HuttCity_TeAwaKairangi_BLACK_AGENDA_COVER

 

 

 

4 May 2020

 

 

 

Order Paper for Council meeting to be held via ZOOM

on:

 

 

 

 

Thursday 7 May 2020 commencing at 2.00pm

 

 

 

 

Membership

 

 

Mayor C Barry (Chair)

Deputy Mayor T Lewis

Cr D Bassett

Cr J Briggs

Cr K Brown

Cr B Dyer

Cr S Edwards

Cr D Hislop

Cr C Milne

Cr A Mitchell

Cr S Rasheed

Cr N Shaw

Cr L Sutton

 

 

 

 

For the dates and times of Council Meetings please visit www.huttcity.govt.nz

 

Have your say

You can speak under public comment to items on the agenda to the Mayor and Councillors at this meeting. Please let us know by noon the working day before the meeting. You can do this by emailing DemocraticServicesTeam@huttcity.govt.nz or calling the Democratic Services Team on 04 570 6666 | 0800 HUTT CITY


HuttCity_TeAwaKairangi_SCREEN_MEDRES
 

 

 

 


COUNCIL

 

Membership:

13 

Meeting Cycle:

Council meets on a six weekly basis (Extraordinary Meetings can be called following a resolution of Council; or on the requisition of the Chair or one third of the total membership of Council)

POWER TO (BEING A POWER THAT IS NOT CAPABLE OF BEING DELEGATED)1:

        Make a rate.

       Make bylaws.

       Borrow money other than in accordance with the Long Term Plan (LTP).

        Purchase or dispose of assets other than in accordance with the LTP.

        Purchase or dispose of Council land and property other than in accordance with the LTP.

        Adopt the LTP, Annual Plan and Annual Report.

        Adopt policies required to be adopted and consulted on under the Local Government Act 2002 in association with the LTP or developed for the purpose of the Local Governance Statement.

        Appoint the Chief Executive.

        Exercise any powers and duties conferred or imposed on the local authority by the Local Government Act 1974, the Public Works Act 1981, or the Resource Management Act 1991, that are unable to be delegated.

        Undertake all other actions which are by law not capable of being delegated.

        The power to adopt a Remuneration and Employment Policy for Council employees.

 

DECIDE ON:

Policy issues

       Adoption of all policy required by legislation.

       Adoption of strategies, and policies with a city-wide or strategic focus.

 

District Plan

       Approval to call for submissions on any Proposed District Plan, Plan Changes and Variations.

       Prior to public notification, approval of recommendations of District Plan Hearings Subcommittees on any Proposed Plan, Plan Changes (including private Plan Changes) and Variations, on the recommendation of the Regulatory Committee.

 

1       Work required prior to the making of any of these decisions may be delegated.

       The withdrawal of Plan Changes in accordance with clause 8D, Part 1, Schedule 1 of the Resource Management Act 1991.

       Approval, to make operative, District Plan and Plan Changes (in accordance with clause 17, Part 1, Schedule 1 of the Resource Management Act 1991).

       Acceptance, adoption or rejection of private Plan Changes.

 

Representation, electoral and governance matters

        The method of voting for the Triennial elections.

        Representation reviews.

        Council’s Code of Conduct for elected members

        Local Governance Statement.

        Elected Members’ Remuneration.

        The outcome of any extraordinary vacancies on Council.

        Any other matters for which a local authority decision is required under the Local Electoral Act 2001.

        Appointment and discharge of members of committees when not appointed by the Mayor.

        All matters identified in these Terms of Reference as delegated to Council Committees (or otherwise delegated by the Council) and oversee those delegations.

        Council‘s delegations to officers and community boards.

 

Delegations and employment of the Chief Executive

Review and negotiation of the contract, performance agreement and remuneration of the Chief Executive.

 

Meetings and committees

        Standing Orders for Council and its committees.

        Council’s annual meeting schedule.

 

Long Term and Annual Plans

        The adoption of the budgetary parameters for the LTP and Annual Plans.

        Determination of rating levels and policies required as part of the LTP.

        Adoption of Consultation Documents, proposed and final LTPs and proposed and final Annual Plans.

 

Council Controlled Organisations

        The establishment and disposal of any Council Controlled Organisation or Council Controlled Trading Organisation.

        Approval of annual Statements of Corporate Intent for Council Controlled Organisations and Council Controlled Trading Organisations.

 

Community Engagement and Advocacy

        Receive reports from the Council’s Advisory Groups.

        Monitor engagement with the city’s communities.

 

Operational Matters

        National Emergency Management Agency matters requiring Council’s  input.

