417 6,602
GST receivable   5,014 4,406 5,134 4,722
Rates receivable   9,053 10,417 9,053 10,417
Sundry receivables   956 13,152 1,540 13,697
           
TOTAL TRADE AND OTHER RECEIVABLES   37,387 49,556 39,664 52,047
           
Represented by:          
Current   37,387 49,556 39,664 52,047
Non-current   - - - -
           
Total trade and other receivables   37,387 49,556 39,664 52,047

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
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance 6,864 6,647 7,155 6,920
New provisions made 218 803 218 821
Release of unused provision (351) (367) (351) (367)
Amount of provision utilised (189) (219) (480) (219)
         
Provision for impairment of total trade receivables - closing balance 6,542 6,864 6,542 7,155

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

Council 2014
Receivables
2013
Receivables
  Gross
$000
Impaired
$000
Net
$000
Gross
$000
Impaired
$000
Net
$000
Trade and other receivables            
Not past due 21,425 - 21,425 31,020 - 31,020
Past due 0-3 months 6,311 (98) 6,213 7,802 (113) 7,689
Past due 3-6 months 3,252 (115) 3,137 3,218 (111) 3,107
Past due more than 6 months 12,941 (6,329) 6,612 14,380 (6,640) 7,740
             
Total trade and other receivables 43,929 (6,542) 37,387 56,420 (6,864) 49,556
Group 2014
Receivables
2013
Receivables
  Gross
$000
Impaired
$000
Net
$000
Gross
$000
Impaired
$000
Net
$000
Trade and other receivables            
Not past due 23,128 - 23,128 32,575 - 32,575
Past due 0-3 months 6,402 (98) 6,305 8,126 (113) 8,013
Past due 3-6 months 3,252 (115) 3,137 3,695 (111) 3,584
Past due more than 6 months 13,423 (6,329) 7,094 14,806 (6,931) 7,875
             
Total trade and other receivables 46,205 (6,542) 39,664 59,202 (7,155) 52,047

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 2014
$000
2013
$000
2014
$000
2013
$000
Financial assets at fair value through other comprehensive income          
Equity investments:          
- Civic Assurance   590 620 590 620
- NZ Local Government Funding Agency (LGFA)   1,883 1,883 1,883 1,883
           
Loans and deposits          
Bank deposits - term greater than 3 months   20,000 - 20,400 400
LGFA - borrower notes   1,328 480 1,328 480
Loans to related parties - associates 42 1,586 1,407 1,586 1,407
Loans to related parties - other organisations   4,312 3,979 4,312 3,979
Loans to external organisations   150 - 150 -
           
TOTAL OTHER FINANCIAL ASSETS   29,849 8,369 30,249 8,769
           
Represented by:          
Current   20,000 - 20,400 400
Non-current   9,849 8,369 9,849 8,369
Total other financial assets   29,849 8,369 30,249 8,769

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% (2013: 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 LGFA has a AA+ (domestic long term) credit rating from Standard and Poors.

Loans

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 2014
$000
2013
$000
2014
$000
2013
$000
Loans to related parties - associates          
           
Wellington Regional Stadium Trust
​(nominal value $15,394,893)
         
Opening balance   1,407 1,248 1,407 1,248
Amortisation of fair value adjustment   179 159 179 159
Closing balance at fair value 42 1,586 1,407 1,586 1,407
           
Loans to related parties - other organisations          
           
Karori Wildlife Sanctuary Trust
​(nominal value $10,346,689)
         
Opening balance   3,979 3,673 3,979 3,673
Amortisation of fair value adjustment   333 306 333 306
Closing balance at fair value   4,312 3,979 4,312 3,979
           
Loans to other external organisations          
Opening balance   - - - -
New loan advanced   300 - 300 -
Loan repayments   (150) - (150) -
Closing balance at fair value   150 - 150  
           
Total loans   6,048 5,386 6,048 5,386

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%. Both loans are due for repayment by the end of 2040.

Loans to other external organisations are suspensory loan arrangements associated with economic development grants provided by Council to achieve defined outcomes. The loans are repayable in the event that the economic development outcomes agreed in providing the grant are not delivered. As agreed outcomes for the grants are met the loans are reduced accordingly.

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

Note 14: InventoriesTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Consumables 631 551 1,313 1,457
Inventories held for re-sale 256 193 360 313
Inventories held for distribution 82 131 82 131
         
Total inventories 969 875 1,755 1,901

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
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance 272 949 272 949
Disposals (272) (899) (272) (899)
Transfers from property, plant and equipment 1,367 222 1,367 222
         
Non-current assets classified as held for sale - closing balance 1,367 272 1,367 272

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
  2014
$000
2013
$000
2014
$000
2013
$000
Computer software        
Cost - opening balance 43,011 38,981 43,701 39,662
Accumulated amortisation (31,941) (28,936) (32,592) (29,509)
Computer software opening balance 11,070 10,045 11,109 10,153
         
Acquired by direct purchase 1,792 5,023 1,871 5,029
Amortisation (3,926) (3,868) (3,974) (3,946)
Net disposals (2,082) (130) (2,082) (130)
Transfer from property, plant and equipment - - - 3
Total computer software - closing balance 6,854 11,070 6,924 11,109
         
Cost 39,849 43,011 40,491 43,701
Accumulated amortisation (32,995) (31,941) (33,567) (32,592)
         
Total computer software - closing balance 6,854 11,070 6,924 11,109
         
Work in progress        
Computer software 9,864 2,442 9,864 2,442
Total work in progress 9,864 2,442 9,864 2,442
         
Carbon credits        
Cost - Opening Balance 37 - 37 -
Additions 25 37 25 37
Net disposals (30) - (30) -
Total Carbon credits - closing balance 32 37 32 37
         
Total intangibles 16,750 13,549 16,820 13,588

Disposals and transfers are reported net of accumulated amortisation.

Work in progress

The increase in computer software work in progress of $7.422m to $9.864m reflects Council’s commitment to enhancing its technological capabilities across a number of platforms. Council has embarked on replacing its core applications, a new electronic document records management system and a new asset management information system for its infrastructure assets.

Carbon credits

As part of the Emissions Trading Scheme (ETS) the Council received carbon credits from Central Government in recognition of the carbon absorbed by a portion of the Council’s green belt. For the year ending 30 June 2014 the Council received 29,721 credits (2013: 149,979). The Council purchased 110,000 credits (2013: 80,000) in the market to cover the expected liabilities associated with landfill operations. During the year 54,613 credits were surrendered to meet the Council’s ETS obligations for the 2013 calendar year. At 30 June 2014 the total number of credits held is 320,194 (2013: 234,686).

At 30 June 2014 the liability relating to these credits is $0.024m (2013: $0.080m).

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
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance 205,951 200,474 205,951 200,474
Additions by acquisition - - - -
Additions by subsequent expenditure 781 92 781 92
Fair value revaluation movements taken to surplus/(deficit) (7,661) 5,385 (7,661) 5,385
Transfer to property, plant and equipment (6,170) - (6,170) -
         
Investment properties - closing balance 192,901 205,951 192,901 205,951

Wellington City Council’s investment properties were valued as at 30 June 2014 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 2014 by Andrew Washington (BCom (VPM) ANZIV SPINZ), registered valuer and Director Valuations for Colliers International (Wellington Valuation) Limited.

The Council’s total investment properties comprise ground leases of $153.480m (2013: $154.902m) and land and buildings of $39.421m (2013: $51.049m) 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 expense Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Revenue from investment properties 11,174 12,668 11,174 12,668
         
Direct operating expenses of investment properties        
- From investment properties that generated income 545 339 545 339
         
Contractual obligations for capital expenditure 19 35 19 35
         
Contractual obligations for operating expenditure 13 48 13 48

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
  2014
$000
2013
$000
2014
$000
2013
$000
         
William Bunt - CBRE Limited 154,830 156,662 154,830 156,662
Andrew Washington - Colliers International Limited 38,071 49,289 38,071 49,289
         
Total fair value of investment properties valued by independent registered valuers 192,901 205,951 192,901 205,951

Note 18: Property, plant and equipmentTop

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

Summary Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Property, plant and equipment - Opening balance 6,546,292 6,501,686 6,558,933 6,514,367
Additions 104,321 149,795 105,948 149,956
Disposals (3,503) (6,823) (3,504) (6,860)
Depreciation expense (91,934) (87,280) (92,637) (88,031)
Impairment losses (458) - (458) -
Revaluation movement (45,290) - (47,163) -
Transfer from non-current assets held for sale (1,367) - (1,367) -
Transfer to non-current assets held for sale - (222) - (222)
Transfer from investment properties 6,170 - 6,170 -
Transfer to intangibles - - - (3)
Movement in work in progress 21,781 (10,864) 21,275 (10,274)
         
Property, plant and equipment - Closing balance 6,536,012 6,546,292 6,547,197 6,558,933

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

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Operational assets        
         
Land        
Land - at cost - opening balance - - - -
Land - at valuation - opening balance 203,331 206,036 203,331 206,036
Total land - opening balance 203,331 206,036 203,331 206,036
Additions 6,976 - 6,976 -
Disposals - (2,205) - (2,205)
Revaluation movement - - - -
Transfer between asset classes 2,775 (500) 2,775 (500)
Total land - closing balance 213,082 203,331 213,082 203,331
         
Land - at cost - closing balance - - - -
Land - at valuation - closing balance 213,082 203,331 213,082 203,331
Total land - closing balance 213,082 203,331 213,082 203,331
         
Buildings        
Buildings - at cost - opening balance 60,906 - 60,906 -
Buildings - at valuation - opening 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 - opening balance 590,375 547,704 590,375 547,704
Additions 10,741 60,906 10,741 60,906
Depreciation expense (21,879) (17,780) (21,879) (17,780)
Disposals (1,228) (485) (1,228) (485)
Impairment (458) - (458) -
Revaluation movement (9,295) - (9,295) -
Transfer between asset classes 365 30 365 30
Transfer from investment properties 6,170 - 6,170 -
Total buildings - closing balance 574,791 590,375 574,791 590,375

Disposals and transfers are reported net of accumulated depreciation.

