Financial Statements

Wellington City Council and Group​
Consolidated Financial Statements
For the year ended 30 June 2015

Section contents

Statement of Compliance and Responsibility Page 122
Statement of Comprehensive Revenue and Expense Page 123
Statement of Changes in Equity Page 125
Statement of Financial Position Page 126
Statement of Cash Flows Page 127
Notes forming part of the Financial Statements Page 129

Statement of Compliance and Responsibility

Compliance

The Council and management of Wellington City Council confirm that all the statutory requirements in relation to the Annual Report, as outlined in Schedule 10 of the Local Government Act 2002, have been complied with.

Responsibility

The Council and management accept responsibility for the preparation of the annual financial statements and judgements used in them. They also accept responsibility for establishing and maintaining a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting.

In the opinion of the Council and management, the annual financial statements for the year ended 30 June 2015 fairly reflect the financial position, results of operations and service performance achievements of Wellington City Council and Group.

Celia Wade-Brown signature. Kevin Lavery signature. Andy Matthews signature.
Celia Wade-Brown
Mayor
Kevin Lavery
Chief Executive
Andy Matthews
Chief Financial Officer
26 August 2015 26 August 2015 26 August 2015

Statement of Comprehensive Revenue and ExpenseTop

For the year ended 30 June 2015

    Council Group1
  Note Actual
2015
$000
Budget
2015
$000
Actual
2014
$000
Actual
2015
$000
Actual
2014
$000
REVENUE            
Rates revenue            
Rates (excluding water rates by meter) 1 240,892 241,387 234,007 240,892 234,007
Water rates by meter 1 12,682 13,879 12,329 12,682 12,329
Revenue from operating activities            
Development contributions 2 2,078 2,000 5,873 2,078 5,873
Grants, subsidies and reimbursements 2 40,826 51,090 43,315 53,213 49,597
Other operating activities 2 121,482 119,913 115,213 132,639 125,440
Investments revenue 3 24,176 20,215 23,253 11,257 11,287
Fair value movement on investment property revaluation 18 8,552 - - 8,552 -
Other revenue 4 15,662 1,100 15,093 15,662 15,103
Finance revenue 5 3,540 603 2,752 3,914 3,085
Total revenue   469,890 450,187 451,835 480,889 456,721
EXPENSE            
Finance expense 5 (23,238) (23,041) (22,754) (23,239) (22,756)
Expenditure on operating activities 7 (310,335) (298,596) (297,951) (330,454) (314,745)
Depreciation and amortisation expense 8 (99,009) (102,165) (95,860) (100,024) (96,611)
Fair value movement on concessionary loans 14 (1,766) - - (1,794) -
Fair value movement on investment property revaluation 18 - - (7,661) - (7,661)
Total expense   (434,348) (423,802) (424,226) (455,511) (441,773)
Share of equity accounted surplus/(deficit) from associates and jointly controlled entities 36 - - - 11,612 15,195
Net surplus before taxation   35,542 26,385 27,609 36,990 30,143
Income tax credit/(expense)   - - - (609) 64
NET SURPLUS for the year   35,542 26,385 27,609 36,381 30,207
             
             
             
Net surplus attributable to:            
Wellington City Council and Group   35,542 26,385 27,609 36,281 30,207
Non-controlling interest   - - - 100 -
    35,542 26,385 27,609 36,381 30,207
  1. The Group includes the Council, the controlled entities disclosed in Note 35, and the Council’s interest in the associates and jointly controlled entities disclosed in Note 36. A structural diagram of the Group is shown in Note 33.

The notes on pages 130 to 212 form part of and should be read in conjunction with these financial statements.

Statement of Comprehensive Revenue and Expense – continued

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For the year ended 30 June 2015

    Council Group1
  Note Actual
2015
$000
Budget
2015
$000
Actual
2014
$000
Actual
2015
$000
Actual
2014
$000
Other comprehensive revenue and expense2            
Items that will be reclassified to surplus/(deficit)            
Cash flow hedges:            
Fair value movement - net 26 (17,059) - 9,552 (17,059) 9,552
Fair value through other comprehensive revenue and expense            
Fair value movement - net 27 43 - (30) 442 (30)
Share of other comprehensive revenue and expense of associates and jointly controlled entities:            
Reclassification to share of equity acounted surplus   - - - - 1
Items that will not be reclassified to surplus/(deficit)            
Non-contolling interest:            
Initial recognition   - - - 316 -
Revaluations:            
Fair value movement - property, plant and equipment - net 25 11,168 57,073 (45,290) 11,168 (47,163)
Share of other comprehensive revenue and expense of associates and jointly controlled entities:            
Fair value movement - property, plant and equipment - net 25 - - - 3,862 -
Effect of changed shareholding in associates 25 - - - 27 38
Total other comprehensive revenue and expense   (5,848) 57,073 (35,768) (1,244) (37,602)
TOTAL COMPREHENSIVE REVENUE and EXPENSE for the year   29,694 83,458 (8,159) 35,137 (7,395)
             
             
             
Total comprehensive revenue and expense attributable to:            
Wellington City Council and Group   29,694 83,458 (8,159) 35,037 (7,395)
Non-controlling interest   - - - 100 -
    29,694 83,458 (8,159) 35,137 (7,395)
  1. The Group includes the Council, the controlled entities disclosed in Note 35, and the Council’s interest in the associates and jointly controlled entities disclosed in Note 36. A structural diagram of the Group is shown in Note 33.
  2. Other comprehensive revenue or expense is non-cash in nature and only reflects changes in equity.

The notes on pages 130 to 212 form part of and should be read in conjunction with these financial statements.

Statement of Changes in EquityTop

For the year ended 30 June 2015

    Council Group
  Note Actual
2015
$000
Budget
2015
$000
Actual
2014
$000
Actual
2015
$000
Actual
2014
$000
EQUITY - Opening balances            
Accumulated funds   1,269,134 1,269,134 1,269,134 1,293,162 1,293,162
Retained earnings   3,685,128 3,696,747 3,654,242 3,672,911 3,639,494
Revaluation reserves   1,372,033 1,685,991 1,417,323 1,482,005 1,529,130
Hedging reserve   (403) (9,955) (9,955) (403) (9,956)
Fair value through other comprehensive revenue and expense reserve   63 93 93 63 93
Restricted funds   14,683 10,715 17,960 17,437 20,647
TOTAL EQUITY - Opening balance   6,340,638 6,652,725 6,348,797 6,465,175 6,472,570
CHANGES IN EQUITY            
Retained earnings            
Net surplus for the year   35,542 26,385 27,609 36,381 30,207
Transfer to restricted funds   (2,273) (3,766) (4,779) (4,146) (5,097)
Transfer from restricted funds   3,832 3,765 8,056 4,660 8,307
             
Revaluation reserves 25          
Fair value movement - property, plant and equipment - net   11,168 57,073 (45,290) 15,030 (47,163)
Effect of changed shareholding in associates   - - - 27 38
             
Hedging reserve 26          
Movement in hedging reserve   (17,059) - 9,552 (17,059) 9,553
             
Fair value through other comprehensive revenue and expense reserve 27          
Movement in fair value - Equity investments   43 - (30) 43 (30)
Movement in fair value - Available for sale equities   - - - 399 -
             
Non-controlling interest            
Recognition of non-controlling interest   - - - 316 -
             
Restricted funds 28          
Transfer to retained earnings   (3,832) (3,765) (8,056) (4,660) (8,307)
Transfer from retained earnings   2,273 3,766 4,779 4,146 5,097
Total comprehensive revenue and expense   29,694 83,458 (8,159) 35,137 (7,395)
EQUITY - Closing balances            
Accumulated funds   1,269,134 1,269,134 1,269,134 1,293,162 1,293,162
Retained earnings   3,722,229 3,723,131 3,685,128 3,709,806 3,672,911
Revaluation reserves   1,383,201 1,743,064 1,372,033 1,497,062 1,482,005
Hedging reserve   (17,462) (9,955) (403) (17,462) (403)
Fair value through other comprehensive revenue and expense reserve   106 93 63 505 63
Non-controlling interest   - - - 316 -
Restricted funds   13,124 10,716 14,683 16,923 17,437
TOTAL EQUITY - Closing balance   6,370,332 6,736,183 6,340,638 6,500,312 6,465,175
             
             
             
Total comprehensive revenue and expense attributable to:            
Wellington City Council and Group   29,694 83,458 (8,159) 35,037 (7,395)
Non-controlling interest   - - - 100 -
    29,694 83,458 (8,159) 35,137 (7,395)

The notes on pages 130 to 212 form part of and should be read in conjunction with these financial statements.

Statement of Financial PositionTop

For the year ended 30 June 2015

    Council Group
  Note Actual
2015
$000
Budget
2015
$000
Actual
2014
$000
Actual
2015
$000
Actual
2014
$000
ASSETS            
Current assets            
Cash and cash equivalents 11 65,913 2,389 52,573 75,598 56,853
Derivative financial assets 12 - 409 - - -
Receivables from exchange transactions 13 5,569 5,980 5,663 6,450 6,675
Recoverables from non-exchange transactions 13 34,445 33,576 31,795 36,006 33,060
Other financial assets 14 150 - 20,000 150 20,400
Prepayments   12,453 15,048 11,643 12,987 11,723
Inventories 15 899 875 969 1,849 1,755
Non-current assets classified as held for sale 16 1,668 - 1,367 1,668 1,367
Total current assets   121,097 58,277 124,010 134,708 131,833
Non-current assets            
Derivative financial assets 12 725 3,280 4,428 725 4,428
Other financial assets 14 9,403 8,928 9,849 10,851 9,849
Intangibles 17 21,465 16,743 17,293 21,568 17,363
Investment properties 18 201,557 205,951 192,901 201,557 192,901
Property, plant and equipment 19 6,595,900 6,974,749 6,536,012 6,608,226 6,547,197
Investment in controlled entities 35 5,071 3,809 3,809 - -
Investment in associates and jointly controlled entities 36 19,465 19,519 19,504 137,666 135,154
Total non-current assets   6,853,586 7,232,979 6,783,796 6,980,593 6,906,892
TOTAL ASSETS   6,974,683 7,291,256 6,907,806 7,115,301 7,038,725
LIABILITIES            
Current liabilities            
Derivative financial liabilities 12 250 404 180 250 180
Payables under exchange transactions 20 45,429 45,654 45,468 49,922 47,787
Taxes and transfers payable 20 12,635 12,291 12,241 12,817 12,606
Revenue in advance 21 29,293 11,405 12,105 32,791 13,224
Borrowings 22 164,104 155,562 129,371 164,107 129,375
Employee benefit liabilities and provisions 23 6,306 5,698 5,228 7,467 6,440
Provision for other liabilities 24 15,207 17,466 30,781 15,207 30,781
Total current liabilities   273,224 248,480 235,374 282,561 240,393
Non-current liabilities            
Deferred tax   - - - 1,240 1,279
Derivative financial liabilities 12 17,937 12,831 4,788 17,937 4,788
Payables under exchange transactions 20 630 - 630 630 630
Borrowings 22 269,624 248,601 289,747 269,624 289,750
Employee benefit liabilities and provisions 23 1,096 1,474 1,207 1,157 1,288
Provision for other liabilities 24 41,840 43,687 35,422 41,840 35,422
Total non-current liabilities   331,127 306,593 331,794 332,428 333,157
TOTAL LIABILITIES   604,351 555,073 567,168 614,989 573,550
EQUITY            
Accumulated funds   1,269,134 1,269,134 1,269,134 1,293,162 1,293,162
Retained earnings   3,722,229 3,723,131 3,685,128 3,709,806 3,672,911
Revaluation reserves 25 1,383,201 1,743,064 1,372,033 1,497,062 1,482,005
Hedging reserve 26 (17,462) (9,955) (403) (17,462) (403)
Fair value through other comprehensive revenue and expense reserve 27 106 93 63 505 63
Non-controlling interest   - - - 316 -
Restricted funds 28 13,124 10,716 14,683 16,923 17,437
TOTAL EQUITY   6,370,332 6,736,183 6,340,638 6,500,312 6,465,175
TOTAL EQUITY AND LIABILITIES   6,974,683 7,291,256 6,907,806 7,115,301 7,038,725

Statement of Cash FlowsTop

For the year ended 30 June 2015

    Council Group
  Note Actual
2015
$000
Budget
2015
$000
Actual
2014
$000
Actual
2015
$000
Actual
2014
$000
CASH FLOWS FROM OPERATING ACTIVITIES            
             
Receipts from rates - Council (excluding metered water)   239,802 241,387 234,890 239,802 234,890
Receipts from water rates by meter   12,682 13,879 12,086 12,682 12,086
Receipts from rates - Greater Wellington Reginal Council   50,763 50,341 48,575 50,763 48,575
Receipts from activities and other Revenue   127,366 123,013 137,052 148,920 151,890
Receipts from grants and subsidies - Operating   7,666 7,715 5,189 28,593 16,446
Receipts from grants and subsidies - Capital   48,244 43,375 37,129 37,906 39,253
Receipts from investment property lease rentals   10,211 9,215 11,174 10,211 11,174
Cash paid to suppliers and employees   (286,807) (286,780) (276,384) (327,119) (310,507)
Rates paid to GWRC   (50,876) (50,341) (48,828) (50,876) (48,828)
Grants paid   (28,524) (28,719) (32,341) (13,713) (25,743)
Income tax paid   - - - (6) (15)
Net GST (paid)/received   (1,180) - (609) (972) (1,487)
             
NET CASH FLOWS FROM OPERATING ACTIVITIES   129,347 123,085 127,933 136,191 127,734
             
CASH FLOWS FROM INVESTING ACTIVITIES            
             
Dividends received   13,082 11,000 12,079 13,082 12,079
Interest received   2,838 44 2,240 3,068 2,491
Decrease in bank investments   20,000 - - 20,000 -
Proceeds from sale of property, plant and equipment   2,290 4,050 4,088 2,447 4,088
Proceeds from sale of investments   - - - 31 -
Loan advance made   - - (300) (75) (300)
Increase in bank investments   - - (20,000) - (20,000)
Increase in investments   (824) - (683) (822) (683)
Cash from aquisition of controlled entity   - - - 668 -
Purchase of investment properties   (10) - (781) (10) (781)
Purchase of intangibles   (7,741) (8,777) (1,788) (7,747) (1,859)
Purchase of property, plant and equipment   (137,353) (155,724) (125,147) (139,799) (126,976)
             
NET CASH FLOWS FROM INVESTING ACTIVITIES   (107,718) (149,407) (130,292) (109,157) (131,941)
             
CASH FLOWS FROM FINANCING ACTIVITIES            
             
New borrowings   70,000 203,964 86,197 70,000 86,197
Repayment of borrowings   (55,390) (155,562) (55,000) (55,390) (55,000)
Interest paid on borrowings   (22,899) (22,080) (20,654) (22,899) (20,654)
             
NET CASH FLOWS FROM FINANCING ACTIVITIES   (8,289) 26,322 10,543 (8,289) 10,543
             
Net increase/(decrease) in cash and cash equivalents   13,340 - 8,184 18,745 6,335
Cash and cash equivalents at beginning of year   52,573 2,389 44,389 56,853 50,518
             
CASH AND CASH EQUIVALENTS AT END OF YEAR 11 65,913 2,389 52,573 75,598 56,853

Wellington City Council acts as a collection agency for Greater Wellington Regional Council (GWRC) by including additional rates and levies in its own billing process. Once collected, the monies are passed to GWRC. The budget assumes that the inflows and outflows will offset each other and are shown as nil accordingly.

The notes on pages 130 to 212 form part of and should be read in conjunction with these financial statements.

Statement of Cash Flows – continued

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The Council has ring-fenced funds of $40.356 million (2014: $24.320 million) relating to the housing upgrade project and waste activities. See Note 22: Borrowings for more information.

