A not-for-profit council-controlled organisation faces a fiscal crisis after a big loss in its first quarter.
Queenstown Lakes District Council’s regulatory company Lakes Environmental last month announced a pre-tax loss of $97,477 for the three months to September.
This is a $158,000 reverse compared with the first quarter last year, when LE made a surplus of $60,503.
LE also reported negative cashflow of $252,497 in this year’s figures, signalling worse is to come.
“The level of cash on hand continues to decline,” the company admitted.
Announcing the poor result, LE said it was re-forecasting for the remainder of the financial year, after originally predicting “a modest increase” in consent income.
“Indications after the first quarter are that that key [growth] assumption is too optimistic,” directors confess to councillors.
In fact, resource consents dropped by 13 per cent and building consents by 12 per cent.
“The company continues to reduce both staff and overhead costs”, LE reported, although there’s “a high fixed-cost base which is difficult to reduce without leaving the company vulnerable” if an upswing occurs.
LE boss Hamish Dobbie tells Mountain Scene: “Our aim is always to be at break-even, that’s always our goal, that’s always what we’re trying to achieve – so it’s just a matter of ensuring we keep a tight control on spending.”
Management made significant efforts to slash costs during the quarter and saved $100,000, directors reported.
However, the biggest expense – wages – was down just $22,389 at $1.35 million for the three months.
Further financial savings may be possible if LE moves in with QLDC instead of maintaining separate Beach Street offices, the report said.
But the Beach Street lease will keep them there until 2013, Dobbie says.
Since its inception, LE has always been billed as not-for-profit and a top QLDC official has labelled the company “very much user-pays”, implying charge-out revenue to the public should cover all costs.
Yet with LE already increasing prices this calendar year, Dobbie says another price hike isn’t on his radar immediately.
While he won’t absolutely rule out another increase, “we see an improving volume of consents over the next 18 months so potentially we’ll just leave our pricing as is”.
Dobbie is guarded about staff cuts: “We’re always managing our staffing. Our biggest cost is people and if there’s not as much work, then we don’t have as many people.”
However, staff numbers have dropped by about 25 per cent since early 2008, he says, and there’s quite a lot of flexibility in arrangements with remaining staff.
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