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Buildings - at cost - closing balance 69,409 60,906 69,409 60,906
Buildings - at valuation - closing balance 539,236 547,282 539,236 547,282
Total cost/valuation 608,645 608,188 608,645 608,188
Accumulated depreciation (33,853) (17,813) (33,853) (17,813)
Total buildings - closing balance 574,792 590,375 574,792 590,375
         
Landfill post closure costs1        
Landfill post closure - at cost - opening balance 3,783 3,930 3,783 3,930
Accumulated depreciation (2,100) (1,850) (2,100) (1,850)
Total landfill post closure costs - opening balance 1,683 2,080 1,683 2,080
Depreciation expense (202) (250) (202) (250)
Movement in post closure costs (139) (147) (139) (147)
Total landfill post closure costs - closing balance 1,342 1,683 1,342 1,683
         
Landfill post closure - at cost - closing balance 3,643 3,783 3,643 3,783
Accumulated depreciation (2,301) (2,100) (2,301) (2,100)
Total landfill post closure costs - closing balance 1,342 1,683 1,342 1,683
         
Civic Centre complex        
Civic Centre complex - at cost - opening balance 173,691 172,949 173,691 172,949
Accumulated depreciation (55,931) (53,065) (55,931) (53,065)
Total Civic Centre complex - opening balance 117,760 119,884 117,760 119,884
Additions 1,541 745 1,541 745
Disposals (687) - (687) -
Depreciation expense (2,962) (2,866) (2,962) (2,866)
Transfer between asset classes - (3) - (3)
Total Civic Centre complex - closing balance 115,652 117,760 115,652 117,760
         
Civic Centre complex - at cost - closing balance 173,817 173,691 173,817 173,691
Accumulated depreciation (58,165) (55,931) (58,165) (55,931)
Total Civic Centre complex - closing balance 115,652 117,760 115,652 117,760
         
Plant and equipment        
Plant and equipment - at cost - opening balance 157,065 156,363 169,867 169,045
Accumulated depreciation (77,728) (74,512) (83,415) (79,448)
Total plant and equipment - opening balance 79,337 81,851 86,452 89,597
Additions 13,846 11,304 15,473 11,464
Depreciation expense (9,797) (10,243) (10,500) (10,994)
Disposals (1,491) (3,548) (1,492) (3,585)
Transfer between asset classes - (27) (1,873) (27)
Transfer to intangibles - - - (3)
Total plant and equipment - closing balance 81,895 79,337 88,060 86,452
         
Plant and equipment - at cost 166,755 157,065 179,310 169,867
Accumulated depreciation (84,860) (77,728) (91,250) (83,415)
Total plant and equipment - closing balance 81,895 79,337 88,060 86,452
  1. The Council’s share of the joint venture with Porirua City Council relating to the Spicer Valley Landfill is included in this asset class.


Disposals and transfers are reported net of accumulated depreciation.

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Library collections        
Library collections - at cost - opening balance 3,972 1,977 3,972 1,977
Library collections - at valuation - opening 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 - opening balance 15,310 15,622 15,310 15,622
Additions 2,072 1,995 2,072 1,995
Depreciation expense (2,438) (2,307) (2,438) (2,307)
Revaluation movement (132) - (132) -
Total library collections - closing balance 14,812 15,310 14,812 15,310
         
Library collections - at cost - closing balance - 3,972 - 3,972
Library collections - at valuation - closing balance 14,812 15,715 14,812 15,715
Total cost/valuation 14,812 19,687 14,812 19,687
Accumulated depreciation - (4,377) - (4,377)
Total library collections - closing balance 14,812 15,310 14,812 15,310
         
TOTAL OPERATIONAL ASSETS 1,001,574 1,007,796 1,007,739 1,014,911
         
Infrastructure assets        
         
Drainage, waste and water        
Drainage, waste and water - at cost - opening balance 76,885 46,755 76,885 46,755
Drainage, waste and water - at valuation - opening 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 - opening balance 1,361,061 1,364,107 1,361,061 1,364,107
Additions 27,784 30,130 27,784 30,130
Depreciation expense (33,153) (33,176) (33,153) (33,176)
Revaluation movement (23,397) - (23,397) -
Transfer between asset classes (4) - (4) -
Total drainage, water and waste - closing balance 1,332,291 1,361,061 1,332,291 1,361,061
         
Drainage, waste and water - at cost - closing balance - 76,885 - 76,885
Drainage, waste and water - at valuation - closing balance 1,332,291 1,350,574 1,332,291 1,350,574
Total cost/valuation 1,332,291 1,427,459 1,332,291 1,427,459
Accumulated depreciation - (66,398) - (66,398)
Total drainage, water and waste - closing balance 1,332,291 1,361,061 1,332,291 1,361,061
         
Roading        
Roading - at cost - opening balance 77,227 38,614 77,227 38,614
Roading - at valuation - opening 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 - opening balance 823,488 804,293 826,088 806,893
Additions 35,286 38,613 35,286 38,613
Depreciation expense (20,201) (19,418) (20,201) (19,418)
Revaluation movement (14,481) - (16,354) -
Transfer between asset classes 4 - 1,877 -
Total roading - closing balance 824,096 823,488 826,696 826,088
         
Roading - at cost - closing balance - 77,227 - 77,227
Roading - at valuation - closing balance 824,096 784,374 826,696 786,974
Total cost/valuation 824,096 861,601 826,696 864,201
Accumulated depreciation - (38,113) - (38,113)
Total roading - closing balance 824,096 823,488 826,696 826,088

Disposals and transfers are reported net of accumulated depreciation.

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Infrastructure land        
Infrastructure land - at cost - opening balance - - - -
Infrastructure land - at valuation - opening balance 36,077 36,447 36,077 36,447
Total infrastructure land - opening balance 36,077 36,447 36,077 36,447
Additions 2,799 - 2,799 -
Disposal - (370) - (370)
Revaluation movement 2,015 - 2,015 -
Transfer between asset classes (2,884) - (2,884) -
Total infrastructure land - closing balance 38,007 36,077 38,007 36,077
         
Infrastructure land - at cost - closing balance - - - -
Infrastructure land - at valuation - closing balance 38,007 36,077 38,007 36,077
Total infrastructure land - closing balance 38,007 36,077 38,007 36,077
         
Land under roads        
Land under roads - at cost - opening balance 2,947,937 2,944,770 2,947,937 2,944,770
Additions 58 3,117 58 3,117
Disposals (51) (88) (51) (88)
Transfer between asset classes 109 360 109 360
Transfer to non-current assets held for sale (84) (222) (84) (222)
Land under roads - closing balance 2,947,969 2,947,937 2,947,969 2,947,937
         
TOTAL INFRASTRUCTURE ASSETS 5,142,363 5,168,563 5,144,963 5,171,163
         
Restricted assets        
         
Art and cultural assets        
Art and cultural assets - at cost - opening balance 9,279 8,731 11,615 11,066
Additions 13 548 13 549
Transfer between asset classes (365) - (365) -
Art and cultural assets - closing balance 8,927 9,279 11,263 11,615
         
Restricted buildings        
Restricted buildings - at cost - opening balance 34,832 33,175 34,832 33,175
Accumulated depreciation (6,793) (5,766) (6,793) (5,766)
Total restricted buildings - opening balance 28,039 27,409 28,039 27,409
Additions 638 1,981 638 1,981
Depreciation expense (1,302) (1,240) (1,302) (1,240)
Disposals - (111) - (111)
Restricted buildings - closing balance 27,375 28,039 27,375 28,039
         
Restricted buildings - at cost - closing balance 35,470 34,832 35,470 34,832
Accumulated depreciation (8,095) (6,793) (8,095) (6,793)
Total restricted buildings - closing balance 27,375 28,039 27,375 28,039
         
Parks and reserves        
Parks and reserves - at cost - opening balance 208,802 204,516 208,802 204,516
Additions 2,706 603 2,706 603
Disposals (46) (16) (46) (16)
Transfer between asset classes - 3,699 - 3,699
Transfer to non-current assets held for sale (1,283) - (1,283) -
Parks and reserves - closing balance 210,179 208,802 210,179 208,802

Disposals and transfers are reported net of accumulated depreciation.

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Town Belt - at cost 84,544 88,103 84,544 88,103
Transfer between asset classes - (3,559) - (3,559)
Total restricted buildings - closing balance 84,544 84,544 84,544 84,544
         
Zoo animals - at cost 500 500 500 500
         
TOTAL RESTRICTED ASSETS 331,525 331,164 333,861 333,500
         
Work in progress        
- Land 80 53 80 53
- Buildings 52,311 13,881 52,311 13,881
- Civic Centre complex - 5,835 - 5,835
- Plant and equipment 7,990 13,354 8,074 13,944
- Drainage, waste and water - 457 - 457
- Roading - 4,840 - 4,840
- Art and cultural 169 173 169 173
- Restricted buildings - 176 - 176
TOTAL WORK IN PROGRESS 60,550 38,769 60,634 39,359
         
Total property, plant and equipment 6,536,012 6,546,292 6,547,197 6,558,933

Core Assets

Included within the infrastructure assets above are the following core Council assets:

Council 2014
  Closing book value Additions Replacement Cost
  Constructed Vested
  $000 $000 $000 $000
Water supply        
- treatment plants and facilities 198,824 793 - 342,597
- other assets 315,647 1,783 - 540,993
         
Sewerage        
- treatment plants and facilities 171,589 - - 211,785
- other assets 317,622 3,873 - 725,665
         
Stormwater drainage 327,629 3,032 - 615,621
         
Flood protection and control works - - - -
         
Roads and footpaths 602,634 4,994 500 784,610
         
Total 1,933,945 14,475 500 3,221,271

The replacement cost is based on the optimised replacement cost estimate amounts in the valuation for the 2013/14 year. The core value of Roads and footpaths shown above excludes the value of retaining walls, street lighting, sumps & leads and other related assets totalling $221.5 million that are included in the value of Roading assets under infrastructural assets as disclosed in the previous page.