The net surplus from the Statement of Comprehensive Revenue and Expense is reconciled to the net cash flows from operating activities in the Statement of Cash Flows as follows:

Reconciliation of net surplus to net cash flows from operating activities​
 
Note Council Group
2015
$000
2014
$000
2015
$000
2014
$000
           
Net surplus for the period   35,542 27,609 36,381 30,207
           
Add/(deduct) non-cash items:          
           
Vested assets 4 (12,368) (8,612) (12,368) (8,612)
Bad debts written off not prevously provided for   307 101 334 101
Depreciation and amortisation 8 99,009 95,860 100,024 96,611
Impairment of property, plant and equipment   5,072 458 5,072 1,246
Fair value changes in investment properties 18 (8,552) 7,661 (8,552) 7,661
Other fair value changes   (197) (375) (191) (375)
Movement in provision for impairments of doubtful debts   (512) (322) (512) (613)
Tax expense   - - - 392
Non-cash movement in provisions   1,045 (65) 1,651 (343)
           
Total non-cash items   83,804 94,706 85,458 96,068
           
Add/(deduct) movement in working capital:1          
Exchange receivables and non-exchange recoverables   (2,083) 12,461 (650) 12,383
Prepayments   (800) 3,405 (1,200) 3,421
Inventories   70 (94) (92) 85
Exchange transactions, taxes and transfers payables   (2,163) (1,166) (961) (773)
Revenue in advance   17,186 700 18,854 (397)
Employee benefit liabilities   967 (737) 776 (689)
Provision for other liabilities   (10,210) (18,000) (10,401) (17,945)
           
Total working capital movement   2,967 (3,431) 6,326 (3,915)
           
Add/(deduct) investing and financing activities:          
Net (gain)/loss on disposal of property, plant and equipment   55 1,861 36 1,782
Dividends received   (13,082) (12,079) (163) (113)
Interest received   (2,838) (2,240) (3,128) (2,383)
Tax paid and Subvention payments   - - (6) (224)
Interest paid on borrowings   22,899 21,507 22,899 21,507
Share of equity accounted surplus in associates   - - (11,612) (15,195)
           
Total investing and financing activities   7,034 9,049 8,026 5,374
           
Net cash flow from operating activities   129,347 127,933 136,191 127,734
  1. Excluding non-cash items

The notes on pages 130 to 212 form part of and should be read in conjunction with these financial statements.

Notes forming part of the Financial StatementsTop

For the year ended 30 June 2015

    Page
     
Summary of significant accounting policies 130
     
Note    
1 Rates revenue 143
2 Revenue from operating activities 144
3 Investments revenue 145
4 Other revenue 145
5 Finance revenue and expenses 146
6 Exchange/Non-exchange revenue 147
7 Expenditure on operating activities 148
8 Depreciation and amortisation 149
9 Income tax expense 150
10 Deferred tax assets and liabilities 151
11 Cash and cash equivalents 151
12 Derivative financial instruments 152
13 Receivables and recoverables 153
14 Other financial assets 155
15 Inventories 157
16 Non-current assets classified as held for sale 157
17 Intangibles 158
18 Investment properties 159
19 Property, plant and equipment 160
20 Exchange transactions, taxes and transfers payable 169
21 Revenue in advance 170
22 Borrowings 171
23 Employee benefit liabilities and provisions 173
24 Provision for other liabilities 174
25 Revaluation reserves 179
26 Hedging reserve 180
27 Fair value through other comprehensive revenue and expense reserve 180
28 Restricted funds 181
29 Financial instruments 183
30 Major budget variations 190
31 Commitments and carry forwards 191
32 Contingencies 194
33 Group structure 196
34 Jointly controlled assets 197
35 Investment in controlled entities 198
36 Investment in associates and jointly controlled entities 199
37 Related party disclosures 202
38 Remuneration and staffing levels 207
39 Events after the end of the reporting period 211
40 Adjustments to comparative year financial statements 211

Summary of Significant Accounting PoliciesTop


 

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. As a defined public entity under the Public Audit Act 2001, the Council is audited by the Auditor General, and is classed as a Public Sector Public Benefit Entity for financial reporting purposes.

The financial statements include the Council and Group. A structural diagram is included in Note 33. 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 34 and the Wellington Venues project. The Group includes the Council, its controlled entities (subsidiaries) disclosed in Note 35, and the Council’s equity accounted interest in the associates and jointly controlled entities disclosed in Note 36.

All entities included within the Group are domiciled in Wellington, New Zealand.

The financial statements of the Council and Group are for the year ended 30 June 2015 and were authorised for issue by the Council on 26 August 2015.

Basis of preparationTop

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 have been prepared to comply with Public Sector Public Benefit Entity Standards (PBE standards) for a Tier 1 entity. A Tier 1 entity is defined as being either, publicly accountable or large (i.e. expenses over $30 million). The Council exceeds the expenses threshold. The Council and Group are adopting the PBE standards for the first time for the year ending 30 June 2015.

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 that 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 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 elected changes in accounting policies during the financial period. The first time adoption of the new suite of PBE standards after having previously applied NZ IFRS PBE does not constitute a change in accounting policies.

Effects of first-time adoption of PBE standards

The changes to the accounting policies and disclosures (including comparatives) resulting from the first-time adoption of PBE standards are as follows:

PBE IPSAS 1: Presentation of financial statements

The name of the Statement of Comprehensive Financial Performance has been changed to the Statement of Comprehensive Revenue and Expense to align with the proposed naming convention in the standard.

The main change on the face of the financial statements is within the Statement of Financial Position where;

1. Trade receivables are now disaggregated into:

a) Receivables from exchange transactions and,

​​b) Recoverables from non-exchange transactions.

2. Trade payables are now disaggregated into:

c) Payables from exchange transactions and,

d) Taxes and transfers payable

Within the notes forming part of the financial statements, further presentational changes have occurred as follows:

PBE IPSAS 23: Revenue from non-exchange transactions

This is a new standard with no previous equivalent under NZ IFRS. It introduces new classifications of Taxes and Transfers and covers most revenue that is not exchange revenue. Using the application of Council’s activities funding policy as the determinate of approximately equal value, a key factor in the exchange/non-exchange distinction, most Council revenue, being either, rates or revenue from rates-subsidised fees and user charges, is non-exchange.

PBE IPSAS 31: Intangibles

The Council is allocated carbon credits from the Government in recognition of the positive environmental effects of its trees particularly in the Town Belt. Council’s policy has been to recognise these credits at cost being nil. Under PBE IPSAS 31, such allocations, being non-exchange transactions, are fair valued at the date of allocation and then held at deemed cost. Adjustment for previously allocated carbon credits recorded at nil cost has been made through opening equity.

PBE IPSAS 32: Service concession arrangements (Grantor)

This standard prescribes the accounting requirements, from the grantor’s perspective, for public sector assets involved in arrangements where they are used by a private sector entity to provide a public service on behalf of a public sector entity. Often this arrangement would involve the asset being built and operated by the private sector entity, which is compensated by being able to directly charge users to recoup its costs. At the end of the arrangement the ownership of the asset would then be transferred to the public entity. For the Council, its wastewater treatments plants, while operated and maintained by a private sector entity, are owned and have been part of Council’s infrastructure assets from inception. Apart from separating these assets into a new standalone category within the Property, Plant and Equipment note disclosure, no other change to the accounting treatment has been required.

An explanation of the monetary effect of these changes in the financial statements and accompanying notes is provided in Note 40: Adjustments to comparative year financial statements.

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 that are relevant to the Group include a revised suite of Public Sector Public Benefit Entity accounting standards that includes enhanced guidance for Not-for-Profit Public Benefit Entities. This revised suite of accounting standards will be adopted from 1 July 2015. The adoption of these revised standards is not expected to impact on the Group.

Judgements and estimationsTop

The preparation of financial statements using 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, controlled entities and associates. A Group structure diagram is included in Note 33.

Joint ventures

Joint ventures are binding contractual arrangements with other parties to jointly control an undertaken activity. The accounting treatment can vary according to the structure of the venture concerned.

For a jointly controlled asset 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.

For a jointly controlled entity the Council chooses to use the equity accounting treatment option available as it better reflects its investment in the joint venture. The investment is initially recognised at cost, and adjusted thereafter for the post-acquisition changes in the Council’s share of net assets/equity of the entity. The Council’s share of the surplus or deficit of the entity is included in the Group’s surplus or deficit on a single line.

Controlled entities

Controlled entities are entities that are controlled by the Council. In the Council financial statements, the investment in controlled entities is carried at cost. In the Group financial statements, controlled entities are accounted for using the purchase method where assets, liabilities, revenue and expenditure is added in on a line-by-line basis. Where a non-controlling interest is held by another party in a Council controlled entity, the controlled entity is consolidated as if it was fully controlled and the share of any surplus or deficit attributable to the non-controlling interest disclosed within the Statement of Comprehensive Revenue and Expense.

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, over their operating and financial policies but they are not controlled entities or joint ventures. 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.

RevenueTop

Revenue comprises rates, revenue from operating activities, investment revenue, gains, finance and other revenue and is measured at the fair value of consideration received or receivable.

Revenue may be derived from either exchange or non-exchange transactions.

Revenue from exchange transactions

Revenue from exchange transactions arises where the Council provides goods or services to another entity or individual and directly receives approximately equal value in a willing arm’s-length transaction (primarily in the form of cash in exchange).

Revenue from non-exchange transactions

Revenue from non-exchange transactions arises from transactions that are not exchange transactions. Revenue from non-exchange transactions arises when the Council receives value from another party without giving approximately equal value directly in exchange for the value received.

An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow.

As Council satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction.

Approximately equal value

Approximately equal value is considered to reflect a fair or market value, which is normally commensurate with an arm’s-length commercial transaction between a willing buyer and willing seller. Some goods or services that Council provides (e.g. the sale of goods at market rates) are defined as being exchange transactions. Only a few services provided by Council operate on a full user pays (e.g. Parking), cost recovery or breakeven basis and these are considered to be exchange transactions unless they are provided at less than active and open market prices.

Most of the services that Council provides for a fee are subsidised by rates (e.g. The cost to swim in a Council pool) and therefore do not constitute an approximately equal exchange. Accordingly most of Council’s revenue is categorised as non-exchange.

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 in full as at the date when rate assessment notices are sent to ratepayers. Rates are a tax as they are payable under the Local Government Ratings Act 2002 and therefore meet the definition of non-exchange.

Water rates by meter are regulated in the same way as other rates and are taxes that use a specific charging mechanism to collect the rate. However, as the rates charged are primarily based on a per unit of consumption basis, water rates by meter are considered to be more in the nature of an exchange transaction. Revenue from water rates by meter is recognised on an accrual basis based on usage.

Operating activities

The Council undertakes various activities as part of its normal operations which generate revenue, but generally at below market prices or at fees and user charges subsidised by rates. The following categories (except where noted) are classified as transfers, which are non-exchange transactions other than taxes.

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 (e.g. 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 revenue 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 (e.g. traffic and parking infringements, library overdue book fines, overdue rates penalties) is recognised when infringement notices are issued or when the fines/penalties are otherwise imposed. In particular the fair value of parking-related fines is determined based on the probability of collecting fines considering previous collection history.

Rendering of services

Revenue from the rendering of services (e.g. 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. Some rendering of services are provided at a market rate or on a full cost recovery basis (e.g. parking fees) and these are classified as exchange.

Sale of goods

The sale of goods is classified as exchange revenue. 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 from equity investments are classified as exchange revenue and are recognised when the Council’s right to receive payment has been established.

Investment property lease rentals

Lease rentals (net of any incentives given) are classified as exchange revenue and recognised on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which benefits derived from the leased asset is diminished.

Other revenue

Donated, subsidised or vested assets

Where a physical asset is acquired for nil or nominal consideration, with no conditions attached, the fair value of the asset received is recognised as non-exchange revenue 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 revenue

Interest

Interest revenue is exchange revenue and 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 (e.g. cash or physical assets) to another entity or individual 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

Council, as a local authority is only liable for income tax on the surplus or deficit for the year derived from any council controlled trading organisations and comprises current and deferred tax. Other members of the Group are subject to normal taxation unless they have tax exempt status as charitable trusts.

Current tax is the expected tax payable on the taxable revenue 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, recoverables 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 or recoverables and financial assets at fair value through other comprehensive revenue and expense), 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 revenue and expense.

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

Cash and cash equivalents comprise cash balances and call deposits with maturity dates of 3 months or less.

Trade and other receivables and recoverables 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 or recoverable.

Loans and deposits include loans to other entities (including controlled entities and associates), and bank deposits with maturity dates of more than 3 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 or recoverables 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 or recoverables.

Financial assets at fair value through other comprehensive revenue and expense primarily relate to equity investments that are held by the Council for long-term strategic purposes and therefore are not intended to be sold. Within the Group, small shareholdings are held in start-up companies, which are available for sale, until the companies mature or cease operations. Financial assets at fair value through other comprehensive revenue and expense 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 revenue and expense 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 revenue and expense while the ineffective part is recognised within surplus or deficit. Gains or losses recognised in other comprehensive revenue and expense 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 that are held primarily to earn rental revenue 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 that 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 (for example, land declared as a reserve under the Reserves Act 1977). The use of the asset may also be restricted such as the donated Basin Reserve land which must be retained for the purposes of providing a cricket and recreation ground with no permitted thoroughfare.

Infrastructure assets include the roading network, water, waste and drainage reticulation networks, service concession arrangement assets 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 (e.g. 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.

Heritage assets are tangible assets with historical, artistic, scientific, technological, geophysical or environmental qualities that are held and maintained principally for their contribution to knowledge and culture. The Council and Group recognises these assets within these financial statements to the extent their value can be reliably measured.

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 (e.g. 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.

Optimised depreciated replacement cost is a valuation methodology where the value of an asset is based on the cost of replacement with an efficient modern equivalent making allowance for obsolesce or surplus capacity. The remaining life is of the asset is estimated and straight line depreciation applied to bring the replacement cost to a fair value.

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

Library Collections

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.

Operational Land & Buildings

Operational land and buildings are valued at fair value on a three-year cycle by independent registered valuers. Where the information is available land and buildings are valued based on market evidence. The majority of Councils land and buildings are of a ‘non-tradeable’ or specialist nature and the value is based on the fair value of the land plus the optimised depreciated replacement cost of the buildings.

For earthquake prone buildings that are expected to be strengthened, the estimated cost to strengthen the building has been deducted from the optimised depreciated replacement cost.

Buildings that comprise the Housing portfolio have been valued on market based approach with the associated land value being established through analysis of sales and market evidence.

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 (the roading network, water, waste and drainage reticulation networks and service concession arrangement assets) are valued at optimised depreciated replacement cost on a three-year cycle by independent registered valuers. Infrastructure valuations are based on the physical attributes of the assets, their condition and their remaining useful lives based on the Council’s best information reflected in its asset management plans. The costs 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.

Other Assets

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

Revaluations

The result of any revaluation of the Group’s property, plant and equipment is recognised within other comprehensive revenue and expense 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 revenue and expense 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 2015
  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 collection 3 - 11 9.1 - 33.3%
Restricted assets (excluding buildings) unlimited not depreciated
Infrastructure assets:    
Land (including land under roads) unlimited not depreciated
Roading 3 - 175 0.57 - 33.3%
Drainage, waste and water 3 - 175 0.57 - 33.3%
Service concession arrangements 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 Council’s assets are defined as cash-generating if the primary purpose of the asset is to provide a commercial return. Non-cash generating assets are assets other than cash-generating assets. Property, plant and equipment assets, measured at fair value, are not required to be reviewed and tested for impairment.

The carrying amounts of cash-generating property, plant and equipment assets 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 revenue and expense.

The carrying amounts of non-cash generating property, plant and equipment assets are reviewed at least annually to determine if there is any indication of impairment. Where an asset’s, or class of assets’, recoverable service amount is less than its carrying amount it will be reported at its recoverable service amount and an impairment loss will be recognised. The recoverable service amount is the higher of an item’s fair value less costs to sell and value in use. A non-cash- generating asset’s value in use is the present value of the asset’s remaining service potential. 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 revenue and expense.

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

Computer software

Acquired computer software is measured on initial recognition at the costs to acquire and bring to use and subsequently less any 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:

Asset Category 2015
  Useful Life
(years)
Depreciation
Rate
     
Computer software 1 - 7 14.29 - 100%

Carbon credits

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 allocated as a non-exchange transaction are initially recognised at fair value, which then becomes the deemed cost. Carbon credits that are purchased are recognised at cost.

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 revenue 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.