        Road closing and road stopping matters.

        Approval of overseas travel for elected members.

        All other matters for which final authority is not delegated.

 

Appoint:

        The non-elected members of the Standing Committees, including extraordinary vacancies of non- elected representatives.

        The Directors of Council Controlled Organisations and Council Controlled Trading Organisations.

        Council’s nominee on any Trust.

        Council representatives on any outside organisations (where applicable and time permits, recommendations for the appointment may be sought from the appropriate Standing Committee and/or outside organisations).

        The Chief Executive of Hutt City Council.

        Council’s Electoral Officer, Principal Rural Fire Officer and any other appointments required by statute.

        The recipients of the annual Civic Honours awards.

 

    


HUTT CITY COUNCIL

 

Ordinary meeting to be held via ZOOM on

 Thursday 7 May 2020 commencing at 2.00pm.

 

ORDER PAPER

 

Public Business

 

 

 

 

 

1.       OPENING FORMALITIES - Karakia Timatanga 

Kia hora te marino

Kia whakapapa pounamu te moana

He huarahi mā tātou i te rangi nei

Aroha atu, aroha mai

Tātou i a tātou katoa

Hui e Tāiki e!

May peace be wide spread

May the sea be like greenstone

A pathway for us all this day

Let us show respect for each other

For one another

Bind us together!

 

2.       APOLOGIES 

3.       PUBLIC COMMENT

Generally up to 30 minutes is set aside for public comment (three minutes per speaker on items appearing on the agenda). Speakers may be asked questions on the matters they raise.

4.       Mayor's Statement (20/379)

5.       Chief Executive's Statement (20/380)

6.       CONFLICT OF INTEREST DECLARATIONS

Members are reminded of the need to be vigilant to stand aside from decision making when a conflict arises between their role as a member and any private or other external interest they might have.

7.       Response to Covid-19 pandemic - Approval of Rates Postponement Policy (20/376)

Report No. HCC2020/3/97 by the Chief Financial Officer                                  9

Mayor’s Recommendation:

“That the recommendations contained in the report be endorsed.”

 

 

8.       Adoption of the Draft Annual Plan 2020/21 ahead of public engagement (20/367)

Report No. HCC2020/3/98 by the Budgeting and Reporting Manager           21

Mayor’s Recommendation:

“That the recommendations contained in the report be endorsed with a new recommendation (x) (a) to read

 

(x)  (a) notes that within this draft emergency budget there is funding to progress capital projects in the 20/21 financial year, however full funding will need to be considered as part of the LTP 2021-3031.”

 

9.       Financial Strategy (20/388)

Report No. HCC2020/3/99 by the Chief Financial Officer                              226

10.     QUESTIONS

With reference to section 32 of Standing Orders, before putting a question a member shall endeavour to obtain the information. Questions shall be concise and in writing and handed to the Chair prior to the commencement of the meeting.   

 

 

11.     CLOSING FORMALITIES - Karakia WHAKAMUTUNGA

 

Whakataka te hau ki te uru

Whakataka te hau ki te tonga

Kia mākinakina ki uta

Kia mātaratara ki tai

E hī ake ana te atakura

He tio, he huka, he hau hū

Tīhei mauri ora.

Cease the winds from the west
Cease the winds from the south
Let the breeze blow over the land
Let the breeze blow over the ocean
Let the red-tipped dawn come with a sharpened air. 
A touch of frost, a promise of a glorious day.

 

 

 

 

 

 

 

Kathryn Stannard

HEAD OF DEMOCRATIC SERVICES

 

 

                 


 Hutt City Council

29 April 2020

 

 

 

File: (20/376)

 

 

 

 

Report no: HCC2020/3/97

 

Response to Covid-19 pandemic - Approval of Rates Postponement Policy

 

Purpose of Report

1.    To seek approval of a revised Rates Postponement Policy.

Recommendations

That Council:

(i)    notes that the proposed Rates Postponement Policy (the policy) has been developed at short-notice in response to the Covid-19 lockdown (attached as Appendix 1 to the report;

(ii)   notes that changes have been made to the policy following the review of the  draft policy by Council on 9 April 2020;

(iii)  notes that Council appointed a Subcommittee to further progress the development of the policy;

(iv) agrees that no public consultation process is required ahead of approval of this policy;

(v)  agrees to approve the proposed Rates Postponement Policy (attached as Appendix 1 to the report);

(vi) agrees to declare the Covid-19 lockdown as an ‘event’ to be covered within the definition of the Rates Postponement Policy; and

(vii) notes that the policy will be reviewed in the next three to six months when better information is available about the Covid-19 pandemic and Council will review at that point whether “the effects of the event are no longer felt in the community” as required by the policy.

