$3.5 million drop in income forecast
Environment Southland is forecasting a drop in income of around $3.5 million in the coming 2020-21 financial year due to the impact of COVID-19 on tourism and income from investments.
A strong balance sheet and a reduction in expenditure mean the Council is in a good position to weather the shock, but it will be challenging, said Chairman Nicol Horrell.
“The largest impact on the Council’s annual income is an expected drop of $2.8 million in marine fees from cruise ships visiting the Southland region, particularly Fiordland. A further drop in income of $700,000 is due to an expected reduction in the Council’s investment portfolio as a result of the COVID-19 economic downturn,” said Chairman Horrell.
“Unfortunately, the drop in income is expected to result in a budget deficit this coming year, with the potential for ongoing deficits through to 2024. The extent of the deficit, however, and the ability of the Council to return to a balanced budget by 2025 will depend on Council tightly managing its expenditure and leveraging its balance sheet to best effect. Work is well underway to do both and this will be reflected in the detail of the Annual Plan when it’s finalised,” he said.
The Council has a strong balance sheet comprising assets in land and investments and these need to be maintained at a reasonable level to ensure the Council can respond to future emergencies like the floods in the Waiau catchment in December 2019 and the Mataura catchment in February 2020. Both flood events saw the Council needing to draw on $2 million of its investment-based reserves to meet the immediate costs of the flood response and subsequent river engineering works not covered by insurance.
The Council is working through its medium-term financial approach to ensure it can continue to effectively manage the region’s natural resources, in particular freshwater, and build on the community’s resilience to natural disasters, including maintaining our flood protection network.
“Being mindful that many Southlanders will be affected by the impacts of COVID-19, we are working hard to keep expenditure down while also ensuring we can deliver our work programmes effectively,” said Chairman Horrell.
The Council aims to adopt its annual plan and associated budget on 30 June.