Employment 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 Group 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 Group 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 Group’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 revenue and expense 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 comprise 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 revenue sources of the Council and 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 revenue. 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. Key management personnel include the Mayor and Councillors as elected members of the governing body of the Council reporting entity, the Chief Executive and all members of the Executive Leadership Team, being key advisors to the Council and Chief Executive.

Remuneration of elected members comprises any money, consideration or benefit received or receivable or otherwise made available, directly or indirectly, during the reporting period but 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 controlled entities 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. 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 Provision). 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:

Note 1: Rates revenueTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
General rates        
Base sector 73,417 71,280 73,417 71,280
Commercial, industrial and business sector 60,835 59,325 60,835 59,325
Targeted rates        
All (excluding water rates by meter) 106,640 103,402 106,640 103,402
         
Total rates revenue (excluding water rates by meter) 240,892 234,007 240,892 234,007
Water rates by meter revenue 12,682 12,329 12,682 12,329
         
Total rates revenue for Wellington City Council 253,574 246,336 253,574 246,336

The total amount of rates charged on Council-owned properties that have not been eliminated from revenue and expenditure is $11.623m (2014: $11.333m). For the Group, rates of $11.657m (2014: $11.378m) have not been eliminated.

The revenue from rates for Wellington City Council was billed on the following rating information held as at 30 June 2014.

The number of rating units: 76,680 (2013: 76,021).

  2015
$000
2014
$000
         
Total capital value of rating units 51,238,236 50,540,014
Total land value of rating units 22,259,307 22,127,973

Rates remission

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 2015 totalled $0.378m (2014: $0.215m).

Non-rateable land

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

Note 2: Revenue from operating activitiesTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Grants, subsidies and reimbursements        
Operating 7,735 7,284 15,872 12,317
Capital 33,091 36,031 37,341 37,280
Total grants, subsidies and reimbursements 40,826 43,315 53,213 49,597
         
Development contributions 2,078 5,873 2,078 5,873
         
Other operating activities        
Fines and penalties 7,857 8,411 7,857 8,411
Rendering of services 107,709 100,539 117,700 109,744
Sale of goods 5,916 6,263 7,082 7,285
Total other operating activities 121,482 115,213 132,639 125,440
         
Total revenue from operating activities 164,386 164,401 187,930 180,910

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

For the Group, the additional principal subsidy was $6.949m (2014: $5.261m) from Greater Wellington Regional Council to Wellington Cable Car Limited for the maintenance and upgrade of the overhead wire trolley system.

For the Council, the principal services rendered were:

Rendering of services contains unbudgeted revenue from the joint ventures with Porirua City Council - $1.258m (2014: $0.490m).

Note 3: Investments revenueTop

    Council Group
  Note 2015
$000
2014
$000
2015
$000
2014
$000
           
Dividend from investment in controlled entities   - - - -
Dividend from investment in associates   12,950 11,966 - -
Dividend from investment in other entities   132 113 132 113
Investment property lease rentals 18 11,094 11,174 11,094 11,174
Proceeds from the sale of shares   - - 31 -
           
Total investments revenue   24,176 23,253 11,257 11,287

The primary investment dividend was from Council’s 34% holding in Wellington International Airport Limited.

Note 4: Other revenueTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Gain on disposal of property, plant and equipment  323  2,786  323  2,786
Gain on investment acquisition  1,262  -   1,262  - 
Release of provisions  437  1,593  437  1,603
Fuel tax distribution  1,077  1,074  1,077  1,074
Restricted funds   195  1,028  195  1,028
Vested assets   12,368  8,612  12,368  8,612
         
Total other revenue  15,662  15,093  15,662  15,103

The gain on investment acquisition relates to the Council’s purchase of Grow Wellington Limited, from Greater Wellington Regional Council, which is now part of the Wellington Regional Economic Development Agency Limited.

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:

Note 5: Finance revenue and expenseTop

    Council Group
  Note 2015
$000
2014
$000
2015
$000
2014
$000
           
Finance revenue          
Amortisation of loans to related parties 14 564 512 564 512
Cash flow hedge movements reclassified from hedging reserve   - - - -
Interest on deposits, loans and receivables   2,839 2,240 3,213 2,573
Movements on derivatives at fair value through surplus or deficit   137 - 137 -
           
Total finance revenue   3,540 2,752 3,914 3,085
           
Less          
Finance expense          
Interest on borrowings   22,142 21,466 22,143 21,468
Interest on finance leases   29 41 29 41
Movements on derivatives at fair value through surplus or deficit   - 137 - 137
Re-discounting of interest on provisions 23,24 1,067 1,110 1,067 1,110
           
Total finance expense   23,238 22,754 23,239 22,756
           
Net finance cost   19,698 20,002 19,325 19,671

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 23: Employee benefit liabilities and provisions, and Note 24: Provision for other liabilities.

Note 6: Exchange/Non-exchange revenueTop

  Council Group
  Actual
2015
$000
Actual
2014
$000
Actual
2015
$000
Actual
2014
$000
         
Exchange revenue        
Water rates by meter 12,682 12,329 12,682 12,329
Rendering of services 16,888 16,587 26,157 24,816
Sale of goods 5,916 6,263 7,082 7,285
Dividend from investments 13,082 12,079 132 113
Interest on deposits, loans and receivables 2,839 2,240 3,213 2,573
Investment property lease rentals 11,094 11,174 11,094 11,174
Sale of shares - - 31 -
Total exchange revenue 62,501 60,672 60,391 58,290
         
Non-exchange revenue        
         
Taxes        
Rates 240,892 234,007 240,892 234,007
         
Transfers        
Development contributions 2,078 5,873 2,078 5,873
Grants, subsidies and reimbursements 40,826 43,315 53,213 49,597
Fines and penalties 7,857 8,411 7,857 8,411
Rendering of services - subsidised 90,821 83,952 91,543 84,928
Fuel tax 1,077 1,074 1,077 1,074
Restricted funds 195 1,028 195 1,028
Vested assets 12,368 8,612 12,368 8,612
         
Total non-exchange revenue 396,114 386,272 409,223 393,530
         
Other revenue        
Loan amortisation 564 512 564 512
Release of provisions 437 1,593 437 1,603
Gains 1,585 2,786 1,585 2,786
Fair value movements 8,689 - 8,689 -
         
Total other revenue 11,275 4,891 11,275 4,901
         
Total Revenue 469,890 451,835 480,889 456,721

For the Council, most revenue transactions are non-exchange as they are subsidised by rates and not fully “user-pays”. Within the Group, most controlled entities are heavily funded through rates-funded operating grants, so their revenue is also largely non-exchange.

Note 7: Expenditure on operating activitiesTop

    Council Group
  Note 2015
$000
2014
$000
2015
$000
2014
$000
           
Auditor's remuneration:          
Audit services - Audit New Zealand - Financial Statements   277 337 382 411
Audit services - Audit New Zealand - Long-Term Plan   135 - 135 -
Audit services - Audit New Zealand - other   34 7 34 7
Audit services - Other Auditors   - - 35 52
           
Impairments          
Bad debts written off not previously provided for   307 101 334 101
Increase in provision for impairment of receivables and recoverables 13 452 218 452 218
Impairment loss from property, plant and equipment 19 5,072 458 5,072 1,246
Impairment loss on shares   - - 6 -
           
Governance and employment          
Councillor remuneration 38 1,390 1,341 1,390 1,368
Directors/trustees of controlled entities - remuneration   - - 406 442
Other elected members' remuneration (Community Boards) 38 94 95 94 95
Employee benefits expense:          
Remuneration   79,518 71,268 99,229 89,175
Superannuation contributions (including Kiwisaver)   2,108 1,897 2,526 2,272
Termination benefits (including severances)   641 924 724 974
Other personnel costs   3,609 3,515 4,060 3,950
           
Insurance          
Insurance premiums   10,713 12,142 11,120 12,613
Insurance reserve costs - net 28 1,632 1,163 1,632 1,163
           
General          
Advertising, printing and publications   2,850 2,380 9,319 8,173
Consultants and legal fees   9,423 7,497 9,577 7,720
Contractors   3,205 3,260 5,269 4,982
Direct costs   109,788 106,095 118,590 115,090
Grants - general   10,910 11,182 11,028 10,979
Grants to controlled entities 37 17,614 18,275 - -
Information and communication technology   6,367 6,062 7,230 6,818
Loss on disposal of property, plant and equipment   354 2,565 335 2,486
Loss on disposal of intangibles   24 2,082 24 2,082
Operating lease - minimum lease payments   1,311 1,116 2,527 1,864
Reassessment of provisions 24 1,045 2,979 1,045 2,979
Utility costs   18,899 18,316 19,360 18,710
Other general costs   22,563 22,676 18,519 18,775
           
Total expenditure on operating activities   310,335 297,951 330,454 314,745

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 and specialist assurance advice on shared IT services.

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 (2014: $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 $11.623m (2014:$11.333m) on Council-owned properties.

Impairment loss from property, plant and equipment – this primarily relates to the Town Hall due to the building being earthquake prone. Its value in use has been calculated as the difference between the expected value of the building after strengthening has been completed and the costs to strengthen it. The impairment amounts to $4.513m.

Note 8: Depreciation and amortisationTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Depreciation        
Buildings 22,435 21,879 22,435 21,879
Civic Centre complex 2,793 2,962 2,793 2,962
Restricted buildings 1,430 1,302 1,430 1,302
Drainage, waste and water infrastructure 27,248 28,130 27,248 28,130
Service concession assets 4,969 5,023 4,969 5,023
Landfill post closure 136 202 136 202
Library collections 2,092 2,438 2,092 2,438
Plant and equipment 11,712 9,797 12,684 10,500
Roading infrastructure 21,857 20,201 21,857 20,201
         
Total depreciation 94,672 91,934 95,644 92,637
         
Amortisation        
Computer software 4,337 3,926 4,380 3,974
         
Total amortisation 4,337 3,926 4,380 3,974
         
Total depreciation and amortisation 99,009 95,860 100,024 96,611

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).

The useful lives of assets and the associated depreciation rates are contained in the Summary of Significant Accounting Policies.

Note 9: Income tax expenseTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Current tax expense        
         
Current year - - 221 -
Prior period adjustment - - (1) -
         
Total current tax expense - - 220 -
         
Deferred tax expense        
         
Origination and reversal of temporary differences (68) (75) - -
Change in unrecognised temporary differences - - 389 (64)
Recognition of previously unrecognised tax losses 68 75 - -
         
Total deferred tax expense - - 389 (64)
Reconciliation of tax on the surplus and tax expense Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Surplus for the period before taxation 35,542 27,609 36,990 30,143
         
Prima facie income tax based on domestic tax rate - 28% 9,952 7,731 10,357 8,439
Effect of non-deductible expenses and tax exempt income (9,977) (7,751) (9,873) (9,725)
Effect of tax losses utilised 68 75 - -
Current years loss for which no deferred tax asset was recognised 25 20 25 30
Recognition of prior year loss (68) (75) (68) (75)
Change in unrecognised temporary differences - - 542 92
Prior period adjustment - - - 12
Share of income tax of equity accounted associates - - (375) 1,163
         
Tax Expense/ (Credit) - - 609 (64)
Imputation credits Group
2015
$000
2014
$000
     
Imputation credits available in subsequent periods 77 98

Note 10: 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
  2015
$000
2014
$000
2015
$000
2014
$000
         
Deductible temporary differences - - 461 971
Tax losses 1,951 1,882 1,951 1,921
Total 1,951 1,882 2,412 2,892

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 $0.546m (2014: $0.527m) and for the Group $0.675m (2014: $0.810m).

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 2015, $0.244m (2014: $0.270m) previously unrecognised tax losses, with a tax effect of $0.068m (2014: $0.076m), were recognised by the Group by way of loss transfer arrangement.

As at 30 June 2015, the Group had a deferred tax liability of $1.240m (2014: $1.279m).

Note 11: Cash and cash equivalentsTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Cash at bank 1,392 4,434 7,622 5,600
Cash on hand 21 41 34 56
Short term bank deposits up to 3 months 64,500 48,098 67,942 51,197
         
Total cash and cash equivalents 65,913 52,573 75,598 56,853

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

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

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

Ring-fenced funds

The Council holds $40.356m (2014: $24.320m) of funds that may only be used for a specified purpose. As part of the agreement with the Crown for the Housing Upgrade Project an amount of $36.460m (2014: $21.041m), representing any as yet unused grant funding from the Crown plus the accumulated surpluses and deficits from the Housing activity, has been ring-fenced for future investment in the Council's social housing assets. There is also an amount of $3.896m (2014: $3.279m) related to accumulated surpluses and deficits 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.

Note 12: Derivative financial instrumentsTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Non-current assets        
Interest rate swaps - cash flow hedges 725 4,428 725 4,428
         
Total non-current assets 725 4,428 725 4,428
         
TOTAL DERIVATIVE FINANCIAL INSTRUMENT ASSETS 725 4,428 725 4,428
         
Current liabilities        
Interest rate swaps - cash flow hedges 250 180 250 180
         
Total current liabilities 250 180 250 180
         
Non-current liabilities        
Interest rate swaps - cash flow hedges 17,937 4,651 17,937 4,651
Interest rate swaps - non-hedged - 137 - 137
         
Total non-current liabilities 17,937 4,788 17,937 4,788
         
Total derivative financial instrument liabilities 18,187 4,968 18,187 4,968

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 29: Financial instruments and Note 26: Hedging Reserve.

Note 13: Receivables and recoverablesTop

Receivables from exchange transactions Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Trade receivables - debtors 4,882 4,062 5,069 4,292
Provision for impairment - debtors (4) (2) (4) (2)
Net receivables - debtors 4,878 4,060 5,065 4,290
         
Accrued revenue 691 1,603 691 1,924
Sundry receivables - - 694 461
         
Total receivables from exchange transactions 5,569 5,663 6,450 6,675
Recoverables from non-exchange transactions Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Taxes        
         
GST recoverable 6,581 5,085 6,549 5,205
Rates recoverable 10,164 9,053 10,164 9,053
Total taxes 16,745 14,138 16,713 14,258
         
Transfers        
         
Trade recoverables - debtors 6,755 7,975 8,649 8,997
Provision for impairment - debtors (382) (254) (382) (254)
Net trade recoverables - debtors 6,373 7,721 8,267 8,743
         
Trade recoverables - fines 8,991 9,773 8,991 9,773
Provision for impairment - fines (5,644) (6,286) (5,644) (6,286)
Net trade recoverables - fines 3,347 3,487 3,347 3,487
         
Total trade recoverables - net 9,720 11,208 11,614 12,230
         
Other recoverables        
Accrued revenue 6,239 5,493 6,239 5,493
Sundry recoverables 1,741 956 1,440 1,079
Total other recoverables 7,980 6,449 7,679 6,572
         
Total transfers 17,700 17,657 19,293 18,802
         
Total recoverables from non-exchange transactions 34,445 31,795 36,006 33,060
Total receivables and recoverables   Council Group
  Note 2015
$000
2014
$000
2015
$000
2014
$000
           
Represented by:          
Current   40,014 37,458 42,445 39,735
Non-current   - - 11 -
           
Total receivables and recoverables   40,014 37,458 42,456 39,735
           
Trade receivables and recoverables from related parties          
- Controlled entities 37 936 976 - -
- Associates and jointly controlled entities 37 15 9 15 9
Total trade receivables and recoverables from related parties   951 985 15 9

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

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

Provision for impairment of total trade receivables and recoverables Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance 6,542 6,864 6,542 7,155
New provisions made 452 218 452 218
Release of unused provision (14) (351) (14) (351)
Amount of provision utilised (950) (189) (950) (480)
         
Provision for impairment of total trade receivables and recoverables - closing balance 6,030 6,542 6,030 6,542

The ageing profile of total receivables and recoverables at the reporting date is as follows:

Council 2015 2014
  Gross
$000
Impaired
$000
Net
$000
Gross
$000
Impaired
$000
Net
$000
             
Trade and other receivables and recoverables            
             
Not past due 21,864 - 21,864 21,496 - 21,496
Past due 0-3 months 8,540 (79) 8,461 6,311 (98) 6,213
Past due 3-6 months 2,859 (47) 2,812 3,252 (115) 3,137
Past due more than 6 months 12,781 (5,904) 6,877 12,941 (6,329) 6,612
             
Total trade and other receivables and recoverables 46,044 (6,030) 40,014 44,000 (6,542) 37,458
Group 2015 2014
  Gross
$000
Impaired
$000
Net
$000
Gross
$000
Impaired
$000
Net
$000
             
Trade and other receivables and recoverables            
             
Not past due 24,203 - 24,203 23,199 - 23,199
Past due 0-3 months 8,549 (79) 8,470 6,402 (98) 6,305
Past due 3-6 months 2,894 (47) 2,847 3,252 (115) 3,137
Past due more than 6 months 12,840 (5,904) 6,936 13,423 (6,329) 7,094
             
Total trade and other receivables and recoverables 48,486 (6,030) 42,456 46,276 (6,542) 39,735

The receivables and recoverables 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 14: Other financial assetsTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Financial assets at fair value through other comprehensive revenue and expense        
Equity investments:        
- Civic Assurance 633 590 633 590
- NZ Local Government Funding Agency (LGFA) 1,866 1,883 1,866 1,883
- Creative HQ incubator/accelerator shareholdings - - 1,401 -
         
Loans and deposits        
Bank deposits - term greater than 3 months - 20,000 - 20,400
LGFA - borrower notes 2,208 1,328 2,208 1,328
Loans to related parties - other organisations 4,696 5,898 4,668 5,898
Loans to external organisations 150 150 225 150
         
TOTAL OTHER FINANCIAL ASSETS 9,553 29,849 11,001 30,249
         
Represented by:        
Current 150 20,000 150 20,400
Non-current 9,403 9,849 10,851 9,849
Total other financial assets 9,553 29,849 11,001 30,249

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% (2014: 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 an AA+ (domestic long term) credit rating from Standard and Poor.