 

Background

2.     The Covid-19 pandemic and lockdown created a lot of uncertainty and challenges for businesses and households. Both central government and local government have worked hard to deliver solutions. In a very short period of time, a range of initiatives were implemented, such as the wage subsidy scheme to help employers and employees. New Zealand’s retail banks have offered to defer repayments for all residential mortgages for up to six months for customers financially affected by Covid-19. 

3.     Council has been proactively providing support. Ratepayers experiencing financial difficulties have been encouraged to contact our rates team. A range of solutions have been worked through with individual ratepayers, including extended payment arrangements to enable some financial relief. 

4.     At the Council meeting held on 9 April 2020, Council reviewed the Covid-19 response plan. As part of this response, Council agreed to progress changes to the rates postponement policy in order to provide further support to ratepayers experiencing financial hardship. Please refer to the report entitled “Review of rates postponement policy” (Reference 2020/3/83).

5.     A Subcommittee was appointed to finalise the policy.  The updated policy is available in Appendix 1 attached to the report together with a summary of the changes made to the policy (attached as Appendix 2 to the report).

6.   Summary of key aspects of the policy:

-     The two existing rates postponement policies have been combined into the updated policy and have been largely retained unchanged.

-     The policy has been extended to enable households and small businesses experiencing financial hardship as a result of an ‘event’, such as the Covid-19 pandemic or some other event such as a natural disaster, to apply for rates postponement.

-     The requirement for a statutory land charge to be registered against the property has been retained in order to provide security to Council

-     The total rates postponed when added to other amounts secured by a mortgage is not to exceed 70% of the ratepayers equity in the property 

-     Insurance is required on the property.

-     A one-off establishment fee of $250 plus GST is charged, as well as an annual $100 plus GST administration fee. These amounts can be added onto the rates postponed.

-     Interest is applied at council’s average cost of funds plus one per cent charge to cover administrative costs of Council.

-     Legal and financial advice is recommended to ratepayers.

-     For properties applying under the event criteria, the capital value of the properties is limited up to $1.5M.

7.    Council is required to declare that an ‘event’ has occurred in line with the policy definition below. Some types of events which the Council may decide are applicable could be significant storms, an earthquake, pandemic, recession etc.

An event declared by Council resolution where the Council will define the type and/or the location of the properties affected. An event could be a natural or an economic event.

The extraordinary Covid-19 lockdown from 26 March 2020 is an event intended to be covered under this policy and Council is requested to resolve in line with this. Officers’ advice is to declare this event as a citywide event.

8.    Given the uncertainty of the Covid-19 lockdown impacts, the policy will be reviewed in three to six months when there is more information available. At this point Council could also consider the end date of the event as required by the policy below. This end date will also determine the repayment requirements of postponed rates.

Rates are postponed in the case of rates postponement due to an event:

Until one year after the Council resolves the effects of the event are no longer felt in the community. At that date, the ratepayer must make arrangements to repay outstanding rates. The Council will allow up to a maximum of 18 months to repay the outstanding rates.

Consultation

9.    The Local Government Act 2002 requires local authorities to follow the principles of consultation (found in section 82) before adopting a rates remission or postponement policy. There is some discretion as to how these principles are applied and the Council can decide what is appropriate after taking into account what it already knows of community views and the significance of the decision. 

10.  Council is proposing an amendment to the existing rates postponement policy. Council’s significance and engagement policy is included in the Long Term Plan 2018-2028. The policy provides the framework to consider Council decisions about issues, assets and other matters and whether a special consultative procedure is required. The policy has a range of thresholds and criteria. The key aspects include:

-      Net costs to Council- increase of 10% of planned capital expenditure or 5% of planned operating expenditure

-      Reversibility and intergenerational equity “the more irreversible the effects of a decision the more significance it has”

-      The extent to which the matter under consideration is of public interest or controversial within the community.

 

11.  The proposed rates postponement policy has been assessed against the criteria of the policy. Officers are of the view that there is no requirement to progress a special consultative procedure (SCP) in relation to this amendment to the rates postponement policy. If the policy was to be extended to have wider financial implications for Council then it is expected that a SCP should be followed.

Legal Considerations

12.  The policy is prepared under sections 102 and 110 of the Local Government Act 2002.

Financial Considerations

13.  There is a lot of uncertainty as to the financial implications of the proposed changes to the rates postponement policy and how many ratepayers will postpone their rates. The current uptake of the existing policy is very low.

