Invercargill City Council's borrowings have climbed to $201.1 million, the equivalent of $7,329 for every property in the city, according to the draft annual report reviewed by the council's risk and assurance committee on Tuesday.

The report for the year to 30 June 2026 records an operating loss of $8.5 million for the council, $6.4 million worse than the $2.1 million loss of the previous year. The result was nonetheless $2.0 million better than budgeted, largely because the council booked $2.4 million of unplanned revenue from assets vested in it.

General expenses came in $5.9 million over plan, but that was more than offset by depreciation running $6.9 million under plan.

Debt rose from $154.8 million, or $5,668 a property, at the end of the previous financial year.

Audit opinion expected to carry a warning

Chief financial officer Bryan Staunton's report says the Audit Office is expected to issue an unmodified opinion by 2 November, but with an emphasis of matter on the council's status as a going concern. That flag reflects uncertainty across the local government sector from reforms and policy statements, and specifically the Local Government Commission's investigation into possible restructuring of Southland's councils.

The council plans to adopt the report at an extraordinary meeting on 2 November, provided the audit is signed off in time. A summary version must be published by 30 November.

Two corrections to last year's figures have been made along the way. Metered water revenue of $4.76 million, previously counted as fees and charges, has been reclassified as targeted rates. And costs from the council's digital enhancement programme in earlier years, which had been sitting on the books as work in progress, have been written off and expensed, cutting the work in progress recorded at June 2025 by about $6 million.

Because of the restatement, the council now misses the total rates increase benchmark for the restated 2025 year. For 2026 it met six of eight prudential benchmarks, one more than the year before, falling short on the balanced budget and operations control measures.

Group picture

Across the wider council group, which includes Invercargill City Holdings, the loss after tax from continuing operations was $9.7 million, $1.2 million better than 2025. Total comprehensive revenue and expenses swung from a $185.1 million surplus to an $8.8 million loss, but almost all of that movement comes from the $170.9 million revaluation gain on roads and buildings booked in 2025, with no revaluation undertaken this year. The previous year also included a $21.6 million profit from the holding company's sale of Pylon Limited.

Total assets stand at $1.59 billion, up $36 million.

The draft figures are worse than the $6.6 million deficit reported to the finance and policy committee in August, mainly because of the write-off of the digital programme costs and of capital spending that did not meet the threshold to be capitalised.

Audit New Zealand has already issued an unmodified opinion on the council's statement of service performance, and the audits of the holding company, Invercargill Central Limited and Great South have been completed.