Creative HQ, a controlled entity of Grow Wellington, which is a controlled entity of Wellington Regional Economic Development Agency Limited (WREDA), has small shareholdings in various incubator and accelerator programme companies. These shares are held until the companies mature or cease operations.

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
  2015
$000
2014
$000
2015
$000
2014
$000
         
Loans to related parties - other organisations        
         
Wellington Regional Stadium Trust        
(nominal value $15,394,893)        
Opening balance 1,586 1,407 1,586 1,407
Amortisation of fair value adjustment 201 179 201 179
Movement in fair value (1,766) - (1,766) -
Closing balance at fair value 21 1,586 21 1,586
         
         
Karori Wildlife Sanctuary Trust        
(nominal value $10,346,689)        
Opening balance 4,312 3,979 4,312 3,979
Amortisation of fair value adjustment 363 333 363 333
Closing balance at fair value 4,675 4,312 4,675 4,312
         
Loans to other external organisations        
Opening balance 150 - 150 -
New loan advanced - 300 75 300
Loan repayments - (150) - (150)
Movement in fair value - - (28) -
Closing balance at fair value 150 150 197 150
         
Total loans   4,846 6,048 4,893 6,048

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%. Following recent notification from the Trust, the expected repayment of this loan has been extended to 2070 in keeping with the terms of the loan, which states that repayment will only occur once all other debt has been repaid. The fair value of the loan has been reduced accordingly.

The amortisation rates applicable to the Karori Wildlife Sanctuary Trust range from 6.875% to 12.710%. This loan is expected to be fully repaid by the end of 2040.

Loans to other external organisations are generally 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 37: Related party disclosures.

Note 15: InventoriesTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Consumables 633 631 1,453 1,313
Inventories held for re-sale 197 256 327 360
Inventories held for distribution 69 82 69 82
         
Total inventories 899 969 1,849 1,755

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 16: Non-current assets classified as held for saleTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance 1,367 272 1,367 272
Disposals (1,041) (272) (1,041) (272)
Transfers from property, plant and equipment 1,668 1,367 1,668 1,367
Transfers to property, plant and equipment (326) - (326) -
         
Non-current assets classified as held for sale - closing balance 1,668 1,367 1,668 1,367

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 17: IntangiblesTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Computer software        
Cost - opening balance 39,849 43,011 40,491 43,701
Accumulated amortisation (32,995) (31,941) (33,567) (32,592)
Computer software opening balance 6,854 11,070 6,924 11,109
Acquired by direct purchase 6,774 1,792 6,859 1,871
Amortisation (4,337) (3,926) (4,380) (3,974)
Net disposals (39) (2,082) (48) (2,082)
Transfer from property, plant and equipment 467 - 467 -
Total computer software - closing balance 9,719 6,854 9,822 6,924
         
Cost 49,256 39,849 49,965 40,491
Accumulated amortisation (39,537) (32,995) (40,143) (33,567)
         
Total computer software - closing balance 9,719 6,854 9,822 6,924
         
Work in progress        
Computer software 10,435 9,864 10,435 9,864
         
Total work in progress 10,435 9,864 10,435 9,864
         
Carbon credits        
Cost - Opening Balance 575 436 575 436
Additions 768 169 768 169
Net disposals (32) (30) (32) (30)
         
Total Carbon credits - closing balance 1,311 575 1,311 575
         
Total intangibles 21,465 17,293 21,568 17,363

Disposals and transfers are reported net of accumulated amortisation.

The increase in computer software work in progress reflects Council’s commitment to enhancing its technological capabilities across a number of platforms. Council has embarked on replacing its core applications, with 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 the central government in recognition of the carbon absorbed by a portion of the Council’s green belt. For the year ending 30 June 2015 the Council received 74,643 credits (2014: 29,721). The Council purchased 67,874 credits (2014: 110,000) in the market to cover the expected liabilities associated with landfill operations. During the year 32,445 credits (2014: 54,213) were surrendered to meet the Council’s ETS obligations for the 2014 calendar year. The Council also sold any remaining purchased credits that were not able to be used after May 2015 due to Government regulation changes. At 30 June 2015 the total number of credits held is 328,072 (2014: 320,194).

At 30 June 2015 the liability relating to landfill carbon emissions is $0.161m (2014: $0.024m).

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

Note 18: Investment propertiesTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance 192,901 205,951 192,901 205,951
Additions by acquisition 10 - 10 -
Additions by subsequent expenditure - 781 - 781
Fair value revaluation movements taken to surplus/(deficit) 8,552 (7,661) 8,552 (7,661)
Transfer to property, plant and equipment - (6,170) - (6,170)
Transfer from property, plant and equipment 94 - 94 -
         
Investment properties - closing balance 201,557 192,901 201,557 192,901

Wellington City Council’s investment properties including the Wellington Waterfront investment properties were valued as at 30 June 2015 by William Bunt (FNZIV, FPINZ), registered valuer and Director of Valuation Services for CBRE Limited.

The Council’s total investment properties comprise ground leases of $160.058m (2014: $153.480m) and land and buildings of $41.499m (2014: $39.421m) 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 revenue over the remaining term of the lease and add the residual value of the land at lease expiry. For sites subject to perpetually renewable leases values have been assessed utilising a discounted cash flow and arriving at a net present value of all future anticipated gross rental payments.

Revenues and expenses Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Revenue from investment properties 11,094 11,174 11,094 11,174
         
Direct operating expenses of investment properties        
- From investment properties that generated revenue 157 545 157 545
         
Contractual obligations for capital expenditure 3 19 3 19
         
Contractual obligations for operating expenditure 5 13 5 13

The direct operating expenses relating to investment properties form part of the direct expenses in Note 7: Expenditure on operating activities.

Fair value of investment properties valued by independent registered valuers Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
William Bunt - CBRE Limited 201,557 154,830 201,557 154,830
Andrew Washington - Colliers International Limited - 38,071 - 38,071
         
Total fair value of investment properties valued by independent registered valuers 201,557 192,901 201,557 192,901

Note 19: Property, plant and equipmentTop

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

Summary Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Property, plant and equipment - Opening balance 6,536,012 6,546,292 6,547,197 6,558,933
Additions 142,128 104,321 142,292 106,736
Disposals (672) (3,503) (862) (3,504)
Depreciation expense (94,672) (91,934) (95,644) (92,637)
Impairment losses (5,072) (458) (5,072) (1,246)
Revaluation movement 11,168 (45,290) 11,168 (47,163)
Transfer to non-current assets held for sale (1,668) (1,367) (1,668) (1,367)
Transfer from non-current assets held for sale 326 - 326 -
Transfer to intangibles (467) - (467) -
Transfer from investment properties - 6,170 - 6,170
Transfer to investment properties (94) - (94) -
Movement in work in progress 8,911 21,781 10,789 21,275
Acquisition of controlled entity - - 261 -
         
Property, plant and equipment - Closing balance 6,595,900 6,536,012 6,608,226 6,547,197

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

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Operational assets        
         
Land        
Land - at cost - opening balance - - - -
Land - at valuation - opening balance 213,082 203,331 213,082 203,331
Total land - opening balance 213,082 203,331 213,082 203,331
Additions 1,322 6,976 1,322 6,976
Revaluation movement 10,837 - 10,837 -
Transfer between asset classes (1,680) 2,775 (1,680) 2,775
Transfer to investment property (94) - (94) -
Transfer to non-current assets held for sale (559) - (559) -
Total land - closing balance 222,908 213,082 222,908 213,082
         
Land - at cost - closing balance - - - -
Land - at valuation - closing balance 222,908 213,082 222,908 213,082
Total land - closing balance 222,908 213,082 222,908 213,082
         
Buildings        
Buildings - at cost - opening balance 69,409 60,906 69,409 60,906
Buildings - at valuation - opening balance 539,236 547,282 539,236 547,282
Total cost/valuation 608,645 608,188 608,645 608,188
Accumulated depreciation (33,854) (17,813) (33,854) (17,813)
Total buildings - opening balance 574,791 590,375 574,791 590,375
Additions 66,705 10,741 66,705 10,741
Depreciation expense (22,435) (21,879) (22,435) (21,879)
Disposals (16) (1,228) (16) (1,228)
Impairment - (458) - (458)
Revaluation movement 331 (9,295) 331 (9,295)
Transfer between asset classes (63,351) 365 (63,351) 365
Transfer from investment properties - 6,170 - 6,170
Total buildings - closing balance 556,025 574,791 556,025 574,791
         
Buildings - at cost - closing balance - 69,409 - 69,409
Buildings - at valuation - closing balance 556,025 539,236 556,025 539,236
Total cost/valuation 556,025 608,645 556,025 608,645
Accumulated depreciation - (33,854) - (33,854)
Total buildings - closing balance 556,025 574,791 556,025 574,791

Disposals and transfers are reported net of accumulated depreciation.

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Landfill post closure costs 1        
Landfill post closure - at cost - opening balance 3,643 3,783 3,643 3,783
Accumulated depreciation (2,301) (2,100) (2,301) (2,100)
Total landfill post closure costs - opening balance 1,342 1,683 1,342 1,683
Depreciation expense (136) (202) (136) (202)
Transfer between asset classes 1 - 1 -
Movement in post closure costs (604) (139) (604) (139)
Total landfill post closure costs - closing balance 603 1,342 603 1,342
         
Landfill post closure - at cost - closing balance 3,040 3,643 3,040 3,643
Accumulated depreciation (2,437) (2,301) (2,437) (2,301)
Total landfill post closure costs - closing balance 603 1,342 603 1,342
         
Civic Centre complex        
Civic Centre complex - at cost - opening balance 173,817 173,691 173,817 173,691
Accumulated depreciation (58,165) (55,931) (58,165) (55,931)
Total Civic Centre complex - opening balance 115,652 117,760 115,652 117,760
Additions 7,239 1,541 7,239 1,541
Disposals - (687) - (687)
Depreciation expense (2,793) (2,962) (2,793) (2,962)
Impairment (4,513) - (4,513) -
Transfer between asset classes 23 - 23 -
Total Civic Centre complex- closing balance 115,608 115,652 115,608 115,652
         
Civic Centre complex - at cost - closing balance 176,562 173,817 176,562 173,817
Accumulated depreciation (60,954) (58,165) (60,954) (58,165)
Total Civic Centre complex- closing balance 115,608 115,652 115,608 115,652
         
Plant and equipment        
Plant and equipment - at cost - opening balance 166,755 157,065 179,310 169,867
Accumulated depreciation (84,860) (77,728) (91,250) (83,415)
Total plant and equipment - opening balance 81,895 79,337 88,060 86,452
Additions 6,865 13,846 7,026 16,261
Depreciation expense (11,712) (9,797) (12,684) (10,500)
Disposals (352) (1,491) (542) (1,492)
Impairment - - - (788)
Transfer between asset classes 44,372 - 44,372 (1,873)
Transfer to intangibles (467) - (467) -
Acquisition of controlled entity - - 261 -
Total plant and equipment - closing balance 120,601 81,895 126,026 88,060
         
Plant and equipment - at cost 213,057 166,755 225,843 179,310
Accumulated depreciation (92,456) (84,860) (99,817) (91,250)
Total plant and equipment - closing balance 120,601 81,895 126,026 88,060
  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
  2015
$000
2014
$000
2015
$000
2014
$000
         
Library collections        
Library collections - at cost - opening balance - 3,972 - 3,972
Library collections - at valuation - opening 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 - opening balance 14,812 15,310 14,812 15,310
Additions 1,665 2,072 1,665 2,072
Depreciation expense (2,092) (2,438) (2,092) (2,438)
Revaluation movement - (132) - (132)
Total library collections - closing balance 14,385 14,812 14,385 14,812
         
Library collections - at cost - closing balance 1,664 - 1,664 -
Library collections - at valuation - closing balance 14,817 14,812 14,817 14,812
Total cost/valuation 16,481 14,812 16,481 14,812
Accumulated depreciation (2,096) - (2,096) -
Total library collections - closing balance 14,385 14,812 14,385 14,812
         
TOTAL OPERATIONAL ASSETS 1,030,130 1,001,574 1,035,555 1,007,739
         
Infrastructure assets        
         
Drainage, waste and water        
Drainage, waste and water - at cost - opening balance - 76,885 - 76,885
Drainage, waste and water - at valuation - opening balance 1,177,524 1,193,003 1,177,524 1,193,003
Total cost/valuation 1,177,524 1,269,888 1,177,524 1,269,888
Accumulated depreciation - (56,351) - (56,351)
Total drainage, water and waste - opening balance 1,177,524 1,213,537 1,177,524 1,213,537
Additions 25,235 27,784 25,235 27,784
Depreciation expense (27,248) (28,130) (27,248) (28,130)
Revaluation movement - (35,663) - (35,663)
Transfer between asset classes 19,631 (4) 19,631 (4)
Total drainage, water and waste - closing balance 1,195,142 1,177,524 1,195,142 1,177,524
         
Drainage, waste and water - at cost - closing balance 25,215 - 25,215 -
Drainage, waste and water - at valuation - closing balance 1,196,804 1,177,524 1,196,804 1,177,524
Total cost/valuation 1,222,019 1,177,524 1,222,019 1,177,524
Accumulated depreciation (26,877) - (26,877) -
Total drainage, water and waste - closing balance 1,195,142 1,177,524 1,195,142 1,177,524
         
Roading        
Roading - at cost - opening balance - 77,227 - 77,227
Roading - at valuation - opening 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 - opening balance 824,096 823,488 826,696 826,088
Additions 29,927 35,286 29,927 35,286
Depreciation expense (21,857) (20,201) (21,857) (20,201)
Revaluation movement - (14,481) - (16,354)
Transfer between asset classes 7 4 7 1,877
Total roading - closing balance 832,173 824,096 834,773 826,696

Disposals and transfers are reported net of accumulated depreciation.