Finance leases

The net carrying amount of plant and equipment assets held by the Council under finance leases is $0.739m (2013: $0.906m).

 

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 2014 by William Bunt (FNZIV, FPINZI), registered valuer and Director of Valuation Services for CBRE Limited.

Library collections were valued as at 30 June 2014 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 2014 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 2014 for the operational land and buildings were assessed using appropriate indices. The increase in asset value of 3.4% was not considered material by management and accordingly the assets were not revalued at 30 June 2014.

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

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.

Insurance of assets

  Council
  2014
$000
2013
$000
     
Total value of property, plant and equipment 6,536,012 6,546,292
Value or assets covered by insurance contracts 3,042,231 3,065,601
     
The maximum amount to which assets are insured under Council insurance policies 550,000 462,500

The value of assets covered by insurance excludes land and land under roads.

In addition to Council’s insurance, in the event of natural disaster it is assumed that Central Government will contribute 60% towards the restoration of Council owned underground drainage, waste and water assets and the New Zealand Transport agency will contribute between 44-54% towards the restoration of roading assets.

The Council is not covered by any financial risk sharing arrangements in relation to its assets.

An insurance reserve fund of $9.609m (2013: $10.022m) exists to meet the cost of claims that fall below deductible limits under Council insurance policies. Refer to Note 29: Special Reserves and Funds.

Note 19: Trade and other payablesTop

    Council Group
  Note 2014
$000
2013
$000
2014
$000
2013
$000
           
Trade payables and accruals   43,753 42,875 46,875 47,118
           
Trade payables owing to related parties          
- Subsidiaries 42 1,203 980 - -
- Associates 42 1,030 712 1,030 712
           
Interest payable   3,679 2,826 3,679 2,826
Sundry payables   8,603 11,182 9,368 12,326
           
TOTAL TRADE AND OTHER PAYABLES   58,268 58,575 60,952 62,982
           
Represented by:          
Current   57,638 57,945 60,322 62,352
Non-current   630 630 630 630
           
Total trade and other payables   58,268 58,575 60,952 62,982

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
  2014
$000
2013
$000
2014
$000
2013
$000
         
Inspection and licensing fees 2,335 2,392 2,335 2,392
Lease rentals 3,942 2,584 3,942 2,584
Rates and water 968 1,457 968 1,457
Indoor Community Sports Centre 1,800 2,043 1,800 2,043
Wellington Venues 1,547 1,270 1,547 1,270
Revenue in advance - subsidiaries - - 1,119 487
Other 1,513 1,659 1,513 1,659
         
Total revenue in advance 12,105 11,405 13,224 11,892

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 cash and cash equivalents and other current (12 months or less) investment deposits held against the gross borrowings to obtain a net borrowings position.

Net borrowings Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Total gross borrowing and overdraft facilities utilised 419,118 388,330 419,125 388,340
         
Less        
Cash and cash equivalents (52,573) (44,389) (56,853) (50,518)
Bank deposits - term (3-12 months) (20,000) - (20,400) (400)
         
Total net borrowings 346,545 343,941 341,872 337,422

Further discussion and illustration of the net borrowing and investment position is included in the Financial Overview on page 106.

Gross Borrowings

The gross borrowings are comprised as follows:

Gross borrowings Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Current        
         
Bank facilities - short term - committed - - - -
Commercial paper 100,000 100,000 100,000 100,000
Debt securities - fixed rate bonds - 25,000 - 25,000
Debt securities - floating rate notes 29,000 30,000 29,000 30,000
Finance leases 371 562 375 565
Total current 129,371 155,562 129,375 155,565
         
Non-current        
         
Bank loans - term 3,125 3,035 3,125 3,035
Debt securities - fixed rate bonds 20,000 15,409 20,000 15,409
Debt securities - floating rate notes 266,500 214,000 266,500 214,000
Finance leases 122 324 125 331
Total non-current 289,747 232,768 289,750 232,775
         
Total borrowings 419,118 388,330 419,125 388,340

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 (2013: $145m) 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 (2013: $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 (2013: Nil).

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 $3.125m (2013: $3.035m) 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 3.31% to 3.71%.

Debt securities

The Group has issued $20m (2013: $40m) of fixed rate bonds with maturities from 13 June 2016 to 31 July 2023. Interest is payable six monthly in arrears. The interest rates range from 4.47% to 7.13%. The value of fixed rate debt securities included a fair value hedge adjustment of $Nil (2013: $0.409m) relating to the fair value interest rate swaps associated with a bond that matured on 31 March 2014.

The Group has issued $295.5m (2013: $244m) of floating rate notes with maturities from 26 July 2014 to 15 April 2023. Interest is payable quarterly in arrears. The interest rates vary from 3.28% to 4.81% and are subject to quarterly reset dates.

The following table shows the further available but as yet unutilised borrowing facilities available to the Council and Group at the end of the reporting period.

Borrowing and overdraft facilities unutilised Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Bank facilities - short term - committed 55,000 55,000 55,000 55,000
Bank facilities - long term - committed 90,000 90,000 90,000 90,000
Bank facilities - short term - uncommitted 5,000 5,000 5,000 5,000
Bank overdraft 1,500 1,500 1,550 1,550
Total borrowing and overdraft facilities unutilised 151,500 151,500 151,550 151,550

Bank overdraft

An overdraft facility of $1.500m (2013: $1.500m) is available to Council. This facility was undrawn as at 30 June 2014 (2013: undrawn). The Group has additional overdraft facilities of $0.050m (2013: $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.

Ring fenced funds

The Council holds $24.320m (2013: $15.442m) 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 $21.041m (2013: $13.059m), representing the accumulated cash surpluses from the Housing activity, has been ring fenced for future investment in the Council's social housing assets. There is also an amount of $3.279m (2013: $2.383m) 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
  2014
$000
2013
$000
2014
$000
2013
$000
Future minimum lease payments        
Not later than one year 394 596 399 600
Later than one year and not later than five years 130 336 133 344
Later than five years - - - -
Total future minimum lease payments 524 932 532 944
         
Future finance charges (31) (46) (32) (48)
Present value of future minimum lease payments 493 886 500 896
         
Present value of future minimum lease payments        
Not later than one year 371 562 375 565
Later than one year and not later than five years 122 324 125 331
Later than five years - - - -
Total present value of future minimum lease payments 493 886 500 896

Note 22: Employee benefit liabilities and provisionsTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Current        
Short-term benefits        
Payroll accruals 771 459 1,039 793
Holiday leave 4,380 4,525 5,324 5,481
Total short-term benefits 5,151 4,984 6,363 6,274
         
Termination benefits        
Other contractual provisions 77 714 77 714
Total termination benefits 77 714 77 714
         
Total current 5,228 5,698 6,440 6,988
         
Non-current        
Long-term benefits        
Long service leave provision - - 69 78
Retirement gratuities provision 1,207 1,474 1,219 1,486
Total long-term benefits 1,207 1,474 1,288 1,564
         
Total employee benefit liabilities and provisions 6,435 7,172 7,728 8,552

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

Long service leave provision Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance - - 78 101
Additional or increased provision made - - - -
Release of provision - - (9) (23)
Amount utilised - - - -
Long service leave - closing balance - - 69 78
Retirement gratuities provision Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance 1,474 1,649 1,486 1,699
Movement in required provision (52) (23) (52) (23)
Release of unused provision (109) (170) (109) (182)
Rediscounting of interest 92 102 92 102
Amount utilised (198) (84) (198) (110)
Retirement gratuities - closing balance 1,207 1,474 1,219 1,486

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 2.57%) as at 30 June 2014, before discounting, is $1.679m (2013: $2.093m). The discount rate used is 6.50%.

Movement in the above termination benefits provision is analysed as follows:

Other contractual provisions Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance 714 1,229 714 1,229
New provision 77 714 77 714
Release of unused provision - (463) - (463)
Amount utilised (714) (766) (714) (766)
Other contractual provisions - closing balance 77 714 77 714

Background

The above provision is to cover estimated redundancy costs as at 30 June 2014 resulting from current restructuring within the Council.

Note 23: Provision for other liabilitiesTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Current        
ACC Partnership programme 31 20 31 20
Landfill post closure costs 2,311 3,322 2,311 3,322
Storm costs - 855 - 855
Weathertight homes 28,439 30,304 28,439 30,304
Total current 30,781 34,501 30,781 34,501
         
Non-current        
Landfill post closure costs 13,468 13,027 13,468 13,027
Weathertight homes 21,954 36,675 21,954 36,675
Total non-current 35,422 49,702 35,422 49,702
         
Total provision for other liabilities 66,203 84,203 66,203 84,203

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

ACC Partnership programme Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance 20 10 20 10
Change in provision for risks incurred 95 96 95 96
Amounts utilised (84) (86) (84) (86)
Total liability for claims outstanding 31 20 31 20
         
Represented by:        
Present value of future payments 30 17 30 17
Risk margin 1 3 1 3
         
Total liability for claims outstanding 31 20 31 20

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
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance 16,349 17,217 16,349 17,217
Release of provision (1,284) (1,521) (1,284) (1,521)
Re-discounting of interest 1,018 1,069 1,018 1,069
Amount utilised (304) (416) (304) (416)
Landfill post closure costs - closing balance 15,779 16,349 15,779 16,349

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 cash flows are discounted using the rate of 6.50%. The gross provision (inflation adjusted at 2.80%), before discounting, is $23.287m as at 30 June 2014 (2013: $24.505m). 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 700,000m3 (2013: 658,051m3) 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 536,000m3 (2013: 589,000m3) and an estimated remaining life out to the end of 2022.