14.  The new criteria extend the policy to include business properties with a capital value of up to $1.5M. In 2019/20 there are 1,900 business properties with a value of up to $1.5M and the total rates billed for this group for the year is $11M.

15.  Not all these businesses are expected to be impacted directly by the event. If a third of business properties applied for a rates postponement, then the amount of rates postponed would be up to $3.7M. The Council’s cashflow would be impacted as this cash would not be received and the Council would need to be increase borrowings levels to fund this.  There is also uncertainty as to the how long ratepayers would take to repay the postponed rates. The cost of additional borrowings incurred by Council would be on-charged to the ratepayers, so there would be no net loss to Council from an operating perspective. The debt limits set in the Financial Strategy are not expected to be materially impacted by the potential exposure here.

Appendices

No.

Title

Page

1

Appendix 1 - Rates postponement policy

13

2

Appendix 2 - Summary of changes to the policy following feedback from Council 9 April 2020

19

 

 

 

Author: Jenny Livschitz

Chief Financial Officer

 

 

 

Approved By: Jo Miller

Chief Executive

 


rates postponement policy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Division

Corporate Services – Finance

Date created

1 April 2020

Publication date

TBA

Review period

Every five years (or earlier if considered necessary)

Owner

Chief Financial Officer

Approved by

Council

 

Version

Author

Date

Description

V 1.0

Jenny Livschitz

Chief Financial Officer

1/4/2020

Draft policy for review by Council

V 1.2

Jenny Livschitz

Chief Financial Officer

29/4/2020

Revised policy for review by Council

 


Contents

 

1.     Policy Objective. 3

2.     Policy Conditions and Criteria. 3

2.1       General Approach. 3

2.2       Eligibility. 3

2.3       Insurance. 3

2.4       Rates Able To Be Postponed. 4

2.5       Conditions. 4

2.6       Review Or Suspension Of Policy. 5

2.7       Procedures. 5

 

1.      Policy objective

The objective of this policy is to give residential and small business ratepayers a choice between paying rates now or later subject to the full cost of rates postponement being met by the ratepayer and Council being satisfied that the risk of loss in any case is minimal.

2.      policy conditions and criteria

 

2.1        general approach

If the ratepayer is eligible for the government rate rebate, an application for this rebate should be completed before any rates are postponed for that year.

Council will add all administrative and financial costs to the postponed rates. This will ensure neutrality between ratepayers who use the postponement option and those who pay as rates are levied.

2.2        Definitions

An event – An event declared by Council resolution where the Council will define the type and/or the location of the properties affected. An event could be a natural or an economic event.

Small business – Is any type of enterprise or firm with fewer than 20 employees.

Financial hardship – This is when ratepayer income reduces to a level where paying rates would result in significant financial hardship. Whilst each applicant will be considered on a case by case basis, the following criteria will apply:

For business (non-residential) ratepayers, evidence of:

-     a 30% reduction in revenue; or

-     qualification for a Government emergency financial support package (for example the wage subsidy scheme); or

-     qualification for a mortgage “holiday” from the bank.

For residential ratepayers, evidence of: 

-     loss of employment; or

-     a significant reduction in income; or

-     qualification for a mortgage “holiday” from the bank.

2.3        eligibility

Only rating units defined as residential and used for personal residential purposes by the applicant ratepayer(s) as their sole or principal residence will be eligible for consideration of rates postponement under the following conditions and criteria:

-     Any ratepayer aged 65 years or over is eligible for postponement provided that the rating unit is used by the ratepayer as their sole or principal residence. This includes in the case of a family Trust owned property, use by a named individual or couple; or

-     Any ratepayer experiencing financial hardship due to personal circumstances such as age, physical or mental disability, injury, illness and family circumstance is eligible for postponement. Ratepayers applying under these criteria must demonstrate to Council’s satisfaction that paying the rates would result in financial hardship.

Only rating units defined as residential or used by a small business will be eligible for consideration of rates postponement under the following conditions and criteria:

-     The financial hardship is the direct result of an event  which affects the ratepayers ability to pay rates; and

-     The rateable value of the property is not greater than $1.5 million; and

-     The ratepayer demonstrates to Council’s satisfaction that paying the rates would result in financial hardship; and

-     The person entered as the ratepayer (in the case of a closed company every director must sign the application form), or their authorised agent, makes the application; and

-     The applicant must demonstrate to Council’s satisfaction that the ratepayer has taken all steps necessary to claim any central government benefits or allowances the ratepayer is properly entitled to receive to assist with the payment of rates.

The following criteria apply to all applicants:

If the property in respect of which postponement is sought is subject to a mortgage, then the applicant ratepayer(s) will be required to obtain the mortgagee’s consent before Council will agree to postpone rates.