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Roading - at cost - closing balance 29,927 - 29,927 -
Roading - at valuation - closing balance 824,103 824,096 826,703 826,696
Total cost/valuation 854,030 824,096 856,630 826,696
Accumulated depreciation (21,857) - (21,857) -
Total roading - closing balance 832,173 824,096 834,773 826,696
         
Service concession assets        
Service concession assets - at cost - opening balance - - - -
Service concession assets - at valuation - opening balance 154,767 157,571 154,767 157,571
Total cost/valuation 154,767 157,571 154,767 157,571
Accumulated depreciation - (10,047) - (10,047)
Total service concession assets - opening balance 154,767 147,524 154,767 147,524
Depreciation expense (4,969) (5,023) (4,969) (5,023)
Revaluation movement - 12,266 - 12,266
Total service concession assets - closing balance 149,798 154,767 149,798 154,767
         
Service concession assets - at cost - closing balance - - - -
Service concession assets - at valuation - closing balance 154,767 154,767 154,767 154,767
Total cost/valuation 154,767 154,767 154,767 154,767
Accumulated depreciation (4,969) - (4,969) -
Total service concession assets - closing balance 149,798 154,767 149,798 154,767
         
Infrastructure land        
Infrastructure land - at cost - opening balance - - - -
Infrastructure land - at valuation - opening balance 38,007 36,077 38,007 36,077
Total infrastructure land - opening balance 38,007 36,077 38,007 36,077
Additions 512 2,799 512 2,799
Revaluation movement - 2,015 - 2,015
Transfer between asset classes (2,189) (2,884) (2,189) (2,884)
Transfer to non-current assets held for sale (320) - (320) -
Total infrastructure land - closing balance 36,010 38,007 36,010 38,007
         
Infrastructure land - at cost - closing balance 192 - 192 -
Infrastructure land - at valuation - closing balance 35,818 38,007 35,818 38,007
Total infrastructure land - closing balance 36,010 38,007 36,010 38,007
         
Land under roads        
Land under roads - at cost - opening balance 2,947,969 2,947,937 2,947,969 2,947,937
Additions 891 58 891 58
Disposals (304) (51) (304) (51)
Transfer between asset classes 2,389 109 2,389 109
Transfer to non-current assets held for sale (748) (84) (748) (84)
Land under roads - closing balance 2,950,197 2,947,969 2,950,197 2,947,969
         
TOTAL INFRASTRUCTURE ASSETS 5,163,320 5,142,363 5,165,920 5,144,963

Disposals and transfers are reported net of accumulated depreciation.

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
Restricted assets        
         
Art and cultural assets        
Art and cultural assets - at cost - opening balance 8,927 9,279 11,263 11,615
Additions - 13 3 13
Transfer between asset classes - (365) - (365)
Art and cultural assets - closing balance 8,927 8,927 11,266 11,263
         
Restricted buildings        
Restricted buildings - at cost - opening balance 35,470 34,832 35,470 34,832
Accumulated depreciation (8,095) (6,793) (8,095) (6,793)
Total restricted buildings - opening balance 27,375 28,039 27,375 28,039
Additions 1,507 638 1,507 638
Depreciation expense (1,430) (1,302) (1,430) (1,302)
Impairment (559) - (559) -
Transfer between asset classes 237 - 237 -
Restricted buildings - closing balance 27,130 27,375 27,130 27,375
         
Restricted buildings - at cost - closing balance 36,627 35,470 36,627 35,470
Accumulated depreciation (9,497) (8,095) (9,497) (8,095)
Total restricted buildings - closing balance 27,130 27,375 27,130 27,375
         
Parks and reserves        
Parks and reserves - at cost - opening balance 210,179 208,802 210,179 208,802
Additions 864 2,706 864 2,706
Disposals - (46) - (46)
Transfer between asset classes 560 - 560 -
Transfer from non-current assets held for sale 326 - 326 -
Transfer to non-current assets held for sale (41) (1,283) (41) (1,283)
Parks and reserves - closing balance 211,888 210,179 211,888 210,179
         
Town Belt - at cost 84,544 84,544 84,544 84,544
         
Zoo animals - at cost 500 500 500 500
         
TOTAL RESTRICTED ASSETS 332,989 331,525 335,328 333,861
         
Work in progress        
- Land 53 80 53 80
- Buildings 22,698 52,311 22,698 52,311
- Civic Centre complex 4,368 - 4,368 -
- Plant and equipment 8,142 7,990 10,104 8,074
- Library 390 - 390 -
- Drainage, waste and water 3,838 - 3,838 -
- Roading 28,745 - 28,745 -
- Art and cultural 180 169 180 169
- Restricted buildings 1,047 - 1,047 -
TOTAL WORK IN PROGRESS 69,461 60,550 71,423 60,634
         
Total property, plant and equipment 6,595,900 6,536,012 6,608,226 6,547,197

Finance leases

The net carrying amount of plant and equipment assets held by the Council under finance leases is $0.286m (2014: $0.739m).

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 Provision.

Core assets

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

Council 2015
  Closing book value Additions Replacement Cost
  Constructed Vested
  $000 $000 $000 $000
         
Water supply        
- treatment plants and facilities - - - -
- other assets 529,724 13,265 933 939,317
         
Sewerage        
- treatment plants and facilities 166,095 - - 221,739
- other assets 318,492 7,959 332 768,062
         
Stormwater drainage 329,221 4,821 818 650,194
         
Flood protection and control works - - - -
         
Roads and footpaths 609,293 41,389 986 830,123
         
Total 1,952,825 67,434 3,069 3,409,435
Council 2014
  Closing book value Additions Replacement Cost
  Constructed Vested
  $000 $000 $000 $000
         
Water supply        
- treatment plants and facilities - - - -
- other assets 514,471 12,822 1,092 883,590
         
Sewerage        
- treatment plants and facilities 171,589 - - 211,785
- other assets 317,622 9,957 1,288 725,665
         
Stormwater drainage 327,629 5,291 1,806 615,621
         
Flood protection and control works - - - -
         
Roads and footpaths 602,634 25,785 560 784,610
         
Total 1,933,945 53,855 4,746 3,221,271

Water and roads assets are not on the valuation cycle this year. Therefore their replacement costs are based on the optimised replacement costs estimate figures in the valuation for the 2013/14 year measured against an appropriate index to get an indication of potential value changes. These indicators are the same as those used for Council’s Long-Term Plan (LTP). The infrastructure indicators used are sourced from Business and Economic Research Limited (BERL) titled “Forecasts of Price Level Change Adjustors”.

The core value of roads and footpaths shown above excludes the value of retaining walls, street lighting, sumps and leads and other related assets totalling $222.8 m that are included in the value of roading assets under infrastructure assets as disclosed above.

Revaluation of property, plant and equipment

The Council’s operational land and buildings were valued as at 30 June 2015, 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, in November 2002. An independent peer review was conducted by Michaela O’Donovan, Service Design and Implementation Manager, National Library of New Zealand.

The drainage, waste and water infrastructure and roading networks and the service concession assets were valued as at 30 June 2014 by John Vessey (MIPENZ), Partner of Opus International Consultants Limited.

In the years in 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 2014 and 30 June 2015 for the infrastructure assets were assessed using appropriate indices. The increase in asset value of 1.7% was not considered material by management and accordingly the assets were not revalued at 30 June 2015.

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

Service concession arrangements

The service concession arrangement asset class consists of the Moa Point, Western (Karori) and Carey’s Gulley waste water treatment plants which are owned by the Council but operated by Veolia Water under agreement. The assets are valued consistently with waste infrastructure network assets.

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 service concession arrangement assets 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 section100 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
  2015
$000
2014
$000
     
Total value of property, plant and equipment 6,595,900 6,536,012
Value or assets covered by insurance contracts 3,090,300 3,042,231
     
The maximum amount to which assets are insured under Council insurance policies 820,000 720,000

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 the central government will contribute 60% towards the restoration of Council owned underground drainage, waste and water assets and the NZTA 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 $8.727m (2014:$ 9.609m) exists to meet the cost of claims that fall below deductible limits under Council insurance policies. Refer to Note 28: Restricted Funds

Note 20: Exchange transactions, taxes and transfers payableTop

Payables under exchange transactions Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Exchange payables and accruals 36,740 39,080 40,690 40,999
Interest payable 2,951 3,679 2,951 3,679
Sundry payables 6,368 3,339 6,911 3,739
         
TOTAL PAYABLES UNDER EXCHANGE TRANSACTION 46,059 46,098 50,552 48,417
Taxes and transfers payable Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Taxes payable        
- GWRC rates 2,315 2,231 2,315 2,231
- FBT 53 71 54 71
- PAYE 909 927 1,075 1,105
- ESCT 21 18 22 19
- Carbon credit liability 161 24 161 24
         
Transfers payable        
- Creditors and accruals 4,797 4,675 4,797 4,675
- Sundry payables 4,379 4,295 4,393 4,481
         
Total taxes and transfers payable 12,635 12,241 12,817 12,606
Total exchange transactions, taxes and transfers payable Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Payables under exchange transactions 46,059 46,098 50,552 48,417
Taxes and transfers payable 12,635 12,241 12,817 12,606
         
  58,694 58,339 63,369 61,023
Represented by:        
Current 58,064 57,709 62,739 60,393
Non-current 630 630 630 630
         
Total exchange transactions, taxes and transfers payable 58,694 58,339 63,369 61,023
Exchange transactions, taxes and transfers payable to related parties   Council Group
  Note 2015
$000
2014
$000
2015
$000
2014
$000
           
Controlled entities 37 1,455 1,203 - -
Associates and jointly controlled entities 37 295 1,030 295 1,030
           
Total exchange transactions, taxes and transfers payable to related parties   1,750 2,233 295 1,030

Exchange transactions, taxes and transfers payable 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 21: Revenue in advanceTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Exchange        
- Lease rentals 3,605 3,942 3,605 3,942
- Other - 27 - 27
         
Taxes        
- Rates 876 968 876 968
         
Transfers        
- Wellington Venues operations 1,325 1,547 1,325 1,547
- Inspection and licensing fees 2,909 2,335 2,909 2,335
- Controlled entities - - 801 589
- Other 1,348 1,536 1,348 1,536
         
         
Liabilities recognised under conditional transfer agreements 19,230 1,750 21,927 2,280
         
Total revenue in advance 29,293 12,105 32,791 13,224

Liabilities recognised under conditional transfer agreements

Council and the Group have received non-exchange transfer monies for specific purposes, which apply to periods beyond the current year, with conditions that would require the return of the monies if they are not able to fulfil the agreement. The revenue from these agreements will only be recognised as the conditions are fulfilled over time.

Note 22: BorrowingsTop

The Council maintains a prudent borrowings position in relation to our equity and annual revenue. 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.

Gross borrowings

The gross borrowings are comprised as follows:

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Current        
         
Bank facilities - short term - committed 2,000 - 2,000 -
Bank loans - term 5 - 5 -
Commercial paper 72,000 100,000 72,000 100,000
Debt securities - fixed rate bonds 5,000 - 5,000 -
Debt securities - floating rate notes 85,000 29,000 85,000 29,000
Finance leases 99 371 102 375
         
Total current 164,104 129,371 164,107 129,375
         
Non-current        
         
Bank loans - term 3,069 3,125 3,069 3,125
Debt securities - fixed rate bonds 20,000 20,000 20,000 20,000
Debt securities - floating rate notes 246,500 266,500 246,500 266,500
Finance leases 55 122 55 125
         
Total non-current 269,624 289,747 269,624 289,750
         
Total borrowings 433,728 419,118 433,731 419,125

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 29: Financial instruments.

The following table shows the utilisation of the borrowing facilities available to the Group at the end of the reporting period. The table also indicates the current applicable maturity and interest rate ranges:

Group Available Utilised Maturities Rates
  $000 $000   %
Bank overdraft - committed 1,550 - - -
Bank facilities - short term - uncommitted 5,000 - - -
Bank facilities - long term - committed 120,000 2,000 on call 4.625
Bank loans - term 3,074 3,074 2015-2036 7.00
Commercial paper 72,000 72,000 ~3 months 3.34 - 3.75
Debt securities - fixed rate bonds 25,000 25,000 2016-2023 4.06 - 5.48
Debt securities - floating rate notes 331,500 331,500 2015-2023 3.59 - 5.10
Finance leases 157 157 2015-2017 10.22
         
Total 558,281 433,731    

Security

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.

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 19: 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:

finance lease liabilities Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Future minimum lease payments        

Not later than one year

109 394 112 399

Later than one year and not later than five years

58 130 58 133

Later than five years

- - - -
         
Total future minimum lease payments 167 524 170 532

Future finance charges

(13) (31) (13) (32)
         
PRESENT VALUE OF FUTURE MINIMUM LEASE PAYMENTS 154 493 157 500
         
Present value of future minimum lease payments        

Not later than one year

99 371 102 375

Later than one year and not later than five years

55 122 55 125

Later than five years

- -   -
         
Total present value of future minimum lease payments 154 493 157 500

Note 23: Employee benefit liabilities and provisions ​Top

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Current        
         
Short-term benefits        
Payroll accruals 1,166 771 1,455 1,039
Holiday leave 5,028 4,380 5,900 5,324
         
Total short-term benefits 6,194 5,151 7,355 6,363
         
Termination benefits        
Other contractual provisions 112 77 112 77
         
Total termination benefits 112 77 112 77
         
Total current 6,306 5,228 7,467 6,440
         
Non-current        
         
Long-term benefits        
Long service leave provision - - 49 69
Retirement gratuities provision 1,096 1,207 1,108 1,219
         
Total long-term benefits 1,096 1,207 1,157 1,288
         
Total employee benefit liabilities and provisions 7,402 6,435 8,624 7,728

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

Long service leave provision Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance - - 69 78
Additional or increased provision made - - - -
Release of provision - - - (9)
Amount utilised - - (20) -
         
Long service leave - closing balance - - 49 69
Retirement gratuities provision Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance 1,207 1,474 1,219 1,486
Movement in required provision (19) (52) (19) (52)
Release of unused provision (29) (109) (29) (109)
Rediscounting of interest 75 92 75 92
Amount utilised (138) (198) (138) (198)
         
Retirement gratuities - closing balance 1,096 1,207 1,108 1,219

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 2.25%) as at 30 June 2015, before discounting, is $1.435m (2014: $1.679m). The discount rate used is 6.10%.


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

Other contractual provisions Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance 77 714 77 714
New provision 112 77 112 77
Release of unused provision (7) - (7) -
Amount utilised (70) (714) (70) (714)
         
Other contractual provisions - closing balance 112 77 112 77

Background

The above provision is to cover estimated redundancy costs as at 30 June 2015 resulting from current restructuring within the Council.

Note 24: Provision for other liabilitiesTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Current        
ACC Partnership programme 27 31 27 31
Landfill post closure costs 2,112 2,311 2,112 2,311
Weathertight homes 13,068 28,439 13,068 28,439
         
Total current 15,207 30,781 15,207 30,781
         
Non-current        
Landfill post closure costs 13,708 13,468 13,708 13,468
Weathertight homes 28,132 21,954 28,132 21,954
         
Total non-current 41,840 35,422 41,840 35,422
         
Total provision for other liabilities 57,047 66,203 57,047 66,203

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

ACC Partnership programme Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance 31 20 31 20
Change in provision for risks incurred 65 95 65 95
Amounts utilised (69) (84) (69) (84)
         
Total liability for claims outstanding 27 31 27 31
         
Represented by:        
         
Present value of future payments 23 30 23 30
Risk margin 4 1 4 1
         
Total liability for claims outstanding 27 31 27 31

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
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance 15,779 16,349 15,779 16,349
Release of provision (866) (1,284) (866) (1,284)
Re-discounting of interest 1,114 1,018 1,114 1,018
Amount utilised (207) (304) (207) (304)
         
Landfill post closure costs - closing balance 15,820 15,779 15,820 15,779

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 6.10%. The gross provision (inflation adjusted at 2.94%), before discounting, is $23.445m as at 30 June 2015 (2014: $23.287m). 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 780,000m3 (2014: 700,000m3) 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 483,000m3 (2014: 536,000m3) and an estimated remaining life out to the end of 2022 (7 years).

Weathertight homes Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance 50,393 66,979 50,393 66,979
Additional or increased provision made 980 2,884 980 2,884
Amount utilised (10,173) (19,470) (10,173) (19,470)
         
Weathertight homes - closing balance 41,200 50,393 41,200 50,393
         
Current 13,068 28,439 13,068 28,439
Non-current 28,132 21,954 28,132 21,954
         
Weathertight homes - closing balance 41,200 50,393 41,200 50,393

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 $3.282m (2014: $4.997m) as a provision for future claims relating to weathertightness issues not yet identified or not yet reported.

Movement in the provision

During the year $10.173m was paid as either part or full settlement of claims. An additional $0.980m was added to the provision after an actuarial re-assessment of the likely future costs to be incurred as explained below. The current / non-current split above reflects the expected timing of payments but is reassessed each year to take account of delays in claim negotiations and any mediation outcomes.

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 that 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.