Storm costs Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance 855 - 855 -
New provision - 855 - 855
Amount utilised (855) - (855) -
Storm costs - closing balance - 855 - 855

Background

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

Weathertight homes Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance 66,979 56,057 66,979 56,057
Additional or increased provision made 2,884 14,965 2,884 14,965
Amount utilised (19,470) (4,043) (19,470) (4,043)
Weathertight homes - closing balance 50,393 66,979 50,393 66,979

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 $4.997m (2013: $7.739m) 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 cash flows 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 2014 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 2014
  +10% -10%
Assumption Effect on
Surplus or Deficit
  $000 $000
Amount claimed 5,039 (5,040)
Settlement level award 5,039 (5,040)
Council contibution to settlement 5,039 (5,040)
Timing of claim payments 241 (465)
Participation in FAP scheme (1,748) 1,748
Change in percentage of homeowners who will make a successful claim 500 (500)
Council and Group 2014
  +2% -2%
Assumption Effect on
Surplus or Deficit
  $000 $000
     
Discount rate (1,624) 1,353

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
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance (3,442) (2,562) (3,442) (2,562)
Funding for weathertight homes liability 4,996 3,331 4,996 3,331
Total amounts paid (19,470) (4,043) (19,470) (4,043)
Interest allocation (614) (168) (614) (168)
Closing balance funded through borrowings (18,530) (3,442) (18,530) (3,442)

Note 24: Accumulated funds and retained earningsTop

    Council Group
  Note 2014
$000
2013
$000
2014
$000
2013
$000
           
Accumulated funds   1,269,134 1,269,134 1,293,162 1,293,162
           
Retained earnings          
Opening balance   3,653,843 3,628,545 3,677,647 3,650,181
Net surplus   27,465 28,187 30,988 30,442
Transfers from revaluation reserves 25 - 370 - 370
Transfers from restricted funds 28 8,056 813 8,307 1,293
Transfers to restricted funds 28 (4,779) (4,072) (5,097) (4,639)
           
Retained earnings - closing balance   3,684,585 3,653,843 3,711,845 3,677,647
           
Total accumulated funds and retained earnings   4,953,719 4,922,977 5,005,007 4,970,809

Note 25: Revaluation reservesTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Land - opening balance 144,302 144,672 144,302 144,672
Transfer between classes (48) - (48) -
Transfer to retained earnings on disposal of assets - (370) - (370)
Land - closing balance 144,254 144,302 144,254 144,302
         
Buildings - opening balance 240,462 240,462 240,462 240,462
Revaluation adjustment (9,295) - (9,295) -
Buildings - closing balance 231,167 240,462 231,167 240,462
         
Library collections - opening balance 7,147 7,147 7,147 7,147
Revaluation recognised in other comprehensive income (132) - (132) -
Library collections - closing balance 7,015 7,147 7,015 7,147
         
Drainage, waste and water - opening balance 641,549 641,549 641,549 641,549
Revaluation recognised in other comprehensive income (23,397) - (23,397) -
Drainage, waste and water - closing balance 618,152 641,549 618,152 641,549
         
Infrastructure land - opening balance 13,347 13,347 13,347 13,347
Revaluation recognised in other comprehensive income 2,015 - 2,015 -
Transfer between classes 48 - 48 -
Infrastructure land - closing balance 15,410 13,347 15,410 13,347
         
Roading - opening balance 370,516 370,516 372,389 372,389
Revaluation recognised in other comprehensive income (14,481) - (16,354) -
Roading - closing balance 356,035 370,516 356,035 372,389
         
Associates' revaluation reserves - opening balance - - 109,934 109,934
Revaluation recognised in other comprehensive income - - - -
Effect of changed shareholding in associates - - 38 -
Associates' revaluation reserves - closing balance - - 109,972 109,934
         
TOTAL REVALUATION RESERVES 1,372,033 1,417,323 1,482,005 1,529,130
         
These revaluation reserves are represented by:        
Opening balance 1,417,323 1,417,693 1,529,130 1,529,500
Revaluation recognised in other comprehensive income (45,290) - (47,163) -
Effect of changed shareholding in associates - - 38 -
Transfer to retained earnings on disposal of assets - (370) - (370)
Total revaluation reserves - closing balance 1,372,033 1,417,323 1,482,005 1,529,130

The revaluation reserves are used to record accumulated increases and decreases in the fair value of certain asset classes. For the period ending 30 June 2014 Council revalued its infrastructure assets (networks and land), library collections and investment properties.

The Council is conducting a stocktake of infrastructural assets. The decrease on revaluation recorded in the 2014 financial year is due to the improvement in data about the condition and quantity of infrastructural assets that Council owns.

Revaluation movements are non-cash in nature and represent the restating of the Council’s assets, subject to revaluation, into current dollar values after taking into account the condition and remaining lives of the assets.

Note 26: Hedging reserveTop

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance (9,955) (23,896) (9,956) (24,050)
Cash flow hedge net movement recognised in other comprehensive income 9,552 14,104 9,552 14,104
Cash flow hedge movement reclassified to finance income - (163) - (163)
Cash flow hedge movement reclassified to share of equity accounted surplus of associate - - 1 153
Hedging reserve - closing balance (403) (9,955) (403) (9,956)

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
  2014
$000
2013
$000
2014
$000
2013
$000
         
Opening balance 93 154 93 154
Fair value adjustment taken to other comprehensive income (30) (61) (30) (61)
Fair value through other comprehensive income - closing balance 63 93 63 93

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 2014
$000
2013
$000
2014
$000
2013
$000
           
Special reserves and funds 29 14,271 17,553 17,025 20,240
Trusts and bequests 30 412 407 412 407
 ​   14,683 17,960 17,437 20,647
           
Opening balance   17,960 14,701 20,647 17,301
Additional funds   4,779 4,072 5,097 4,639
Funds utilised   (3,813) (813) (4,064) (1,293)
Funds released to retained earnings   (4,243) - (4,243) -
Restricted funds - closing balance   14,683 17,960 17,437 20,647

These funds are held by 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
  2014
$000
2013
$000
2014
$000
2013
$000
Wellington economic initiatives development fund        
Opening balance 3,000 - 3,000 -
Additional funds 3,000 3,000 3,000 3,000
Funds utilised (1,625) - (1,625) -
Wellington economic initiatives development fund - closing balance 4,375 3,000 4,375 3,000
         
Reserve purchase and development fund        
Opening balance 285 299 285 299
Additional funds received 2 7 2 7
Funds utilised - (21) - (21)
Reserve purchase and development fund - closing balance 287 285 287 285
         
Early Settlers Memorial Park reserve        
Opening balance 3 23 3 23
Funds utilised (3) (20) (3) (20)
Early Settlers Memorial Park reserve - closing balance - 3 - 3
         
Insurance reserve        
Opening balance 10,022 9,723 10,022 9,723
Additional funds received 750 750 750 750
Funds utilised - net of recoveries (1,163) (451) (1,163) (451)
Insurance reserve - closing balance 9,609 10,022 9,609 10,022
         
Subsidiaries' restricted funds        
Opening balance - - 2,687 2,600
Additional funds received - - 318 567
Funds utilised - - (251) (480)
Subsidiaries' restricted funds - closing balance     2,754 2,687
         
Subdivision development reserve - 4,119 - 4,119
Other reserves - 124 - 124
         
Total special reserves and funds - closing balance 14,271 17,553 17,025 20,240

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 but was not utilised during this year.

Early Settlers Memorial Park reserve

This reserve is used to upgrade and maintain the Bolton Street Cemetery and surrounding park and walkways. This fund has now been exhausted.

Insurance reserve

This reserve came into effect in 2001 and allows the Council to meet the cost of claims that fall below deductible limits under Council’s insurance policies. Annual additions to the reserve of $0.750m (2013: $0.750m) 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 Closing Balance
2013
$000
Additional Funds
2014
$000
Funds Utilised
2014
$000
Closing Balance
2014
$000
A Graham Trust 3 - - 3
A W Newton Bequest 286 15 - 301
Charles Plimmer Bequest - 1,009 (1,009) -
E A McMillan Estate 6 - - 6
E Pengelly Bequest 12 1 - 13
F L Irvine Smith Memorial 6 1 - 7
Greek NZ Memorial Association 5 - - 5
Kidsarus 2 Donation 3 - - 3
Kirkcaldie and Stains Donation 17 - - 17
QEII Memorial Book Fund 20 1 (3) 18
Schola Cantorum Trust 6 - - 6
Stanley Banks Trust 19 - (10) 9
Terawhiti Grant 10 - - 10
Wellington Beautifying Society Bequest 14 - - 14
Total trusts and bequests 407 1,027 (1,022) 412

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 - $1.009m

Funds utilised

Trusts and bequests funds utilised during the year were:

Charles Plimmer

Stanley Banks

QEII Memorial Book fund

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
  2014
$000
2013
$000
2014
$000
2013
$000
Financial assets        
Loans and receivables        
Cash and cash equivalents 52,573 44,389 56,853 50,518
Trade and other receivables 37,387 49,556 39,664 52,047
Other financial assets 27,376 5,866 27,776 6,266
Total loans and receivables 117,336 99,811 124,293 108,831
         
Financial assets at fair value through other comprehensive income        
Other financial assets 2,473 2,503 2,473 2,903
Total financial assets at fair value through other comprehensive income 2,473 2,503 2,473 2,903
         
Hedged derivative financial instruments        
Derivatives designated as cash flow hedges 4,428 3,280 4,428 3,280
Derivatives designated as fair value hedges - 409 - 409
Total hedged derivative financial instruments 4,428 3,689 4,428 3,689
         
Total financial assets 124,237 106,003 131,194 115,423
Total non-financial assets 6,782,955 6,805,315 6,946,394 6,965,931
         
TOTAL ASSETS 6,907,192 6,911,318 7,077,588 7,081,354
         
Financial liabilities        
Financial liabilities at amortised cost        
Trade and other payables 58,268 58,575 60,952 62,982
Borrowings 419,118 388,330 419,125 388,340
Total financial liabilities at amortised cost 477,386 446,905 480,077 451,322
         
Derivative financial instruments        
Derivatives designated as cash flow hedges 4,831 13,235 4,831 13,235
Total derivative financial instruments 4,831 13,235 4,831 13,235
         
Financial liabilities at fair value through surplus/deficit        
Derivative financial instruments - non-hedged 137 - 137 -
Total financial liabilities at fair value through surplus/deficit 137 - 137 -
         
Total financial liabilities 482,354 460,140 485,045 464,557
Total non-financial liabilities 84,743 102,780 88,434 106,074
         
Total liabilities 567,097 562,920 573,479 570,631

Fair value

The fair values of all financial instruments equate or are approximate 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 2014 2013
  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 - - 2,473 - - 2,503
             
Derivative financial instruments            
- Fair value hedges - - - - 409 -
- Cash flow hedges - 4,428 - - 3,280 -
             
Financial liabilities            
Derivative financial instruments            
- Cash flow hedges - 4,831 - - 13,235 -
- non-hedged swaps - 137 - - - -
Reconciliation of fair value movements in Level 3 Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME        
Equity investments        
         
Opening balance - 1 July 2,503 2,681 2,503 2,681
Purchases - - - -
Disposals - (117) - (117)
Gains or losses recognised in other comprehensive income (30) (61) (30) (61)
Closing balance - 30 June 2,473 2,503 2,473 2,503

The level 3 equity investments comprise the Council’s shareholdings in the Local Government Funding Agency $1.833m (2013: $1.833m) and Civic Assurance $0.590m (2013:$0.620m). Refer to Note 13: Other financial assets for more details.