When a property is owned by a family Trust, Council must be satisfied that all trustees have agreed to be part of the postponement scheme. Council will require a consent form from the trustees confirming that the family Trust has agreed to apply for postponement of rates.

Council must be satisfied, based on reasonable assumptions, that the risk of any shortfall when postponed rates, (including accumulated administration and finance costs), are ultimately paid is negligible. To best safeguard Council, the total amount of rates postponed (including accumulated administration and finance costs), when added to other amounts secured by a mortgage, may not exceed 70% of the applicant ratepayer(s) equity in the property. Equity in the property is calculated as the difference between Council’s rateable value of the property (the capital value at the most recent Triennial valuation) and all other amounts secured by a property mortgage.

For prudential reasons, Council will need to register a statutory land charge against the property to protect its right to recover postponed rates.

At present, the law does not allow Councils to register such a statutory land charge against Māori freehold land. Accordingly, Māori freehold land is not eligible for rates postponement under this policy (unless and until the law is changed so that the Council can register a statutory land charge).  

2.4        insurance

The property must be insured for its full replacement value and evidence of this must be provided to Council annually.

If insurance cannot be arranged because the property is uninsurable, only the land value can be used when calculating maximum postponement allowable under this policy.

2.5        RATES ABLE TO BE POSTPONED

Hutt City Council rates are eligible for postponement except for:

§ Lump sum options which are rates paid in advance.

§ Central government rates rebates received by the applicant ratepayer(s).

2.6        CONDITIONS

Any postponed rates (under this policy) will be postponed until:

a)      The rating unit is sold or transferred (other than just a change of trustees).

b)     Until a date specified by Council, as agreed in writing and in advance between Council and the applicant ratepayer(s).

In the case of rates postponement due to an event:

c)   Until one year after the Council resolves the effects of the event are no longer felt in the community. At that date, the ratepayer must make arrangements to repay outstanding rates. The Council will allow up to a maximum of 18 months to repay the outstanding rates.

In the case of rates postponement due to a ratepayer being over the age of 65:

d)     Until the ratepayer(s) or nominated individual or couple cease to be the occupier(s) of the rating unit; or

e)      The death of the ratepayer(s) or the survivor of them, or nominated individual or couple where a family Trust is the owner. In this case, Council will allow up to 18 months for payment so that there is sufficient time available to settle the estate or, in the case of a family Trust owned property, make arrangements for repayment; or

f)      If the ratepayer(s) or nominated individual or couple continue to own the rating unit, but are placed in long term residential care, Council will consider them to still be occupying the residence for a limited period of time for the purpose of determining when postponement ceases and rates are to be paid in full. In this case, Council will allow up to 18 months for payment so that there is ample time for the property to be sold, and

g)     Until a date specified by Council, as agreed in writing and in advance between Council and either the applicant ratepayer(s) or the named individual or couple in the case of a family Trust.

For all rates postponements:

The administration cost will include a once-off establishment fee of $250 plus GST on postponed rates and Council will charge an annual management fee of $100 plus GST on postponed rates for the period between the rates payment due date and the date they are paid. These fees are designed to cover Council’s administrative costs to establish the rates postponement account, register the statutory land charge (one-off) and confirm adequate annual insurance cover is in place and provide rates postponement account statements to eligible ratepayer(s) every two (2) months.

The financial cost will be the interest that Council will incur, being Council’s average cost of borrowings as at 30 June of the preceding financial year, calculated daily, for funding rates postponed, plus a margin of 1% to cover staff costs related to calculating and applying such interest charges to respective postponed rates accounts.

Interest will be applied to rates postponement accounts every six (6) months and will be included in the total rates postponement balance, as shown on ratepayers’ statement of account  every instalment one (1) and four (4) respectively.

Whilst is not a condition, Council strongly recommends that applicant ratepayer(s) should first obtain independent legal and/or financial advice from a suitably qualified person(s), prior to applying for a rates postponement. At the request of the applicant ratepayer(s), all costs associated with this independent advice can be paid directly by Council and the total costs will be added to the applicant ratepayer(s) postponed rates account.

The postponed rates, (including accumulated administration and finance costs), or any part thereof, may be paid to Council at any time. The applicant ratepayer(s) may elect to postpone the payment of a lesser sum than that which they would be entitled to postpone pursuant to this policy.

Properties that are granted a rates postponement will be subject to a statutory land charge being registered on the rating unit title. This serves to ensure that property settlements do not occur without all postponed rates and charges being fully paid.