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 that may experience weathertightness problems and therefore the percentage of homeowners 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 2015
  $000
  +10% -10%
Assumption Effect on
Surplus or Deficit
     
Amount claimed 4,120 (4,379)
Settlement level award 4,120 (4,379)
Council contibution to settlement 4,120 (4,379)
Timing of claim payments - -
Participation in FAP scheme (1,639) 1,637
Change in percentage of homeowners who will make a successful claim 327 (329)
  2015
  +2% -2%
Assumption Effect on
Surplus or Deficit
     
Discount rate (1,489) 1,604

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
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance (18,530) (3,442) (18,530) (3,442)
Funding for weathertight homes liability 6,662 4,996 6,662 4,996
Total amounts paid (10,173) (19,470) (10,173) (19,470)
Interest allocation (1,166) (614) (1,166) (614)
         
Closing balance funded through borrowings (23,207) (18,530) (23,207) (18,530)

Note 25: Revaluation reservesTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Land - opening balance 144,254 144,302 144,254 144,302
Revaluation recognised in other comprehensive revenue and expense 10,837 - 10,837 -
Transfer between classes - (48) - (48)
         
Land - closing balance 155,091 144,254 155,091 144,254
         
Buildings - opening balance 231,167 240,462 231,167 240,462
Revaluation adjustment 331 (9,295) 331 (9,295)
         
Buildings - closing balance 231,498 231,167 231,498 231,167
         
Library collections - opening balance 7,015 7,147 7,015 7,147
Revaluation recognised in other comprehensive revenue and expense - (132) - (132)
         
Library collections - closing balance 7,015 7,015 7,015 7,015
         
Drainage, waste and water - opening balance 547,533 585,184 547,533 585,184
Revaluation recognised in other comprehensive revenue and expense - (37,651) - (37,651)
         
Drainage, waste and water - closing balance 547,533 547,533 547,533 547,533
         
Service concession assets - opening balance 70,619 58,353 70,619 58,353
Revaluation recognised in other comprehensive revenue and expense - 12,266 - 12,266
         
Service concession assets - closing balance 70,619 70,619 70,619 70,619
         
Infrastructure land - opening balance 15,410 13,347 15,410 13,347
Revaluation recognised in other comprehensive revenue and expense - 2,015 - 2,015
Transfer between classes - 48 - 48
         
Infrastructure land - closing balance 15,410 15,410 15,410 15,410
         
Roading - opening balance 356,035 370,516 356,035 372,389
Revaluation recognised in other comprehensive revenue and expense - (14,481) - (16,354)
         
Roading - closing balance 356,035 356,035 356,035 356,035
         
Associates' revaluation reserves - opening balance - - 109,972 109,934
Revaluation recognised in other comprehensive revenue and expense - - 3,862 -
Effect of changed shareholding in associates - - 27 38
         
Associates' revaluation reserves - closing balance - - 113,861 109,972
         
TOTAL REVALUATION RESERVES - CLOSING BALANCE 1,383,201 1,372,033 1,497,062 1,482,005
         
These revaluation reserves are represented by:        
Opening balance 1,372,033 1,417,323 1,482,005 1,529,130
Revaluation recognised in other comprehensive revenue and expense 11,168 (45,290) 15,030 (47,163)
Effect of changed shareholding in associates - - 27 38
Transfer to retained earnings on disposal of assets - - - -
         
Total revaluation reserves - closing balance 1,383,201 1,372,033 1,497,062 1,482,005

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 2015 Council revalued its operational land and buildings and investment properties.

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
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance (403) (9,955) (403) (9,956)
Cash flow hedge net movement recognised in other comprehensive revenue and expenses (17,059) 9,552 (17,059) 9,552
Cash flow hedge movement reclassified to share of equity accounted surplus of associate - - - 1
         
Hedging reserve - closing balance (17,462) (403) (17,462) (403)

The hedging reserve shows accumulated fair value changes for interest rate swaps that satisfy the criteria for hedge accounting and have operated as effective hedges during the period. The Council uses interest rate swaps to fix interest rates on floating rate debt (floating rate notes and commercial paper) to give it certainty over interest costs. Council uses hedge accounting to recognise any fair value fluctuations in these swaps through this reserve within equity. Using hedge accounting prevents any large movement in interest rate exposure significantly affecting the Council’s ability to meet its balanced budget requirements.

Note 27: Fair value through other comprehensive revenue and expense reserveTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Opening balance 63 93 63 93
Movements:        
Civic Assurance 43 (30) 43 (30)
Creative HQ shareholdings - available for sale - - 399 -
         
Fair value through other comprehensive revenue and expense reserve - closing balance 106 63 505 63

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 14: Other financial assets - for further information.

In the Group, Creative HQ, a controlled entity of Grow Wellington, itself a controlled entity of WREDA, has small shareholdings in incubator and accelerator programme companies. These shareholdings are fair valued annually and any movement is held within this reserve until the shares are disposed.

Note 28: Restricted fundsTop

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Special reserves and funds 14,271 17,553 17,025 20,240
Trusts and bequests - Council 412 407 412 407
         
Restricted funds - Opening balance 14,683 17,960 17,437 20,647
         
Additional funds 2,273 4,779 4,146 5,097
Funds utilised (3,832) (3,813) (4,660) (4,064)
Funds released to retained earnings - (4,243) - (4,243)
Total movments in restricted funds (1,559) (3,277) (514) (3,210)
         
Special reserves and funds 12,702 14,271 16,501 17,025
Trusts and bequests - Council 422 412 422 412
         
Restricted funds - Closing balance 13,124 14,683 16,923 17,437
Special reserves and funds Closing
Balance
2014
$000
Additional
Funds
2015
$000
Funds
Utilised
2015
$000
Closing
Balance
2015
$000
         
Council        
Wellington economic initiatives development fund 4,375 627 (2,026) 2,976
Reserve purchase and development fund 287 712 - 999
Insurance reserve 9,609 750 (1,632) 8,727
  14,271 2,089 (3,658) 12,702
Group        
Controlled entities' restricted funds 2,754 1,873 (828) 3,799
         
Council and Group 17,025 3,962 (4,486) 16,501

Nature and purposeTop

Wellington Economic Initiatives Development (WEID) 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.

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 (2014: $0.750m) are funded through rates as identified in the Annual Plan.

Controlled entities’ restricted funds

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

Trust and Bequests - Council Closing
Balance
2014
$000
Additional
Funds
2015
$000
Funds
Utilised
2015
$000
Closing
Balance
2015
$000
         
A Graham Trust 3 - - 3
A W Newton Bequest 301 17 - 318
Charles Plimmer Bequest - 165 (165) -
E A McMillan Estate 6 - - 6
E Pengelly Bequest 13 - - 13
F L Irvine Smith Memorial 7 - - 7
Greek NZ Memorial Association 5 - - 5
Kidsarus 2 Donation 3 - - 3
Kirkcaldie and Stains Donation 17 - - 17
QEII Memorial Book Fund 18 1 - 19
Schola Cantorum Trust 6 1 - 7
Stanley Banks Trust 9 - (9) -
Terawhiti Grant 10 - - 10
Wellington Beautifying Society Bequest 14 - - 14
         
Total trusts and bequests 412 184 (174) 422

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 revenue - $165,000

Funds utilised

Trusts and bequests funds utilised during the year were:

Nature and purpose

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

Note 29: 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
  2015
$000
2014
$000
2014
$000
2014
$000
         
Financial assets        
         
Loans and receivables        
Cash and cash equivalents 65,913 52,573 75,598 56,853
Receivables from exchange transactions 5,569 5,663 6,450 6,675
Recoverables from non-exchange transactions 34,445 31,795 36,006 33,060
Other financial assets 9,553 27,376 11,001 30,249
Total loans and receivables 115,480 117,407 129,055 126,837
         
Financial assets at fair value through other comprehensive revenue and expense        
Other financial assets 2,499 2,473 3,900 2,473
Total financial assets at fair value through other comprehensive revenue and expense 2,499 2,473 3,900 2,473
         
Hedged derivative financial instruments        
Derivatives designated as cash flow hedges 725 4,428 725 4,428
Total hedged derivative financial instruments 725 4,428 725 4,428
         
Total financial assets 118,704 124,308 133,680 133,738
Total non-financial assets 6,855,979 6,783,498 6,981,621 6,904,987
         
TOTAL ASSETS 6,974,683 6,907,806 7,115,301 7,038,725
         
Financial liabilities        
         
Financial liabilities at amortised cost        
Payables under exchange transactions 46,059 46,098 50,552 48,417
Taxes and transfers payable 12,635 12,241 12,817 12,606
Borrowings 433,728 419,118 433,731 419,125
Total financial liabilities at amortised cost 492,422 477,457 497,100 480,148
         
Derivative financial instruments        
Derivatives designated as cash flow hedges 18,187 4,831 18,187 4,831
Total derivative financial instruments 18,187 4,831 18,187 4,831
         
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 510,609 482,425 515,287 485,116
Total non-financial liabilities 93,742 84,743 99,702 88,434
         
Total liabilities 604,351 567,168 614,989 573,550

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 2015 2014
  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 revenue and expense - - 3,900 - - 2,473
             
Derivative financial instruments            
- Fair value hedges - - - - - -
- Cash flow hedges

- 725 - - 4,428 -
             
Financial liabilities            
Derivative financial instruments            
- Cash flow hedges - 18,187 - - 4,831 -
- non-hedged swaps - - - - 137 -
Reconciliation of fair value movements in Level 3 Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Financial assets at fair value through other comprehensive revenue and expense        
         
- Equity investments        
         
Opening balance - 1 July 2,473 2,503 2,473 2,503
Opening balance from acquisition - - 1,008 -
Purchases - - - -
Disposals (17) - (23) -
Gains or losses recognised in other comprehensive revenue and expense 43 (30) 442 (30)
         
Closing balance - 30 June 2,499 2,473 3,900 2,473

The level 3 equity investments comprise the Council’s shareholdings in the Local Government Funding Agency $1.866m (2014: $1.883m) and Civic Assurance $0.633m (2014:$0.590m). Refer to Note 14: Other financial assets for more details.

Financial risk management

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

Credit risk

Credit risk is the risk that a third party will default on its obligations to the Group, thereby causing a financial loss. The Group is not exposed to any material concentrations of credit risk other than its exposure within the Wellington region. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the Statement of Financial Position and the face value of financial guarantees to related parties (refer Note 32: 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
  2015
$000
2014
$000
2015
$000
2014
$000
         
Financial instruments with credit risk        
         
Cash and cash equivalents 65,892 52,532 75,564 56,797
         
Derivative financial instrument assets 725 4,428 725 4,428
         
Receivables and recoverables        
- Receivables 5,569 5,663 6,450 6,675
- Recoverables 34,445 31,795 36,006 33,060
         
Other financial assets        
- Bank deposits - term - 20,000 - 20,400
- LGFA borrower notes 2,208 1,328 2,208 1,328
- Loans to related parties - other organisations 4,696 5,898 4,668 5,898
- Loans to external organisations 150 150 225 150
         
Financial guarantees to related parties 500 600 500 600
         
Total financial instruments with credit risk 114,185 122,394 126,346 129,336

Receivables and recoverables 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 32: Contingencies.

Credit quality of financial assets

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

Counterparties with credit ratings Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Cash - registered banks        
AA- 1,392 4,434 7,622 5,600
         
Short term deposits - registered banks        
AA- 61,500 48,098 64,942 51,197
A+ 3,000 - 3,000 -
         
Term deposits (greater than 3 months) - registered banks        
AA- - 10,000 - 10,400
A+ - 10,000 - 10,000
         
Term deposits - borrower notes - NZ LGFA        
AA+ 2,208 1,328 2,208 1,328
         
Derivative financial instrument assets        
AA- 725 4,428 725 4,428

Liquidity risk

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

Contractual maturity

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

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Contractual cash flows of financial liabilities excluding derivatives        
0-12 months 236,052 200,845 240,730 203,534
1-2 years 49,642 104,395 49,642 104,398
2-5 years 128,050 139,265 128,050 139,265
More than 5 years 136,273 95,146 136,273 95,146
TOTAL CONTRACTUAL CASH FLOWS OF FINANCIAL LIABILITIES EXCLUDING DERIVATIVES 550,017 539,651 554,695 542,343
         
Represented by:        
Carrying amount as per the Statement of Financial Position 492,422 477,386 497,100 480,077
Future interest payable 57,595 62,265 57,595 62,266
Total contractual cash flows of financial liabilities excluding derivatives 550,017 539,651 554,695 542,343

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
  2015
$000
2014
$000
2015
$000
2014
$000
         
Contractual cash flows of derivative financial liabilities        
0-12 months 5,482 3,478 5,482 3,478
1-2 years 5,651 1,464 5,651 1,464
2-5 years 8,186 1,289 8,186 1,289
More than 5 years 753 (252) 753 (252)
TOTAL CONTRACTUAL CASH FLOWS OF DERIVATIVE FINANCIAL LIABILITIES 20,072 5,979 20,072 5,979
         
Represented by:        
Future interest payable 20,072 5,979 20,072 5,979
Total contractual cash flows of derivative financial liabilities 20,072 5,979 20,072 5,979

In addition to cash to be received in 2015/16 the Council currently has $118m in unused committed bank facilities available to settle obligations as well as $104.441m 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 32: 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% 36%
3 - 5 years 20% 60% 30%
More than 5 years 15% 60% 34%

Market risk

Market risk is the risk that the value of an investment will decrease or a liability will increase due to changes in market conditions. The Group uses interest rate swaps in the ordinary course of business to manage interest rate risks. A Treasury committee, headed by senior management personnel 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
before interest rate swaps
Actual % of fixed debt
after interest rate swaps
50% 95% 7% 93%

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

  Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Financial instruments subject to interest rate volatility - before effect of interest rate swaps        
Cash and cash equivalents 65,913 52,573 75,598 56,853
Bank deposits - term greater than 3 months - 20,000 - 20,400
Bank facilities - short term (2,000) - (2,000) -
Bank loans (3,074) (3,125) (3,074) (3,125)
Commercial paper (72,000) (100,000) (72,000) (100,000)
Debt securities - floating rate notes (331,500) (295,500) (331,500) (295,500)
Total financial instruments subject to interest rate volatility - before effect of interest rate swaps (342,661) (326,052) (332,976) (321,372)
         
Effect of interest rate swaps in reducing interest rate volatility        
Effect of Cash flow interest rate swaps - hedged 357,500 303,500 357,500 303,500
Effect of Cash flow interest rate swaps - non-hedged - 7,500 - 7,500
         
Total effect of interest rate swaps in reducing interest rate volatility 357,500 311,000 357,500 311,000
         
Total financial instruments subject to interest rate volatility - after effect of interest rate swaps 14,839 (15,052) 24,524 (10,372)

These interest rate swaps have a nominal value that 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 2015 the fair value of the interest rate swaps was -$17.462m (2014: -$0.540m). 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
  2015
$000
2014
$000
2015
$000
2014
$000
         
Investments        
Cash and cash equivalents 3.76 3.79 3.47 3.71
Short term deposits > 3 months - 4.29 - 4.29
LGFA - borrower notes 3.96 4.11 3.96 4.11
Loans to related parties - - - -
Loans to external organisations - - - -
         
Borrowings        
Bank facilities - short term 4.63 - 4.63 -
Bank loans 7.00 7.00 7.00 7.00
Commercial paper 3.65 3.46 3.65 3.46
Debt securities - fixed 4.93 5.14 4.93 5.14
Debt securities - floating 4.22 4.17 4.22 4.17
Derivative financial instruments - hedged 4.76 5.04 4.76 5.04
Derivative financial instruments - non-hedged - 4.84 - 4.84
Finance leases 10.22 10.20 10.24 10.21

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   2015
    $000
    +1% -1% +1% -1%
Interest rate risk Note Effect on Surplus or Deficit Effect on Other Comprehensive Revenue and Expense
           
Financial assets          
Cash and cash equivalents a 659 (659) - -
LGFA - borrower notes   22 (22) - -
Derivatives - Interest rate swaps - hedged b - - 2,579 (2,939)
           
Financial liabilities          
Derivatives - interest rate swaps - hedged b - - 16,298 (17,282)
Debt securities - floating rate notes c (310) 310 - -
Debt securities - fixed rate bonds d - -    
Bank term loans e - - - -
Commercial paper f - - - -
           
Total sensitivity to interest rate risk   371 (371) 18,877 (20,221)

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 revenue of $0.659m.

b. Derivatives - hedged interest rate swaps

Derivatives include interest rate swaps with a fair value totalling -$17.462m. A movement in interest rates of plus 1% has an effect on increasing the unrealised value of the hedged interest rate swaps by $18.877m. A movement in interest rates of minus 1% has an effect on reducing the unrealised value of the hedged interest rate swaps by $20.221m.

c. Debt securities – floating rate notes

Debt securities at floating rates total $331.500m. The full exposure to changes in interest rates has been reduced because the Council has $300.500m of this 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 $0.310m.

d. Debt securities – fixed rate bonds

The Council has $25m of fixed rate bonds which are not exposed to interest rate changes.

e. Bank loan

The Council, through its joint venture with Porirua City Council has a bank term loan of $3.074m. This loan consists of various loans provided to the joint venture through Porirua City Council borrowing. The interest rate applied is fixed at 7% for the joint venture partners and is not subject to interest rate risk.

f. Commercial paper

The Council also has a Commercial Paper programme which is subject to floating rates and totals $72m. The exposure to changes in interest rates has been removed because the Council has all of the debt effectively at fixed rates through interest rate swaps.