Financial risk managementTop

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 riskTop

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
  2014
$000
2013
$000
2014
$000
2013
$000
Financial instruments with credit risk        
         
Cash and cash equivalents 52,532 44,284 56,797 50,403
         
Derivative financial instrument assets 4,428 3,689 4,428 3,689
         
Trade and other receivables        
- Trade receivables 15,268 15,482 16,520 16,609
- Other receivables 22,119 34,074 23,144 35,438
         
Other financial assets        
- Bank deposits - term 20,000 - 20,400 400
- LGFA borrower notes 1,328 480 1,328 480
- Loans to related parties - associates 1,586 1,407 1,586 1,407
- Loans to related parties - other organisations 4,312 3,979 4,312 3,979
- Loans to external organisations 150 - 150 -
         
Financial guarantees to related parties 600 700 600 700
         
Total financial instruments with credit risk 122,323 104,095 129,265 113,105

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.

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Cash - registered banks        
AA- 4,434 7,284 5,600 10,105
         
Short term deposits - registered banks        
AA- 48,098 36,000 51,197 38,970
A+ - 1,000 - 1,328
         
Term deposits (greater than 3 months) - registered banks        
AA- 10,000 - 10,400 400
A+ 10,000 - 10,000 -
         
Term deposits - borrower notes - NZ LGFA        
AA+ 1,328 480 1,328 480
         
Derivative financial instrument assets        
AA- 4,428 3,689 4,428 3,689

Liquidity riskTop

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
  2014
$000
2013
$000
2014
$000
2013
$000
Contractual cash flows of financial liabilities excluding derivatives        
0-12 months 200,845 224,791 203,534 229,832
1-2 years 104,395 39,429 104,398 38,804
2-5 years 139,265 176,441 139,265 176,444
More than 5 years 95,146 46,526 95,146 46,526
TOTAL CONTRACTUAL CASH FLOWS OF FINANCIAL LIABILITIES EXCLUDING DERIVATIVES 539,651 487,187 542,343 491,606
         
Represented by:        
Carrying amount as per the Statement of Financial Position 477,386 446,905 480,077 451,322
Future interest payable 62,265 40,282 62,266 40,284
Total contractual cash flows of financial liabilities excluding derivatives 539,651 487,187 542,343 491,606

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
  2014
$000
2013
$000
2014
$000
2013
$000
Contractual cash flows of derivative financial liabilities        
0-12 months 3,478 6,612 3,478 6,612
1-2 years 1,464 4,310 1,464 4,310
2-5 years 1,289 3,998 1,289 3,998
More than 5 years (252) 39 (252) 39
TOTAL CONTRACTUAL CASHFLOW OF DERIVATIVE FINANCIAL LIABILITIES 5,979 14,959 5,979 14,959
         
Represented by:        
Future interest payable 5,979 14,959 5,979 14,959
Total contractual cash flows of derivative financial liabilities 5,979 14,959 5,979 14,959

In addition to cash to be received in 2014/15 the Council currently has $145m in unused committed bank facilities available to settle obligations as well as $89.915m 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% 53%
3-5 years 20% 60% 21%
More than 5 years 15% 60% 26%

Market riskTop

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 and the Council’s treasury management advisors (presently PwC), 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% 6% 90%

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

  Council Group
  2014
$000
2013
$000
2014
$000
2013
$000
Financial instruments subject to interest rate volatility - before effect of interest rate swaps        
Cash and cash equivalents 52,573 44,389 56,853 50,518
Bank deposits - term greater than 3 months 20,000 - 20,400 400
Bank facilities - short term - - - -
Bank loans (3,125) (3,035) (3,125) (3,035)
Commercial paper (100,000) (100,000) (100,000) (100,000)
Debt securities - floating rate notes (295,500) (244,000) (295,500) (244,000)
Total financial instruments subject to interest rate volatility - before effect of interest rate swaps (326,052) (302,646) (321,372) (296,117)
         
Effect of interest rate swaps in reducing interest rate volatility        
Effect of fair value hedge - (25,000) - (25,000)
Effect of Cash flow interest rate swaps - hedged 303,500 277,000 303,500 277,000
Effect of Cash flow interest rate swaps - non-hedged 7,500 - 7,500 -
         
Total effect of interest rate swaps in reducing interest rate volatility 311,000 252,000 311,000 252,000
         
Total financial instruments subject to interest rate volatility - after effect of interest rate swaps (15,052) (50,646) (10,372) (44,117)

These interest rate swaps have a nominal value which represents the value of the debt that 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 2014 the fair value of the interest rate swaps was -$0.540m (2013: -$9.546m). 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
  2014
%
2013
%
2014
%
2013
%
Investments        
Cash and cash equivalents 3.79 3.18 3.71 3.17
Short term deposits > 3 months 4.29 - 4.29 -
Bank deposits - term - - - 4.25
LGFA - borrower notes 4.11 3.35 4.11 3.35
Loans to related parties - - - -
         
Borrowings        
Bank facilities - short term - - - -
Bank loans 7.00 7.00 7.00 7.00
Commercial paper 3.46 2.78 3.46 2.78
Debt securities - fixed 5.14 6.32 5.14 6.32
Debt securities - floating 4.17 3.50 4.17 3.50
Derivative financial instruments - hedged 5.04 5.00 5.04 5.00
Derivative financial instruments - non-hedged 4.84 - 4.84 -
Finance leases 10.20 10.28 10.21 10.29

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   2014
    +1% -1% +1% -1%
Interest rate risk   Effect on Surplus
​or Deficit
Effect on Other Comprehensive Income
  Note $000 $000 $000 $000
Financial assets          
Cash and cash equivalents - Council a 526 (526)    
Bank deposits - term greater than 3 months   200 (200)    
LGFA - Borrower notes   13 (13)    
Derivatives - Interest rate swaps - hedged b     7,417 (8,023)
           
Financial liabilities          
Bank term loans   (31) 31    
Commercial paper c (180) 180    
Debt securities d (840) 840    
Derivatives - Interest rate swaps - hedged b     8,069 (8,496)
Derivatives - Interest rate swaps - non-hedged e 859 (916)    
           
Total sensitivity to interest rate risk   547 (604) 15,486 (16,519)

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 $0.526m.

b. Derivatives - hedged interest rate swaps

Derivatives include interest rate swaps with a fair value totalling -$0.540m. A movement in interest rates of plus 1% has an effect on increasing the unrealised value of the hedged interest rate swaps by $15.486m. A movement in interest rates of minus 1% has an effect on reducing the unrealised value of the hedged interest rate swaps by $16.519m.

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 $295.500m. The full exposure to changes in interest rates has been reduced because the Council has $211.500m of this debt at fixed rates through interest rate swaps. Debt securities at fixed rates total $20m. A movement in interest rates of plus or minus 1% has an effect on the interest expense of $0.840m.

e. Derivatives – non-hedged interest rate swaps

Council presently has non-hedged interest rate swaps with a fair value totalling $0.137m. A movement in interest rates of plus 1% has an effect on the interest expense of $0.859m. A movement in interest rates of minus 1% has an effect on the interest expense of -$0.916m.

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 (LTP) 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 activity areaTop

This analysis by activity area is a summary of the “what it cost” information within the Statements of Service Performance. Refer to pages 24 to 97 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
2014
$000
Budget
2014
$000
Actual
2014
$000
Budget
2014
$000
Actual
2014
$000
Budget
2014
$000
Variance
2014
$000
Activity area              
               
Governance 1,102 733 16,590 17,314 (15,488) (16,581) 1,093
Environment 21,349 15,440 142,512 144,978 (121,163) (129,538) 8,375
Economic development 22,137 186 42,143 19,080 (20,006) (18,894) (1,112)
Cultural wellbeing 933 1,013 17,311 17,361 (16,378) (16,348) (30)
Social and recreation 62,082 68,490 100,078 101,146 (37,996) (32,656) (5,340)
Urban development 9,300 11,473 35,020 27,634 (25,720) (16,161) (9,559)
Transport 33,731 33,056 53,890 54,473 (20,159) (21,417) 1,258
               
Total activity areas 150,634 130,391 407,544 381,986 (256,910) (251,595) (5,315)
               
Council 301,057 293,973 16,682 6,711 284,375 287,262 (2,887)
               
Total activity areas and Council 451,691 424,364 424,226 388,697 27,465 35,667 (8,202)

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

Environment is under budget due to assets which have been vested to Council. The value of these assets is reflected as income. The favourable position was also impacted by a reduction in the Closed Landfill Provision, and lower landfill operations, refuse collection and waste water treatment plant operational costs.

The variance in Economic Development is due to unbudgeted investments in economic projects, which were funded via the Wellington Economic Initiatives Development Fund (WEID). A total of $3m for WEID was approved by Council, after the 2013/14 Annual Plan was finalised, and was to be funded out of the 2012/13 Audited Operating Surplus.