2.7        REVIEW OR SUSPENSION OF POLICY

The policy is in place indefinitely and can be reviewed subject to the requirements of the Local Government Act 2002 at any time. Any resulting modifications will not change the entitlement of people already in the postponement scheme, to continued postponement of all future rates.

Council reserves the right not to postpone any further rates once the postponed rates (including accumulated administration and finance costs), combined with secured borrowings against the residential property, exceed 70% of Council’s rateable value of the property as recorded in Council’s rating information database.  This will require the ratepayer(s) for that property to pay all future rates. All postponed rates before such time will only fall due for payment when any condition(s), as outlined in clause 2.5 (a) to (e) are satisfied.

The policy consciously acknowledges that future changes in policy could include withdrawal of this rates postponement scheme.

 

2.8        PROCEDURES

Applications must be on the required application form which will be available from the Council’s main office or online at www.huttcity.org.nz.

The policy will apply from the beginning of the rating year in which the application is made although Council may consider backdating the rates postponement to apply to the past rating year in which the application is made, depending on the individual circumstances.

The policy shall apply to ratepayers who meet the relevant criteria as approved by the Chief Financial Officer.

The administration of this policy may be sub-delegated to a Council Officer(s) as appropriate.

 


Rates postponement policy - Summary of changes to policy following the Council meeting 9 April 2020

 

 

Feedback from councillors

 

Action taken

Further commentary

1.

Increase capital value limit from $1M to $1.5M

Changed to $1.5M

 

2.

Improve definition for “Financial hardship” so as to be clearer as to who can apply.

Example given is government recent use of loss of revenue of 30%.

Amended definition

Extract of updated policy:

Financial hardship – This is when ratepayer income reduces to a level where paying rates would result in significant financial hardship. Whilst each applicant will be considered on a case by case basis, the following criteria will apply:

For business (non-residential) ratepayers, evidence of:

-     a 30% reduction in revenue; or

-     qualification for a Government emergency financial support package (for example the wage subsidy scheme); or

-     qualification for a mortgage “holiday” from the bank.

For residential ratepayers, evidence of: 

-     loss of employment; or

-     a significant reduction in income; or

-     qualification for a mortgage “holiday” from the bank.

3.

Improve definition for small business – for example, instead of using business ownership model rather apply MBIE definition.

Policy amended to use MBIE definition

Extract of updated policy:

Small business – Is any type of enterprise or firm with fewer than 20 employees.

 

4.

One year after the end of the event “the ratepayer must make arrangements to repay outstanding rates”. Be clearer about within what timeframe repayment will be required, noting that clauses relating to over 65 specify an 18 month timeframe.

Additional content added to policy

Extract of policy:

In the case of rates postponement due to an event

a)   Until one year after the Council resolves the effects of the event are no longer felt in the community. At that date, the ratepayer must make arrangements to repay outstanding rates; the Council will allow up to a maximum of 18 months to repay the outstanding rates.

 

5.

Limit of 60% cap on equity – excludes for example first home owners. Should this be increased as it will restrict those that could apply.

Amended to be 70%

 

6.

“ The entity entered on Council’s rating information database as the ‘ratepayer’ must not own any other rating units other than a residential property in the case of business or in the case of a business, their residential property.”

Does that limit eligibility to owner occupier businesses only. Business in building that they don’t own – many of these for example in Jackson Street. Is this clause restricting eligibility.  

Clause removed

Note that it is normal practice for the ratepayer to pay the rates, then invoice the occupier.  In the case of businesses renting buildings from landlord (e.g. Jackson Street), the owner of the building would need to apply to Council to postpone the rates and would need to come to arrangements with the tenant as to how this is passed onto the tenant and the repayment terms.

 

 

7.

Remove criteria that property must have been owned for six months prior to event

Clause removed

 

8.

Update the policy objective to state “residential and small business ratepayers” to make it clear who the policy is targeted at.

Amended

Revised wording: The objective of this policy is to give residential and small business ratepayers a choice between paying rates now or later subject to the full cost of rates postponement being met by the ratepayer and Council being satisfied that the risk of loss in any case is minimal.

 

9.

Paragraph 2.3 states that Māori freehold land is not eligible for rates postponement under this policy.  “At present, the law does not allow Councils to register such a statutory land charge against Māori freehold land. Accordingly, Māori freehold land is not eligible for rates postponement (unless and until the law is changed so that the Council can register a statutory land charge).  

There is however a  separate ‘Policy for remission and postponement of rates on Māori freehold land’  http://iportal.huttcity.govt.nz/Record/ReadOnly?Tab=3&Uri=4622441 . This policy does not require a statutory land charge and is therefore an option available for rates postponement. This policy is due for review. 