Equity management

The Group’s equity includes accumulated funds and retained earnings, revaluation reserves, a hedging reserve, a fair value through other comprehensive revenue and expense 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 30: Major budget variationsTop

Statement of Comprehensive Revenue and Expense

Significant variations from budgeted revenues and expenses are as follows:

Revenues were $19.7m higher than budgeted primarily due to unbudgeted other revenues of $14.6m (including vested assets of $12.4m), higher finance revenues of $2.9m, higher investment revenues of $4.0m (including increased dividends of $2.0m) and an investment property revaluation increase of $8.6m. These were offset by lower than expected grant revenue of ($10.3m), largely due to Housing Upgrade grant funding not being recognised yet.

Expenses were $10.5m higher than budgeted primarily due to asset impairments of $5.1m, fair value movements of $1.8m, the reassessment of the weathertight homes provision ($1.0m), insurance costs (net of recoveries) funded through the insurance reserve of $1.6m and other increases in operating activity expenses of $4.2m. These were offset by lower depreciation of ($3.2m).

Statement of Changes in Equity

Significant variations from budgeted changes in equity are as follows:

Due to the effect of lower than expected revaluations of infrastructure assets in 2013/14 – ($221m), opening equity was below budget ($314m) due to the timing of the budget preparation being before the revaluation results were known.

During the year, lower than expected revaluations of land and building assets ($45.9m) and a downward movement in the hedging reserve ($17.1m) contributed to an overall lower than expected change in the equity position ($53.8m).

Statement of Financial Position

Significant variations from budget are as follows.

Current assets are $62.8m higher than budget primarily due to the unbudgeted holding of additional cash and cash equivalents resulting from the prefunding of debt replacement and the timing of investment maturities to meet cash flow requirements.

Non-current assets are $379.4m lower than budget primarily due to the lower revaluations in the 2013/14 year

Total liabilities are $49.3m higher than budget due to; unrecognised housing grant revenue of $14.5m, increased borrowings of $21m (including prefunded debt replacement) and higher derivative movements of $5.1m.

Statement of Cash Flows

Significant variations from budget are as follows:

Net cash flows from operating activities were $6.3m higher than budgeted primarily due to increased revenue from operating activities by $4.4m, offset by higher grants revenue recognised of $4.8m and lower Council rates received ($2.8m).

Net cash flows from investing activities were $41.7m lower than budget primarily due to higher dividends and interest received of $4.9m, a decrease in bank investments of $20m and lower purchases of property, plant and equipment assets of $18.4m.

Note 31: CommitmentsTop

Capital commitments Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Approved and contracted - property, plant and equipment 35,368 38,375 35,369 46,475
Approved and contracted - investment properties 3 19 3 19
Approved and contracted - intangibles 1,891 - 1,891 -
Approved and contracted - share of associates - - 12,194 1,030
Approved and contracted - share of joint ventures - - - -
         
Total capital commitments 37,262 38,394 49,457 47,524

The capital commitments above often span more than one financial year and includes the budgeted capital expenditure carried forward as detailed below.

Budgeted capital expenditure - Carried forward - Council From
2014
to 2015
$000
From
2015
to 2016
$000
From
2015
to 2017
$000
       
Strategic area      
       
Governance - - -
Environment 2,796 2,048 -
Economic development 480 203 -
Cultural wellbeing - 48 -
Social and recreation 3,802 2,235 -
Urban development 3,519 3,950 -
Transport 1,503 1,880 -
       
Total by strategic areas 12,100 10,364 -
       
Council 2,826 2,729 2,570
       
Total budgeted capital expenditure carried forward 14,926 13,093 2,570

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 7: Expenditure on operating activities.

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

Non-cancellable operating lease commitments as lessee Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Plant and equipment        
Not later than one year 30 29 92 125
Later than one year and not later than five years 19 13 93 113
Later than five years - - - -
         
Land and buildings        
Not later than one year 821 973 1,332 1,335
Later than one year and not later than five years 1,977 1,625 2,477 1,975
Later than five years 1,317 1,100 1,317 1,100
         
Total non-cancellable operating lease commitments as lessee 4,164 3,740 5,311 4,648

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 that 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
  2015
$000
2014
$000
2015
$000
2014
$000
         
Investment properties        
Not later than one year 9,231 9,332 9,231 9,332
Later than one year and not later than five years 35,194 36,220 35,194 36,220
Later than five years 74,438 81,846 74,438 81,846
         
Land and buildings        
Not later than one year 3,687 1,434 4,335 1,512
Later than one year and not later than five years 8,702 2,771 9,398 2,771
Later than five years 12,849 7,557 12,849 7,557
         
Total non-cancellable operating lease commitments as lessor 144,101 139,160 145,445 139,238

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 controlled entities and associates only to the extent of the expenditure approved in the Long-term Plan for the period ending 30 June 2016. Other expenditure approved as part of the Long-term Plan for the period from 1 July 2016 to 30 June 2025 is subject to change and approval each year through the Annual Plan.

The commitments are as follows:

Council 2016
LTP
$000
2017-2025
LTP
$000
Total
LTP
$000
       
Controlled entities      
Wellington Cable Car Limited - 2,500 2,500
Wellington Museums Trust (including Carter Observatory) 8,313 83,922 92,235
Wellington Regional Economic Development Agency 12,128 111,103 123,231
Wellington Zoo Trust 2,814 29,190 32,004
Total controlled entities commitments 23,255 226,715 249,970
       
Other related parties      
Basin Reserve Trust 618 6,407 7,025
Karori Wildlife Sanctuary Trust (Zealandia) 875 7,875 8,750
Wellington Regional Stadium Trust - 5,000 5,000
Total other related party commitments 1,493 19,282 20,775
       
Total related party commitments 24,748 245,997 270,745

Note 32: ContingenciesTop

Contingent liabilities Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Financial guarantees to community groups 500 600 500 600
Uncalled capital - LGFA 1,866 1,866 1,866 1,866
Other legal proceedings 202 2,237 202 2,237
Share of associates' contingent liabilities - - - -
Share of joint ventures' contingent liabilities - - - -
         
Total contingent liabilities 2,568 4,703 2,568 4,703

The financial guarantees to community groups above are analysed below:

Outstanding debt subject to Council guarantees Council Group
  2015
$000
2014
$000
2015
$000
2014
$000
         
Karori Wildlife Sanctuary Trust 500 600 500 600
         
Total outstanding debt subject to Council guarantees 500 600 500 600

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. The loan matures 30 June 2020 and repayments are being met on schedule.

NZ Local Government Funding Agency Limited (LGFA)

The Council is one of 30 local authority shareholders and 8 local authority guarantors of the LGFA. In that regard the Council has uncalled capital of $1.866m. When aggregated with the uncalled capital of other shareholders, $20m is available in the event that an imminent default is identified. Also, together with the other shareholders and guarantors, the Council is a guarantor of all of LGFA’s borrowings. At 30 June 2015, LGFA had borrowings totalling $4,955m (2014: $3,778m).

Financial reporting standards require the Council to recognise the guarantee liability at fair value. However, the Council has been unable to determine a sufficiently reliable fair value for the guarantee, and therefore has not recognised a liability. The Council considers the risk of LGFA defaulting on repayment of interest or capital to be very low on the basis that we are not aware of any local authority, 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. The Council considers that even if it was called upon to contribute the cost would not be material.

Other legal proceedings

Other legal proceedings are current claims against the Council and Group as a result of past events that 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 the Council is anticipated to be less than $0.202m.

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 24: 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 that 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 that 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 2015 (2014: $Nil).

Note 33: Council and Group structureTop

Council and Group structure

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 240-249. 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.

The 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 Positively Wellington Tourism is Partnership Wellington Trust. The operations of the Trust have been transferred to Wellington Regional Economic Development Agency Limited with effect from 1 January 2015. The winding up of the Trust has not been completed as at 30 June 2015.
2. Wellington Regional Economic Development Agency Limited (WREDA) is a combination of the previously held activities of the Wellington Venues Limited and Positively Wellington Tourism entities. WREDA has also acquired 100% ownership of Grow Wellington Limited and indirectly Creative HQ Limited from Greater Wellington Regional Council for consideration of 20% of WREDA.

Note 34: Jointly Controlled AssetsTop

The Council has significant interests in the following joint ventures:

Joint Venture Interest 2015 Interest 2014 Nature of business
Wastewater treatment plant – Porirua City Council 27.60% 27.60% 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 21.50% 21.50% 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 - Porirua City Council Joint Venture (PCCJV) 2015
$000
2014
$000
     
Assets    
     
Current    
Inventory 59 36
Receivables and recoverables 1,657 1,126
     
Non-current    
Property, plant and equipment 20,680 21,012
     
Share of total assets 22,396 22,174
     
Liabilities    
     
Non-current    
Borrowings 3,074 3,125
Provisions for other liabilities 1,595 1,661
     
Share of total liabilities 4,669 4,786
     
Share of net assets 17,727 17,388

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

Share of Net Surplus and Revaluation Movements - PCCJV​ 2015
$000
2014
$000
     
Operating revenue 3,014 2,679
Operating expenditure (2,699) (2,660)
     
SHARE OF NET SURPLUS OR (DEFICIT) 315 19
     
Share of current year revaluation movement 24 2,044

The Council’s and Group’s share of the joint ventures’ capital commitments is $Nil (2014: $Nil) and contingent liabilities is $Nil (2014: $Nil).

Note 35: Investments in Controlled EntitiesTop

The following entities are Council-controlled entities:

Controlled entities Interest
2015
Interest
2014
Nature of business
       
Positively Wellington Tourism (Partnership Wellington Trust Inc.) 100% 100% The operations have been transferred to WREDA – (see below) while the Trust is being wound up.
Wellington Waterfront Limited 100% 100% Acts as bare trustee for the 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.
Wellington Regional Economic Development Agency Limited (WREDA) 80% 100% Manages the Wellington Venues Project and creates economic and social benefit by marketing the city with the private sector as a tourism destination.
- Grow Wellington Limited 80% 0% The economic development agency working to accelerate economic growth in the Wellington region and make it more internationally competitive.
- Creative HQ Limited 80% 0% Business incubators.
Wellington Zoo Trust 100% 100% Manages and guides the future direction of the Wellington Zoo.

The reporting period end date for all controlled entities 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 240-249).

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

Investment in controlled entities 2015
$000
2014
$000
     
Wellington Cable Car Limited 3,809 3,809
Wellington Regional Economic Development Agency Limited (WREDA) 1,262 -
     
Total investment in controlled entities 5,071 3,809

The equity investment represents the cost of the investment to the Council and includes all capital contributions made by the Council to controlled entities. The Council has only made equity investments as noted in the table above. 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 37: Related party disclosures.

Note 36: Investments in Associates and Jointly Controlled EntitiesTop

The Council has a significant interest in the following associates:

Associates and Jointly controlled entities Interest
2015
Interest
2014
Nature of business
       
Basin Reserve Trust 0% 50% Manages, operates and maintains the Basin Reserve.
Chaffers Marina Holdings Limited 10.52% 10.99% 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 0% 50% Owns and manages the Westpac Stadium.
Wellington Water Limited
(Previously Capacity Infrastructure Services Limited)
42.11% 50% Manages all water services for Wellington, Lower Hutt, Upper Hutt and Porirua City Councils and Greater Wellington Regional Council.

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

Associates Top

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 2015 Council held a 10.52% interest in Chaffers Marina Holdings Limited (2014:10.99%), 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).

Basin Reserve Trust

The Basin Reserve Trust was established on 24 February 2005 to manage, operate and maintain the Basin Reserve. The Trust was jointly created with Cricket Wellington Incorporated (CWI). The Council and CWI each appoint two of the four trustees. The Council has significant influence over the Trust through the appointment of trustees, and receives benefits from the complementary activities of the Trust.

Under previously applicable accounting standards, the Trust was consolidated on an equity accounted basis. On transition to PBE standards, the Council no longer considers the Trust meets the requirements of PBE IPSAS 7 Investments in Associates to enable continued consolidation on this basis. The Trust is still identified as an associate given the Council’s level of influence and financial support but due to the lack of equity investment the Council believes it is no longer appropriate to include the Trust in the Group financial statements.

Wellington Regional Stadium Trust

Wellington Regional Stadium Trust was jointly created with Greater Wellington Regional Council and 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.

Under previously applicable accounting standards the Trust was consolidated on an equity accounted basis. On transition to PBE standards, the Council no longer considers the Trust meets the requirements of PBE IPSAS 7 Investments in Associates to enable continued consolidation on this basis. The Trust is still identified as an associate given the Council’s level of influence and financial support but due to the lack of equity investment the Council believes it is no longer appropriate to include the Trust in the Group financial statements. The financial comparatives for 2014 have been adjusted accordingly and the effect is shown in Note 40: Adjustments to comparative year financial statements.

The Trust’s own reported high-level 2015 financials are: Assets $96.950m; Liabilities $57.489m; Revenues $17.298m and Net Surplus $2.093m.

Jointly Controlled EntitiesTop

Wellington Water Limited

Formerly trading as Capacity (Capacity Infrastructure Services Limited) and jointly created with Hutt City Council on 9 July 2003 the company has expanded its operations and ownership to include Upper Hutt and Porirua City councils from 1 November 2013 and Greater Wellington Regional Council from 16 September 2014. The company has a reporting period ending 30 June and has a dual share structure comprising Class A shares (voting rights) and Class B shares (financial entitlements). The new structure is as follows:

Council Class A shares
(voting rights)
Class B Shares
(financial entitlements)
Ownership interest
Wellington City 150 200 42%
Hutt City 150 100 21%
Upper Hutt City 150 40 8%
Porirua City 150 60 13%
Greater Wellington Regional 150 75 16%
Total shares on issue 750 475 100%

The Class A shares represent voting rights and are split evenly between the five councils. The Class B shares confer the level of contributions and ownership benefits of each council. Under NZ IFRS (PBE) this company was classed as an associate. Under PBE standards, Council has re-classified this entity as jointly controlled because of the equal sharing of voting rights conferred through the Class A shares and the shareholder’s agreement, which constitutes a binding arrangement. Wellington City Council, in accordance with PBE IPSAS 8 Joint Ventures, chooses to use equity accounting to recognise its ownership interest as determined by the proportionate value of Class B shares held. Wellington City Council’s ownership interest in the company is 42.11%.