Social and Recreation is over budget mainly due to the timing of grant income recognition relating to the Housing Upgrade Project. Libraries are also over budget due to lower operating revenue and higher personnel and depreciation expenditure.

Transport is under budget due to assets which have been vested to Council. The value of these assets is reflected as income. This has offset an unfavourable variance in parking due to lower enforcement revenue and one off costs associated with transitioning parking enforcement from an external contractor to an internal Council team.

Urban development is over budget due to a downward movement in the fair value of investment properties and additional depreciation costs all relating to the Wellington Waterfront Project.

The variance in Council is due to number of factors including the increase in the provision for weathertight homes, payments from the insurance reserve, the decrease in the value of commercial properties and reduced rates revenue. Offset by higher than budgeted Wellington International Airport Limited dividend income.

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

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
Activity 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 activity 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 activity areas and Council 446,415 416,606 418,228 379,180 28,187 37,426 (9,239)

Note 33: Major budget variationsTop

Statement of Comprehensive Financial Performance Council
  2014
$000
2013
$000
Reconciliation of actual surplus to underlying surplus and variance to budget    
     
Council actual net surplus 27,465 28,187
     
Less:    
Fair value movements:    
Investment property revaluation (including Wellington Waterfront Project) 7,661 (5,385)
Other 175 (298)
Total fair value movements 7,836 (5,683)
     
Additional net expenditure from Wellington Waterfront and Venues Projects and Porirua Joint Ventures 5,003 6,764
     
Changes to external funding for capital expenditure:    
Restricted funds income 52 (72)
(Increase)/Decrease in development contributions revenue (873) 644
Timing of the Housing New Zealand capital grant 6,225 6,513
Change in New Zealand Transport Agency reimbursement - capital (227) (139)
Additional external funding towards capital projects (730) (271)
Total changes to external funding for capital expenditure 4,447 6,675
     
Vested assets - income (8,468) (10,519)
Gain on disposal of assets (2,786) (360)
Loss on disposal of assets and intangible assets 4,647 1,487
Loss on impairment of assets 458 -
     
Expenditure not funded under section 100 of LGA    
New Zealand Transport Agency funded transport projects 110 (31)
Moa Point Treatment Plant and Living Earth - (517)
Total additional expenditure not funded under section 100 of LGA 110 (548)
     
Underlying Council actual net surplus 38,712 26,003
less Council budget net surplus 35,667 37,426
Council underlying variance from budget 3,045 (11,423)
     
Major Budget Variations    
     
Unbudgeted revenue/(expenditure):    
Restatement of weathertight homes provision (2,884) (14,965)
Provision for storm costs - (855)
Insurance costs (net of recoveries) funded through insurance reserve (1,163) (451)
Total unbudgeted revenue/expenditure (4,047) (16,271)
     
Significant variations from budget    
Decrease in rates revenue (498) (2,228)
Decrease in income from activities (1,052) (3,276)
Dividends in excess of budget (including Wellington International Airport Limited) 2,181 1,624
Decrease in net interest expense 1,762 1,997
Decrease in depreciation 1,244 2,820
Other net variances1 1,605 2,039
Total significant variations from budget 5,242 2,976
     
COUNCIL UNDERLYING VARIANCE EXCLUDING RINGFENCED AMOUNTS 1,195 (13,295)
     
Variance in ringfenced City Housing surplus / (deficit) 973 505
Variance in ringfenced Waste Activity surplus / (deficit) 877 1,367
Council underlying variance from budget 3,045 (11,423)
  1. Other net variances relate to other reduced costs in programmes, projects and organisational costs.

Statement of Changes in Equity

Significant variations from budgeted changes in equity are as follows:

Total equity is $230.281m lower than budgeted primarily due to the $220.061m of variations above, plus a $10.190m lower opening position due to annual plan budget timing.

Statement of Financial Position

Significant variations from budget are as follows:

Current assets are $64.474m higher than budget primarily due to:

Non-current assets are $245.052m lower than budget primarily due to

Total liabilities are $49.703m higher than budget due to:

Statement of Cash Flows

Significant variations from budget are as follows:

Note 34: Analysis of capital expenditure by activity area Top

This analysis reports capital expenditure performance against the approved budget contained within the Annual Plan by activity 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
  2014
$000
2013
$000
2014
$000
2015
$000
2014
$000
2014
$000
2014
$000
Activity area              
               
Governance 110 - 110 - 110 53 57
Environment 29,203 5,467 34,670 (2,796) 31,874 27,680 4,194
Economic development 765 3,531 4,296 (480) 3,816 3,551 265
Cultural wellbeing 26 - 26 - 26 - 26
Social and recreation 38,278 13,239 51,517 (3,802) 47,715 38,368 9,347
Urban development 26,087 2,897 28,984 (3,519) 25,466 13,650 11,816
Transport 31,321 1,655 32,976 (1,503) 31,473 28,875 2,598
               
Total activity areas 125,790 26,789 152,579 (12,100) 140,480 112,177 28,303
               
Council 13,929 5,954 19,883 (2,826) 17,056 15,815 1,241
               
Total capital expenditure 139,719 32,743 172,462 (14,926) 157,536 127,992 29,544
               
Excluding additional expenditure funded from external sources:  
SPCA Capital contribution towards Chest Hospital 309
Track Maintenaince for Spicer Forest 3
Insurance recoveries for June 2013 storm damage repairs 438
Halfway House Glenside from Lotteries Commission 28
Cost recover for retaining wall 64A Waripori St 20
Cost recovery for retaining wall works (2-8 Durham Crescent) 1
Greater Wellington Regional Council funding for Park & Ride facilities (Raroa Station on Fraser Ave) 50
Greater Wellington Regional Council funding for Bus Stop facilities (Churchill Drive, Ngaio) 50
Private work carried out in association with bus layby (114A Newlands Rd, Newlands) 2
Total adjusted net variance 30,445

The $29.54m variance in the capital expenditure programme represents a shift in Council’s process, where the majority of these projects will be reprioritised in the forthcoming 2015-25 Long-term Plan to ensure the Council has the capacity to deliver these projects within the financial year that they will be budgeted for.

The variance of $29.54m 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
  2013
$000
2012
$000
2013
$000
2014
$000
2013
$000
2013
$000
2013
$000
Activity 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 activity 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

Note 35: Capital expenditure performance Top

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 the strategy area section of the Statements of Service Performance.

  Actual
​Expenditure1
Proposed Budget
Carry Forward2
Forecast Completion
of total Capex Budget
Budget3 Notes
  2014
$000
2014
$000
2014
$000
2014
$000
 
Governance          
City governance and engagement 53 - 53 110  
Total Governance 53 - 53 110  
           
Environment          
Local parks and open spaces 1,939 220 2,159 2,207  
Botanical gardens 661 - 661 886 4
Water network 10,984 710 11,694 12,577  
Sewage collection and disposal network 7,924 - 7,924 8,242  
Stormwater management 4,193 - 4,193 5,220  
Conservation visitor attractions 1,203 1,866 3,069 3,069  
Other 776 - 776 2,469 5
Total Environment 27,680 2,796 30,476 34,670  
           
Economic development          
Visitor attractions and Convention venues 3,551 480 4,031 4,296  
Total Economic development 3,551 480 4,031 4,296  
           
Cultural Wellbeing - - - 26  
           
Social and recreation          
Swimming Pools 3,713 3,802 7,515 7,516  
Sportsfields 888 - 888 864  
Libraries 2,103 - 2,103 2,099  
Housing 27,763 - 27,763 37,237 6
Public toilets 484 - 484 537  
Other 3,417 - 3,417 3,264  
Total Social and recreation 38,368 3,802 42,170 51,517  
           
Urban development          
Urban planning and policy 535 - 535 527  
Waterfront development 5,882 - 5,882 9,532  
Public spaces and centres development 3,325 1,854 5,179 5,070  
Earthquake risk mitigation - built environment 3,908 1,665 5,573 13,856 7
Total Urban development 13,650 3,519 17,169 28,985  
           
Transport          
Vehicle network 19,278 1,300 20,578 21,717  
Cycle network 1,886 - 1,886 1,729  
Passenger transport network 171 - 171 165  
Pedestrian network 3,775 - 3,775 4,820  
Network-wide control and management 1,891 - 1,891 2,140  
Road safety 1,873 203 2,076 2,404  
Parking 1 - 1 1  
Total Transport 28,875 1,503 30,378 32,976  
           
Council 15,815 2,826 18,641 19,882 8
           
Total capital expenditure projects 127,992 14,926 142,918 172,462  
  1. Actual capital expenditure consists of all expenditure 2013/14 including expenditure against carry forwards.
  2. Proposed budget carry forwards represent the portion of the project budget to be carried forward to future financial years.
  3. Budgets comprise 2013/14 Annual Plan budgets brought forward into 2013/14 from the previous financial period.
  4. Under budget due to delays in the reconfiguring of the Curator’s House at Otari-Wilton’s Bush.
  5. Under budget due to delays in the Stage 4 landfill extension as a result of a protracted resource consent process.
  6. Under budget due to timing changes on the Housing Upgrade project. Housing renewals are also behind budget this year. The revised timeframes for the Housing Upgrade project will be reflected in the 2015-25 LTP.
  7. Savings due to the changes to the Town Hall strengthening project. Options will be presented to Council and funding will be included in the 2015-25 LTP to deliver the approved option.
  8. Savings on property renewal costs.

Note 36: CommitmentsTop

Capital commitments Council Group
  2014
$000
2013
$000
2014
$000
2013
​$000
         
Approved and contracted - property, plant and equipment 38,375 48,790 46,475 51,775
Approved and contracted - investment properties 19 35 19 35
Approved and contracted - intangibles - 1,400 - 1,400
Approved and contracted - share of associates - - 1,030 5,745
Approved and contracted - share of joint ventures - - - -
         
Total capital commitments 38,394 50,225 47,524 58,955

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 activity 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 2 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
  2014
$000
2013
$000
2014
$000
2013
​$000
Plant and equipment        
Not later than one year 29 22 125 154
Later than one year and not later than five years 13 8 113 172
Later than five years - - - -
         
Land and buildings        
Not later than one year 973 981 1,335 1,263
Later than one year and not later than five years 1,625 2,135 1,975 2,392
Later than five years 1,100 1,398 1,100 1,398
         
Total non-cancellable operating lease commitments as lessee 3,740 4,544 4,648 5,379

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 1 to 15 years.

