For five successive years, from 2017 to last year, the council has run operational deficits.
It is an issue that has lately been noted by the council’s auditors.
Now, in a report to be presented to the council’s audit and risk subcommittee tomorrow, corporate services general manager Nick Donnelly said the council’s ongoing deficit spending required the use of reserves to make up the difference.
However, while using reserves to cover one-off overspending could be financially prudent, as an ongoing strategy it was unsustainable, he said.
Mr Donnelly’s report also outlined how the council’s long-term planning was contributing to its ongoing deficits.
The council’s 10-year plans typically included deficits in the first three years followed by surpluses for the remainder of the plan, he said.
Yet, long-term plans did not reach the forecast year 4 surpluses, or those in subsequent years, because the long-term planning cycle renewed every three years.
Budgeted surpluses in year 4 reverted to year 1 deficits when the next long-term plan was introduced, he said.
He confirmed the council had not achieved any of the operational surpluses forecast over the previous two long-term planning cycles.
Instead, Mr Donnelly’s report shows the council last ran an operating surplus in 2016.
Further, over the last three years the council planned to run deficits totalling $10.8 million, but instead spent $17.6 million more than it could without borrowing.
Mr Donnelly noted dedicated reserves remained consistent over the past six years.
However, targeted rate reserves had declined from $2.5 million in surplus in 2016, to $18.9 million in deficit last year.
General reserves had also decreased over that time, from $27.4 million to $19.7 million, he said.
Audit and risk subcommittee co-chairwoman Cr Hilary Calvert, who is not seeking re-election, has called for greater financial prudence at the council.
She also called for Mr Donnelly’s report.
Yesterday, she said it did not assuage her concerns but it "lifted off the lid" of the council’s deficit spending.
"It’s just not acceptable," Cr Calvert said.
"And it amounts to hiding the fact that we are overspending in some fashion.
"We shouldn’t be hiding [deficit spending] however unintentionally we’re doing it."
Cr Calvert pointed to the council’s management of its "so-called reserves".
Fore example, in 2016, the council had $5.4 million in the public transport reserve for Dunedin.
By last year, the reserve was $6.5 million in deficit.
Cr Calvert likened the present strategy to borrowing "from our children".
She said the council should stop budgeting deficits, it should stop spending more than it budgeted, and it should stop pretending it would make up the shortfall in later years in its long-term plans.
Last year, the council planned a $5.2 million deficit; its actual $8.4 million deficit was about 30% of the year’s total rates revenue of $27 million, she said.
"There will never be a year 8 [in a long-term plan], so there’s no sense pretending that you are balancing long-term books," she said.
Addressing her claim the council was "hiding" its deficit spending, Mr Donnelly said yesterday the information in his report was all taken directly from the council’s annual reports, long-term plans and annual plans and was therefore publicly disclosed and reported.