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:

  Assets
​2015
$000
Liabilities
​2015
$000
Revenues
​2015
$000
Surplus/(Deficit)
​2015
$000
         
Associates        
Chaffers Marina Holdings Limited 626 135 77 4
Wellington International Airport Limited 286,111 137,154 36,825 11,188
         
Jointly controlled entities        
Wellington Water Limited 3,898 3,130 10,943 420
Associates Assets
​2014
$000
Liabilities
​2014
$000
Revenues
​2014
$000
Surplus/(Deficit)
​2014
$000
         
Associates        
Chaffers Marina Holdings Limited 668 138 95 (15)
Wellington International Airport Limited 286,391 136,678 37,703 15,192
         
Jointly controlled entities        
Wellington Water Limited 1,835 1,499 6,641 18

Investment in Associates and Jointly Controlled Assets

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

Investment in associates and jointly controlled entities Council
  2015
$000
2014
$000
     
Chaffers Marina Holdings Limited 1,290 1,329
Wellington International Airport Limited 17,775 17,775
Wellington Water Limited 400 400
     
TOTAL INVESTMENT IN ASSOCIATES AND JOINTLY CONTROLLED ENTITIES 19,465 19,504

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

Investment in associates and jointly controlled entities Group
  2015
$000
2014
$000
     
Chaffers Marina Holdings Limited    
Opening balance 959 998
Change in shares during the year (39) (39)
Change in equity due to changed shareholding 15 15
Equity accounted earnings of associate 4 (15)
     
Closing balance - investment in Chaffers Marina Holdings Limited 939 959
     
Wellington International Airport Limited    
Opening balance 133,860 130,633
Dividends (12,950) (11,966)
Equity accounted earnings of associate 11,188 15,192
Share of net revaluation of property, plant and equipment - movement 3,862 -
Share of hedging reserve - movement - 1
     
Closing balance - investment in Wellington International Airport Limited 135,960 133,860
     
Wellington Water Limited    
Opening balance 336 271
Change in shares during the year - 24
Change in equity due to changed shareholding 12 23
Equity accounted earnings of jointly controlled entity 420 18
     
Closing balance - investment in Wellington Water Limited 768 336
     
Total investment in associates and jointly controlled entities 137,666 135,154

The Council’s share of the results of Chaffers Marina Holdings Limited, Wellington International Airport Limited and Wellington Water Limited is as follows:

Share of associates' and jointly controlled entities surplus/(deficit) Group
  2015
$000
2014
$000
     
Chaffers Marina Holdings Limited    
Share of net surplus/(deficit) before tax 4 (15)
Tax (expense)/credit - -
     
Share of associate's surplus/(deficit) - Chaffers Marina Holdings Limited 4 (15)
     
Wellington International Airport Limited    
Share of net surplus before tax 10,764 16,088
Tax (expense)/credit 424 (896)
     
Share of associate's surplus/(deficit) - Wellington International Airport Limited 11,188 15,192
     
Wellington Water Limited    
Share of net surplus/(deficit) before tax 420 18
Tax (expense)/credit - -
     
Share of jointly controlled entities surplus/(deficit) - Wellington Water Limited 420 18
     
Total share of associates' and jointly controlled entities surplus/(deficit) 11,612 15,195

Note 37: 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 members of the governing body (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, controlled entities and associates. The remuneration payable to key management personnel of the Group’s other entities is disclosed separately within their individual financial statements and is not included in the following table.

Key management personnel Council
  2015
$
2014
$
     
Council Members    
     
Short-term employee benefits 1,434,782 1,385,983
     
Chief Executive and Executive Leadership Team    
     
Short-term employee benefits 2,362,735 2,480,499
Post employment benefits 55,359 52,576
Termination benefits - 285,000
     
Total remuneration paid to key management personnel 3,852,876 4,204,058

Key management personnel comprise 23 individuals: 15 elected members or 15 full-time equivalents and 8 executive leaders or 8 full-time equivalents.

For further disclosure of the remuneration payable to the Mayor, Councillors and the Chief Executive refer to Note 38: 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 with the Council such as payment of rates and purchases of rubbish bags or other Council services.

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 (wellington.govt.nz).

There are no commitments from Council to key management personnel.

Material related party transactions – other organisations

The Basin Reserve Trust was established on 24 February 2005 to manage, operate and maintain the Basin Reserve. 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.

Under previously applicable accounting standards the Trust was consolidated on an equity accounted basis. On transition to PBE standards, the Council no longer considers the Trust meets the requirements of PBE IPSAS 7 Investments in Associates to enable continued consolidation on this basis. The Trust is still identified as an associate given the Council’s level of influence and financial support but due to the lack of equity investment the Council believes it is no longer appropriate to include the Trust in the Group financial statements. The financial comparatives for 2014 have been adjusted accordingly and the effect is shown in Note 40: Adjustments to comparative year financial statements.

During the year ending 30 June 2015 Council contributed $0.368m (2014: $0.355m) to fund the operations of the Trust.

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 $1.866m representing 8.3% of paid-up capital.

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 2015. 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 14: Other financial assets.

Wellington Regional Stadium Trust was jointly created with Greater Wellington Regional Council and Wellington City Council has significant influence over the WRST through the appointment of trustees and receives benefits from the complementary activities of the Trust.

Under previously applicable accounting standards the Trust was consolidated on an equity accounted basis. On transition to PBE standards, the Council no longer considers the Trust meets the requirements of PBE IPSAS 7 Investments in Associates to enable continued consolidation on this basis. The Trust is still identified as an associate given the Council’s level of influence and financial support but due to the lack of equity investment the Council believes it is no longer appropriate to include the Trust in the Group financial statements. The financial comparatives for 2014 have been adjusted accordingly and the effect is shown in Note 40: Adjustments to comparative year financial statements.

Council holds a $15m limited recourse loan to WRST which, 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 initial 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.

During the year ending 30 June 2015 Council transacted directly with WRST to the amount of $0.577m and also indirectly with the financial support of major events.

Intra-group transactions and balances

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

Intra group transactions and balances - Jointly controlled assets 2015
$000
2014
$000
     
Expenditure incurred by the Council to fund the operation and management of:    
Porirua - waste water treatment plant 1,756 2,087

During the year the Council has entered into transactions with its controlled entities. These transactions disclosed are within the normal course of business. The nature of these intra-group transactions and the outstanding balances at the year-end are as follows:

Intra group transactions and balances - Controlled entities 2015
$000
2014
$000
     
Revenue for services provided by the Council to:    
Positively Wellington Tourism 530 222
Positively Wellington Waterfront 139 27
Wellington Cable Car Limited 106 50
Wellington Museums Trust 1,496 1,485
Wellington Regional Economic Development Agency 184 32
Wellington Zoo Trust 664 361
  3,119 2,177
     
Expenditure incurred by the Council to fund operations and management of:    
Positively Wellington Tourism 3,253 6,475
Positively Wellington Waterfront - 1,075
Wellington Museums Trust 8,226 8,010
Wellington Regional Economic Development Agency 3,378 -
Wellington Zoo Trust 2,757 2,715
  17,614 18,275
     
Expenditure for services provided to the Council by:    
Positively Wellington Tourism 121 178
Positively Wellington Waterfront 21 -
Wellington Cable Car Limited 134 13
Wellington Museums Trust 3,429 329
Wellington Regional Economic Development Agency 6,495 5,585
Wellington Zoo Trust 3,022 1,798
  13,222 7,903
     
Current receivables and recoverables owing to the Council from:    
Positively Wellington Waterfront 139 29
Wellington Cable Car Limited 3 1
Wellington Museums Trust 183 267
Wellington Regional Economic Development Agency 3 386
Wellington Zoo Trust 608 293
  936 976
     
Current payables owed by the Council to:    
Positively Wellington Tourism - 89
Wellington Cable Car Limited 27 4
Wellington Museums Trust 579 657
Wellington Regional Economic Development Agency 628 32
Wellington Zoo Trust 221 421
  1,455 1,203

Current receivables, recoverables and payables

The receivable, recoverable and payable 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 and jointly controlled entities. These transactions disclosed are within the normal course of business. The nature of these intra-group transactions and the outstanding balances at the year-end are as follows:

Intra group transactions and balances - Associates and jointly controlled entities 2015
$000
2014
$000
     
Dividend received from:    
Wellington International Airport Limited 12,950 11,966
     
Revenue for services provided by the Council to:    
Wellington Water Limited 83 45
     
Expenditure for services provided to the Council from:    
Wellington International Airport Limited 72 120
Wellington Water Limited 18,046 15,200
  18,118 15,320
     
Current receivables and recoverables owing to the Council from:    
Wellington Water Limited 15 9
     
Current payables owed by the Council to:    
Wellington International Airport Limited 2 -
Wellington Water Limited 293 1,030
  295 1,030

Current receivables, recoverables and payables

The receivable, recoverable and payable balances are non-interest bearing and are to be settled with the relevant entities on normal trading terms and conditions.

Note 38: 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 following people held office as elected members of the Council’s governing body during the reporting period.

The total remuneration attributed to the Mayor and Councillors during the year from 1 July 2014 to 30 June 2015 was $1,434,782 (2014: $1,455,653) and is disaggregated and classified as follows:

Council Member Monetary Remuneration Non
Monetary
Remuneration
Total
Remuneration
  Salary Resource
Consent
Hearing
Fees
Allowances
  $ $ $ $ $
Ahipene-Mercer, Ray 86,354 - 360 3,000 89,714
Coughlan, Jo 91,660 - - 3,000 94,660
Eagle, Paul 91,660 - 360 3,000 95,020
Foster, Andy 91,660 - 360 3,000 95,020
Free, Sarah 82,802 - 360 3,000 86,162
Lee, David 82,802 - 360 3,000 86,162
Lester, Justin 102,440 - 360 3,000 105,800
Marsh, Simon 86,354 - 360 3,000 89,714
Pannett, Iona 91,660 - 360 3,000 95,020
Peck, Mark 82,802 - 360 3,000 86,162
Ritchie, Helene 82,802 - 360 3,000 86,162
Sparrow, Malcolm 82,802 - 360 3,000 86,162
Wade-Brown, Celia 163,700 - - 3,000 166,700
Woolf, Simon 82,802 - 360 3,000 86,162
Young, Nicola 82,802 - 360 3,000 86,162
           
Totals 1,385,102 - 4,680 45,000 1,434,782
    TOTAL MONETARY RENUMERATION 1,389,782
    Total non- monetary remuneration 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 2014/15 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 allowances – mileage, 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 that 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.

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
$
Other
$
Total
2015
$
         
TAWA COMMUNITY BOARD        
Tredger, Robert (Chair) 17,400 540 - 17,940
Lucas, Margaret (Deputy Chair) 8,700 - - 8,700
Hansen, Graeme 8,700 - - 8,700
Herbert, Richard 8,700 - - 8,700
Lester, Justin ( see Councillor remuneration above) - - - -
Marshall, Jack (includes Youth Council attendance fee) 8,700 - 510 9,210
Sutton, Alistair 8,700 - - 8,700
Sparrow, Malcolm (see Councillor remuneration above) - - - -
         
MAKARA-OHARIU COMMUNITY BOARD        
Grace, Christine (Chair) 9,000 540 - 9,540
Burden, Murray 4,500 - - 4,500
Liddell, Judy 4,500 - - 4,500
Rudd, Wayne 4,500 - - 4,500
Scotts, Margie 4,500 - - 4,500
Todd, Hamish 4,500 - - 4,500
         
Totals 92,400 1,080 510 93,990

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 2015.

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
  2015
$
2014
$
     
Short-term employee benefits    
     
Kevin Lavery    
Salary 405,000 379,624
Motor vehicle - 17,376
Motor vehicle park 3,000 3,000
     
Total remuneration paid or payable 408,000 400,000

Severances

In accordance with Schedule 10, section 33 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 2015 the Council made severance payments to 13 employees totalling $227,468 (2014: 15 employees, $290,555).

The individual values of each of these severance payments are: $4,394; $2,466; $500; $42,000; $7,059; $12,946; $28,857; $2,000; $1,753; $37,883; $6,860; $61,272; $19,478.

Employee numbers and remuneration bands

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

  Council
  2015 2014
     
The number of full-time employees as at 30 June 1,020 971
     
The full-time equivalent number of all other non full-time employees 244 228
     
The number of employees receiving total annual remuneration of less than $60,000 1084 1044
     
The number of employees receiving total annual remuneration of more than $60,000 in bands of $20,000    
     
$60,000 - $79,999.99 277  
$80,000 - $99,999.99 152  
$100,000 - $119,999.99 84  
$120,000 - $139,999.99 53  
$140,000 - $159,999.99 20  
$160,000 - $179,999.99 13  
$180,000 - $199,999.99* 6  
$200,000 - $239,999.99* 6  
$240,000 - $319,999.99* 8  
$340,000 - $419,999.99** 2  
     
$60,000 - $79,999.99   266
$80,000 - $99,999.99   142
$100,000 - $119,999.99   74
$120,000 - $139,999.99   44
$140,000 - $159,999.99   23
$160,000 - $179,999.99   14
$180,000 - $219,999.99*   9
$220,000 - $299,999.99*   7
$300,000 - $400,000**   3

The Council, as at 30 June 2015, has 1,705 (2014: 1,626) individual employees of which 685 (2014: 655) 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.

Council has resolved that in addition to legislative requirements to disclose the above bandings it has also included the 3 lowest wage and salary grades.

Grade Salary Range 2015 2014
B1 $32,620 - $44,134 176 167
B2 $32,594 - $51,922 559 556
10 $42,585 - $57,615 37 39

Council initiated a minimum wage of $18.40 per hour for all directly employed staff from 2014. As at 30 June 2015, 86 Council staff (excluding apprentices) were under $18.40 per hour, compared with 346 as at 30 June 2014. Staff currently earning less than $18.40, are subject to our competency based framework where they are required to be fully certified to perform the role. The intention is that all staff should achieve $18.40 per hour in a 6-12 month period.

Note 39: 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.

Note 40: Adjustments to comparative year financial statementsTop

As a result of adopting the PBE accounting standards a number of adjustments were made to the amounts disclosed in the financial statements for the 2014 comparative year.

The changes were required due to:

1. The need to account for carbon credits allocated at no cost, which are now required to be recognised at fair value on the date of allocation. Some were received prior to 1 July 2014 and these were adjusted through opening equity. Those received in 2014 have been added to the appropriate financial statements and notes as shown below.
2. Council considers that it is no longer appropriate to equity account for both the Basin Reserve Trust and the Wellington Regional Stadium Trust due to the lack of actual equity investment. Their contributions to the 2014 Group surplus and the value of the investments previously recorded have been reversed out through the financial statements as shown below.
3. In the disaggregation of non-exchange transactions, the recoverables from GST due have been clarified by excluding a portion relating to FBT payable. This amount has been transferred to Taxes Payable with no effect on the surplus.
4. Service concession assets are now required to be disclosed as a separate assets class and this has occurred within Note 19: Property, Plant and Equipment and Note 25: Revaluations. The changes in comparatives have not been included here as there was no change in values.
Statement of Comprehensive revenue and expense Council Group
  2014
$000
2014
$000
     
Other revenue    
Carbon credits vested 144 144
     
Share of equity accounted surplus/(deficit) from associates and jointly controlled entities    
Wellington Regional Stadium Trust - (1,016)
Basin Reserve Trust - 91
     
NET SURPLUS FOR THE YEAR 144 (781)
     
Total comprehensive revenue and expense 144 (781)
Statement of Changes in Equity Council Group
  2014
$000
2014
$000
     
Opening Equity - Retained earnings    
Carbon credits vested - prior years 399 399
Wellington Regional Stadium Trust - (38,078)
Basin Reserve Trust - (474)
     
Changes to equity - retained earnings    
Net Surplus 144 (781)
     
Closing Equity - Retained earnings 543 (38,934)

Statement of Financial Position Council Group
  2014
$000
2014
$000
     
Current assets    
Recoverables from non-exchange transactions 71 71
     
Non-current assets    
Intangibles    
- Carbon credits vested 543 543
Investment in associates and jointly controlled entities    
- Wellington Regional Stadium Trust   (39,094)
- Basin Reserve Trust   (383)
     
TOTAL ASSETS 614 (38,863)
     
Current Liabilities    
Payables under exchange transactions 71 71
     
TOTAL LIABILITIES 71 71
     
Equity    
Retained earnings 543 (38,934)
     
TOTAL EQUITY 543 (38,934)
     
Total Equity and LiabilitieS 614 (38,863)
Notes to the financial statements Council Group
  2014
$000
2014
$000
     
Note 4 - Other revenue    
Vested assets 144 144
     
Note 13 - Recoverables from non-exchange transactions    
Taxes - GST recoverable 71 71
     
Note 17 - Intangibles    
Carbon credits - opening balance 399 399
Additions 144 144
     
Note 20 - Taxes and transfers payable    
Taxes payable - FBT 71 71