 

Minor change to policy

Actions for officers:

The Policy for remission and postponement of rates on Māori freehold land’ will be reviewed over the next quarter.

Officers will look at how best to promote the new rates postponement policy in the context of other relevant policies (e.g. Policy for remission and postponement of rates on Māori freehold land, and other rates remissions available).

Minor wording change to policy:

At present, the law does not allow Councils to register such a statutory land charge against Māori freehold land. Accordingly, Māori freehold land is not eligible for rates postponement under this policy (unless and until the law is changed so that the Council can register a statutory land charge).  

10.

Minor editorial changes.

 

 

 


-     Hutt City Council

01 May 2020

 

 

 

File: (20/367)

 

 

 

 

Report no: HCC2020/3/98

 

Adoption of the Draft Annual Plan 2020/21 ahead of public engagement

 

Purpose of Report

1.    The purpose of this report is to seek adoption of the Draft Annual Plan 2020/21 in order to progress the public engagement and feedback process.    

Recommendations

That Council:

(i)        receives the information;

(ii)       notes Council’s updated Covid-19 Response Plan which includes a wide range of initiatives to support the Lower Hutt community, attached as Appendix 1 to this report;

(iii)      notes the Council’s submission to central government of “shovel ready projects”, attached as Appendix 2 to the report;

(iv)      notes that Council agreed on 9 April 2020 not to progress the Amendment to the Long Term Plan (LTP) due to the Covid-19 pandemic; 

(v)       notes that Council agreed on 9 April 2020 to progress an “Emergency Budget” Draft Annual Plan 2020/21, which includes a rates revenue increase of 3.8%;

(vi)      notes that officers have prepared a revised “Emergency Budget” with the reduced rates revenue as directed by Council and that this budget includes $3 million of operational savings;

(vii)     notes that a deficit of $9 million is projected for the Draft Annual Plan 2020/21 whilst the 2018-2028 Long Term Plan projected a surplus of $4.4 million for 2020/21, refer Section D;

(viii)    notes the long term projected debt shows that debt will exceed the limits set in the financial strategy from 2023/24 onwards, refer graphs 3 and 4;

(ix)      agrees that all projects from 2021/22 and beyond are in principle placed on hold pending reprioritisation and funding solutions through the development of the LTP 2021-2031.

(x)       notes that a Subcommittee of the Mayor, Deputy Mayor and Chairs of Committee was appointed to make final decisions on the content and design of the Draft Annual Plan 2020/21 and the questionnaire for engagement;

(xi)      notes the engagement plans as detailed in Section F of this report;

(xii)     notes the public engagement document prepared for the Draft Annual Plan 2020/21, attached as Appendix 4 to the report;

(xiii)    agrees to adopt the Draft Annual Plan 2020/21 and to progress the public engagement process, attached as Appendix 5 to the report; and

(xiv)    considers any further direction and guidance to be provided to officers ahead of the LTP/Annual Plan Subcommittee meetings scheduled for 29 May 2020 and 18 June 2020 at which Council will finalise decisions for the  Annual Plan 2020/21.

 

Acronyms:

DAP – Draft Annual Plan 2020/21

FAP – Final Annual Plan 2020/21

LTP – Long Term Plan 2018-2028          

 


 

Executive Summary

2.    In light of the unprecedented situation as a result of Covid-19, we have taken stock of the key projects planned in the 2018-2028 Long Term Plan (LTP). The focus now is on ensuring that investment in essential services can continue. This includes additional expenditure on Three Waters to do the basics like fixing water leaks, renewing some pipes in poor condition and to upgrade the Seaview Wastewater Plant to address seismic issues.

3.    The emergency one-year budget for 2020/21 is limited to getting us through this period of uncertainty. We have made some tough choices which include $3 million of operational savings to help us “get through.” 

4.    We were progressing plans to consult on significant changes to the LTP. This included long term investment choices for Three Waters, Naenae Pool and fitness centre development, Cycleways and Cross Valley Connections, together with proposed changes to funding solutions. These plans have been put on hold as a result of Covid-19, and will be progressed when we develop our Long Term Plan 2021-2031. The financial challenges remain and we will need to find sustainable solutions where there is sufficient revenue to match the costs of delivering services for our growing city.

5.    The proposed 3.8% rates rise for ratepayers means less revenue at a time when operating expenditure has increased by $16 million compared to what was projected for 2020/21 in our LTP. This is largely due to unbudgeted or higher than anticipated costs for Three Waters repairs and renewals, depreciation and insurance, the review of the District Plan, preparatory work for Naenae Pool, our homelessness strategy, sports initiatives for tennis and gymnastics and the development stimulus package.