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

Non-cancellable operating lease commitments as lessor Council Group
  2014
$000
2013
$000
2014
$000
2013
​$000
Investment properties        
Not later than one year 9,332 9,344 9,332 9,344
Later than one year and not later than five years 36,220 36,280 36,220 36,280
Later than five years 81,846 89,994 81,846 89,994
         
         
Land and buildings        
Not later than one year 1,434 2,158 1,512 1,070
Later than one year and not later than five years 2,771 4,246 2,771 1,045
Later than five years 7,557 4,150 7,557 4,150
         
Total non-cancellable operating lease commitments as lessor 139,160 146,172 139,238 141,883

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
  2014/15
$000
2016-2022
$000

$000
Subsidiaries      
Wellington Zoo Trust 2,757 19,593 22,350
Wellington Museums Trust 7,860 53,972 61,832
Positively Wellington Tourism 5,630 48,189 53,819
Carter Observatory 312 2,100 2,412
Wellington Venues - 716 716
Total subsidiary commitments 16,559 124,570 141,129
       
Associates      
Basin Reserve Trust 605 2,485 3,090
Total associate commitments 605 2,485 3,090
       
Other related parties      
Karori Wildlife Sanctuary Trust 875 - 875
Total other related party commitments 875 - 875
       
Total related party commitments 18,039 127,055 145,094

Note 37: ContingenciesTop

Contingent liabilities Council Group
  2014
$000
2013
$000
2014
$000
2013
​$000
         
Financial guarantees to community groups 600 700 600 700
Uncalled capital - LGFA 1,883 1,883 1,883 1,883
Other legal proceedings 2,237 172 2,237 172
Share of associates' contingent liabilities - - - -
Share of joint ventures' contingent liabilities - - - -
         
Total contingent liabilities 4,720 2,755 4,720 2,755

The financial guarantees to community groups above are analysed below:

Outstanding debt subject to Council guarantees Council Group
  2014
$000
2013
$000
2014
$000
2013
​$000
         
Karori Wildlife Sanctuary Trust 600 700 600 700
         
Total outstanding debt subject to Council guarantees 600 700 600 700

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)

Council is one of 30 local authority shareholders and 8 local authority guarantors of the LGFA. In that regard Council has uncalled capital of $1.883m. 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 2014, LGFA had borrowings totalling $3,778m (2013: $2,422m).

Financial reporting standards require 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, which is a member of the LGFA, that has had 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 $2.237m.

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. A provision for known claims and future claims has been made (refer Note 23: Provisions for other liabilities). The impact and cost of future and unknown claims 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 2014 (2013: $Nil).

Note 38: Group structureTop

Wellington City Council Reporting Entity (Council) diagram.

The Council has established several Council Controlled Organisations (CCO’s) and Council Controlled Trading Organisations (CCTO’s) 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 226. 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 2014 Interest 2013 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 2014
$000
2013
$000
Assets    
     
Current    
Inventory 36 5
Trade and other receivables 1,126 693
     
Non-current    
Property, plant and equipment 21,012 19,430
     
Share of total assets 22,174 20,128
     
Liabilities    
     
Current    
Trade and other payables - -
     
Non-current    
Borrowings 3,125 3,035
Provisions for other liabilities 1,661 1,768
     
Share of total liabilities 4,786 4,803
     
Share of net assets 17,388 15,325

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 2014
$000
2013
$000
     
Operating revenue 2,679 2,400
Operating expenditure (2,660) (3,540)
     
Share of net surplus or (deficit) 19 (1,140)
     
Share of current year revaluation movement 2,044 -

The Council’s and Group’s share of the joint ventures’ capital commitments is $Nil (2013: $Nil) and contingent liabilities is $Nil (2013: $Nil).

Note 40: Investment in SubsidiariesTop

The following entities are subsidiaries of Council:

Subsidiary Interest
2014
Interest
2013
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 226).

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

Investment in subsidiaries 2014
$000
2013
$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 (i.e. $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
2​014
Interest
2013
Nature of business
       
Basin Reserve Trust   50% 50% Manages, operates and maintains the Basin Reserve
Capacity
(Capacity Infrastructure Services Limited)
50% 62.5% Jointly manages water services for Wellington, Lower Hutt, Upper Hutt and Porirua cities. (refer below for voting rights)
Chaffers Marina Holdings Limited 10.99% 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 the 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 (PBE): 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. At inception Wellington City Council and Hutt City Council each owned Class A and Class B shares in the company. Effective from 1 November 2013 Upper Hutt City and Porirua City Councils have formally joined as shareholders. The new structure is as follows:

  Class A shares
(voting rights)
Class B Shares
(financial entitlements)
Ownership interest
Wellington City Council 150 200 50%
Hutt City Council 150 100 25%
Upper Hutt City Council 150 40 10%
Porirua City Council 150 60 15%
Total shares on issue 600 400  

The Class A shares represent voting rights and are split evenly between the four Councils. The Class B shares confer the level of contributions and ownership benefits of each council. 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 each Council in accordance with NZ IAS 28 (PBE): 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 50%.

Greater Wellington Regional Council, who is responsible for the bulk supply of water, is currently considering joining the single delivery agency. This would ensure knowledge and ideas are shared to ensure a long term regional approach to water management.

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 2014 Council held a 10.99% interest in Chaffers Marina Holdings Limited (2013: 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 (PBE): 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
2014
$000
Liabilities
2014
$000
Revenues
2014
$000
Surplus/(Deficit)
2014
$000
         
Basin Reserve Trust 421 38 317 (91)
Capacity 1,835 1,499 6,641 18
Chaffers Marina Holdings Limited 668 138 95 (15)
Wellington International Airport Limited 286,391 136,678 37,703 15,192
Wellington Regional Stadium Trust 49,863 9,438 8,155 1,016
Associates Assets
2013
$000
Liabilities
2013
$000
Revenues
2013
$000
Surplus/(Deficit)
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

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
  2014
$000
2013
$000
     
Capacity 400 376
Chaffers Marina Holdings Limited 1,329 1,368
Wellington International Airport Limited 17,775 17,775
     
Total investment in associates 19,504 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
  2014
$000
2013
$000
Basin Reserve Trust    
Opening balance 474 574
Equity accounted earnings of associate (91) (100)
     
Closing balance - investment in Basin Reserve Trust 383 474
     
Capacity    
Opening balance 271 226
Change in shares during the year 24 -
Change in equity due to changed shareholding 23 -
Equity accounted earnings of associate 18 45
     
Closing balance - investment in Capacity 336 271
     
Chaffers Marina Holdings Limited    
Opening balance 998 1,014
Change in shares during the year (39) -
Change in equity due to changed shareholding 15 -
Equity accounted earnings of associate (15) (16)
     
Closing balance - investment in Chaffers Marina Holdings Limited 959 998
     
Wellington International Airport Limited    
Opening balance 130,633 129,959
Dividends (11,966) (10,828)
Equity accounted earnings of associate 15,192 11,349
Share of hedging reserve - movement 1 153
     
Closing balance - investment in Wellington International Airport Limited 133,860 130,633
     
Wellington Regional Stadium Trust    
Opening balance 38,078 36,651
Equity accounted earnings of associate 1,016 1,427
     
Closing balance - investment in Wellington Regional Stadium Trust 39,094 38,078
Total investment in associates 174,631 170,453

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
  2014
$000
2013
$000
Basin Reserve Trust    
Share of net surplus/(deficit) before tax (91) (100)
Tax (expense)/credit - -
     
Share of associate's surplus/(deficit) - Basin Reserve Trust (91) (100)
     
Capacity    
Share of net surplus/(deficit before tax) 18 45
Tax (expense)/credit - -
     
Share of associate's surplus/(deficit) - Capacity 18 45
     
Chaffers Marina Holdings Limited    
Share of net surplus/(deficit) before tax (15) (16)
Tax (expense)/credit - -
     
Share of associate's surplus/(deficit) - Chaffers Marina Holdings Limited (15) (16)
     
Wellington International Airport Limited    
Share of net surplus before tax 16,088 11,671
Tax (expense)/credit (896) (322)
     
Share of associate's surplus/(deficit) - Wellington International Airport Limited 15,192 11,349
     
Wellington Regional Stadium Trust    
Share of net surplus before tax 1,016 1,427
Tax (expense)/credit - -
     
Share of associate's surplus - Wellington Regional Stadium Trust 1,016 1,427
     
Total share of associates' surplus/(deficit) 16,120 12,705

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 2014
$
2013
$
2014
$
2013
$
Council Members (Directors)          
           
Short-term employee benefits 43 1,385,983 1,362,501 1,455,653 1,529,492
           
Chief Executive and Executive Leadership Team          
           
Short-term employee benefits   2,480,499 2,219,482 2,480,499 2,219,482
Post employment benefits   52,576 22,148 52,576 22,148
Termination benefits   285,000 104,520 285,000 104,520
           
Total remuneration paid to key management   4,204,058 3,708,651 4,273,728 3,875,642

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).

These transactions were on normal commercial terms. Except for these transactions no key management personnel have entered into related party transactions with the Group.

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

There are no commitments from 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 $0.875m was made during the year to 30 June 2014. 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 2014
$000
2013
$000
Expenditure incurred by the Council to fund the operation and management of:    
Porirua - waste water treatment plant 2,196 1,792

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 2014
$000
2013
$000
Dividend received from:    
Wellington Cable Car Limited - 94
     
Revenue for services provided by the Council to:    
Positively Wellington Tourism 222 125
Positively Wellington Waterfront 27 2
Wellington Cable Car Limited 50 68
Wellington Museums Trust 1,485 1,970
Wellington Venues Limited 32 -
Wellington Zoo Trust 361 608
  2,177 2,773
     
Expenditure incurred by the Council to fund operations and management of:    
Positively Wellington Tourism 6,475 6,390
Positively Wellington Waterfront 1,075 1,075
Wellington Museums Trust 8,010 8,010
Wellington Zoo Trust 2,715 2,799
  18,275 18,274
     
Expenditure for services provided to the Council by:    
Positively Wellington Tourism 178 168
Wellington Cable Car Limited 13 323
Wellington Museums Trust 329 313
Wellington Venues Limited 5,585 5,386
Wellington Zoo Trust 1,798 1,280
  7,903 7,470
     
Current receivables owing to the Council from:    
Positively Wellington Waterfront 29 -
Wellington Cable Car Limited 1 2
Wellington Museums Trust 267 30
Wellington Venues Limited 386 -
Wellington Zoo Trust 293 639
  976 671
     
Current payables owed by the Council to:    
Positively Wellington Tourism 89 15
Wellington Cable Car Limited 4 -
Wellington Museums Trust 657 15
Wellington Venues Limited 32 492
Wellington Zoo Trust 421 458
  1,203 980

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 outstanding balances at the year-end are as follows:

Intra group transactions and balances - Associates 2014
$000
2013
$000
Dividend received from:    
Wellington International Airport Limited 11,966 10,828
     
Revenue for services provided by the Council to:    
Basin Reserve Trust 71 71
Capacity 45 34
Wellington International Airport Limited - 1
Wellington Regional Stadium Trust 279 276
  395 382
     
Expenditure incurred by the Council to fund the operation and management of:    
Basin Reserve Trust 355 355
Wellington International Airport Limited1 - 1,000
  355 1,355
     
Expenditure for services provided to the Council from:    
Capacity 15,200 11,370
Wellington International Airport Limited 120 108
Wellington Regional Stadium Trust 2 297
  15,322 11,775
     
Current receivables owing to the Council from:    
Basin Reserve Trust 5 2
Capacity 9 3
Wellington Regional Stadium Trust 20 8
  34 13
     
Current payables owed by the Council to:    
Capacity 1,030 605
Wellington International Airport Limited - 35
Wellington Regional Stadium Trust - 72
  1,030 712
     
Limited-recourse funding loan and advance    
Wellington Regional Stadium Trust - nominal value - $15,394,893 1,586 1,407
  1. This grant to Wellington International Airport Limited related to the agreement to fund 50% (capped at $1m) of the resource consent costs arising from the airport runway extension.

 
 

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.

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 2013 to 30 June 2014 was $1,455,653 (2013: $1,529,492) and is disaggregated and classified as follows:

Council Member Monetary Remuneration Non
Monetary
Remuneration
Total
Council
Remuneration
2014
Director/
Trustee
Fees
Total
Remuneration
2014
  Salary Resource
Consent
Hearing
Fees
Allowances
  $ $ $ $ $ $ $
Current Council              
Ahipene-Mercer, Ray 82,639 - 360 3,000 85,999 5,544 91,543
Coughlan, Jo 86,073 - 360 3,000 89,433 6,250 95,683
Eagle, Paul 86,073 - 360 3,000 89,433 20,000 109,433
Foster, Andy 89,085 1,727 360 3,000 94,172 7,500 101,672
Free, Sarah 56,105 - 240 2,000 58,345 5,000 63,345
Lee, David 56,105 - 240 2,000 58,345 - 58,345
Lester, Justin 93,050 - 360 3,000 96,410 - 96,410
Marsh, Simon 78,447 - 360 3,000 81,807 3,750 85,557
Pannett, Iona 86,073 - 360 3,000 89,433 - 89,433
Peck, Mark 56,105 - 240 2,000 58,345 - 58,345
Ritchie, Helene 80,340 - 360 3,000 83,700 - 83,700
Sparrow, Malcolm 56,105 - 240 2,000 58,345 - 58,345
Wade-Brown, Celia 159,240 - - 3,000 162,240 - 162,240
Woolf, Simon 56,105 - 240 2,000 58,345 - 58,345
Young, Nicola 56,105 - 240 2,000 58,345 - 58,345
               
Previous Council              
Best, Ngaire 24,461 - 120 1,000 25,581 4,240 29,821
Cook, Stephanie 26,789 - 120 1,000 27,909 - 27,909
Gill, Leonie 25,971 - - 1,000 26,971 - 26,971
McKinnon, Ian 28,816 - 120 1,000 29,936 12,886 42,822
Morrison, John 24,461 - 120 1,000 25,581 4,500 30,081
Pepperell, Bryan 24,461 1,727 120 1,000 27,308 - 27,308
               
Totals 1,332,609 3,454 4,920 45,000 1,385,983 69,670 1,455,653
    TOTAL MONETARY REMUNERATION 1,340,983 69,670 1,410,653
    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 2013/14 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

The Remuneration Authority’s current policy does not allow Councillors to claim an allowance for mileage for their normal duties. However, prior to this decision Councillors had voluntarily decided to forgo receiving this allowance from December 2008.

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.

The Remuneration Authority does permit Council to provide the Mayor with a vehicle for full private use, which would be a taxable benefit; however the current Mayor has declined to take up this option.

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

In November 2012, the Council resolved that no further payments would be made to elected members appointed to Council Controlled Organisation (CCO) boards from the start of the new triennium (being 19 October 2013). On 14 November 2013 the Council resolved that elected members appointed to the Council Organisation (CO) boards, including the Wellington Regional Stadium Trust, Zealandia, and Wellington International Airport Limited (where applicable), would not receive remuneration with respect to those appointments. Any remuneration that otherwise would have been paid to elected members on a Council Organisation board will be paid directly to the Council and included in the relevant grant fund.

For the period from 1 July 2013 to the end of the previous triennium (being 19 October 2013), which is prior to the above resolutions taking effect, the following payments were made to elected members in their capacity as Council appointees to the following organisations:

Council Member Position Director/Trustee Fees Organisation Council
Interest
%
  Subsidiaries
$
Associates
$
Current Council          
Ahipene-Mercer, Ray Trustee 5,544 - Wellington Museums Trust 100
Coughlan, Jo Trustee 6,250 - Positively Wellington Tourism 100
Eagle, Paul Director 7,500 - Positively Wellington Venues 100
  Director - 12,500 Wellington Regional Stadium Trust 50
Foster, Andy Director - 7,500 Capacity 50
Free, Sarah Director - 5,000 Capacity 50
Marsh, Simon Trustee 3,750 - Wellington Zoo Trust 100
           
Previous Council          
Best, Ngaire Director 4,240 - Positively Wellington Venues 100
McKinnon, Ian Director - 12,886 Wellington International Airport Limited 34
Morrison, John Trustee - 4,500 Wellington Regional Stadium Trust 50
           
Total director and trustee fees 27,284 42,386    

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
2014
$
TAWA COMMUNITY BOARD      
Current Board      
Tredger, Robert (Chair) 13,823 360 14,183
Lucas, Margaret (Deputy Chair) 8,490   8,490
Hansen, Graeme (previous Deputy Chair) 8,490   8,490
Herbert, Richard 6,078   6,078
Lester, Justin (Councillor remuneration shown above) -   -
Marshall, Jack 6,078   6,078
Sutton, Alistair 8,490   8,490
Sparrow, Malcolm (Councillor remuneration shown separately above) 6,310 180 6,490
       
Previous Board      
Reading, Chris 2,552   2,552
       
MAKARA/OHARIU COMMUNITY BOARD      
Grace, Christine (Chair) 9,890 540 10,430
Burden, Murray 3,218   3,218
Liddell, Judy 4,727   4,727
Rudd, Wayne 4,727   4,727
Scotts, Margie 4,727   4,727
Todd, Hamish 4,727   4,727
       
Previous Board      
Bruce, Gavin (Deputy Chair) 1,595   1,595
       
Totals 93,922 1,080 95,002

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.

Malcolm Sparrow was the previous Chair of the Tawa Community Board, before his election to the Council.

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 2014.

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
  2014
$
2013
$
     
Short-term employee benefits    
     
Kevin Lavery    
Salary1 379,624 99,726
Motor Vehicle 20,376 -
     
TOTAL REMUNERATION PAID OR PAYABLE 400,000 99,726
     
Garry Poole    
Salary2 - 327,345
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

1 Kevin Lavery is on a fixed term individual employment agreement with total remuneration of $400,000pa. His remuneration for 2013 reflects his term as Chief Executive only being for the 3 months from 31 March 2013 to 30 June 2013.
2 Garry Poole was on a fixed term individual employment agreement with total remuneration of $419,231pa. for the 2013 year.

 

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 2014 the Council made severance payments to 15 employees (2013:12) totalling $290,555 (2013: $240,830).

The individual values of each of these severance payments are: $7,668; $6,500; $6,531; $31,998; $1,561; $14,832; $12,169; $75,700; $8,582; $10,000; $700; $54,399; $8,055; $45,000; $6,860.

Employee numbers and remuneration bands

The following table identifies the number of full time employees as at the 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
  2014 2013
     
The number of full-time employees as at 30 June 971 910
     
The full-time equivalent number of all other non full-time employees 228 216
     
The number of employees receiving total annual remuneration of less than $60,000 1044 1024
     
The number of employees receiving total annual remuneration of more than $60,000 in bands of $20,000    
     
$60,000 - $79,999.99 266 257
$80,000 - $99,999.99 142 122
$100,000 - $119,999.99 74 76
$120,000 - $139,999.99 44 39
$140,000 - $159,999.99 23 10
$160,000 - $179,999.99 14 14
$180,000 - $219,999.99* 9 9
$220,000 - $299,999.99* 7 9
$300,000 - $400,000** 3 2

The Council as at 30 June has 1626 (2013:1562) individual employees of which 655 (2013: 652) work part-time.

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 5 or less then it has been combined with the next highest band.

** Includes the Chief Executive.

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.