6.   The rates rise equates to an average increase of $2.35 per week per household or an average increase of $122 per annum. Investment in our Three Waters infrastructure makes up $84 of the average $122 per annum rise. The remaining $38 covers cost increases for all the other services provided.

7.    We will stay within the borrowing limits set in our Financial Strategy for 2020/21, however on the down side there is a $9 million projected deficit for 2020/21 compared to the $4.4 million surplus projected in the LTP.  The gap in revenue to meet operational costs will be funded through additional debt as a short-term solution.

 

Net surplus or deficit 2020/21

Balanced budget

Projected net debt

Debt to revenue ratio limits

DAP 2020/21

Deficit $9M

Not achieved until 2027/28

Peak debt of $407M in 2030/31. Debt to revenue limits exceeded from 2023/24.

LTP year 3,  2020/21

Surplus $4.4M

Achieved in 2020/21

Peak debt of $233M. Debt to revenue ratio limits not exceeded.

 

8.   As per Council’s decision to progress a one-year emergency budget for 2020/21, a “light touch” public engagement period is proposed from 8 May to 22 May subject to Council’s decisions on 7 May. Details are outlined in this paper in section F.

9.   Following the public engagement process, hearings and submission analysis, Council will have the opportunity to make changes to the 2020/21 budgets at meetings scheduled for 29 May 2020 and 18 June 2020.

 

 


 

Section A - Council response to Covid-19 pandemic

10.  Council took action promptly in response to the Covid-19 lockdown. A range of initiatives were developed to support the Lower Hutt community as part of the Covid-19 Response Plan. This includes:

-     Focus on welfare

Grants to food banks and charities supporting food distribution,

A new Community Resilience Fund of $100k established,

Council staff at Emergency Operations Centre leading welfare support efforts across the region.

-     Rates and charges

Lobbying to extend rates rebates funding by central government, and to put a hold on recent general property revaluations,

Extended payment terms for ratepayers and extending rates postponement policy,

No parking charges and library fines.

-     Support to businesses

Planning for “shovel ready” projects to provide economic stimulus,

Paying Council suppliers within 5 days,

Partnering with Hutt Valley Chamber of Commerce and Upper Hutt City Council to provide support to businesses,

Rates postponement policy extended to include small businesses impacted by event, such as Covid-19 (refer separate agenda item for details on this). 

11.  Council continues to proactively monitor and respond to the Covid-19 pandemic. Latest details of the Council’s response plan are available in Appendix 1 attached to the report.

12.  Shovel ready projects: Council has submitted a proposal to the Infrastructure Industry Reference Group for key capital projects that will reduce the impact of the Covid-19 lockdown on the economy. Government is seeking infrastructure projects that can achieve a rapid lift in infrastructure when the construction sector returns to work. The projects submitted include residential housing developments, Eastern Bays Shared Path, Naenae Pool and fitness centre and the Wastewater storage tank at Seaview Wastewater Treatment Plant. Refer to Appendix 2 for the full submission.

13.  The financial impact of Covid-19 on the Council Group includes the following:

-     Loss of revenue due to closure of facilities, with the largest part of this being pools and fitness centres.

-     Reduced parking and infringement revenue

-     Cashflow impacts with a number of ratepayers and tenants entering into extended payment arrangements

-     Delayed maintenance and project delivery.

Further impact assessment is underway.


 

Section B - Council proposed amendment to the LTP 2018-2028

14.  Ahead of Covid-19 lockdown Council had adopted a proposed amendment to the LTP 2018-2028 for consultation and an external audit had been successfully completed. The LTP amendment included increased expenditure of $321M higher than the LTP 2018-2028 ($185M capital and $136M operational expenditure):

a)   A capital investment programme of $814M over the ten year period from 2020/21, $185M (29%) higher than the LTP mainly due to

a.   New information about projects that were planned in the LTP (e.g. Riverlink, Cross Valley Connection, Cycleways programme),

b.   Additional funding for Naenae Pool and fitness centre redevelopment $43M;

c.   Additional funding for priority areas such as Three Waters $47M and seismic strengthening of Council properties.

b)   Increased operational expenditure over the ten year period of $136M (7%) higher than the LTP, largely due to increased costs related to the capital investment (includes depreciation $46M) together with increased costs of Three Waters $17M, the Development stimulus package $17M and increased District Plan legislative costs, IT costs and a range of priority initiatives (such as the Homelessness Strategy, Climate change and community engagement etc.)

15. The LTP amendment proposed funding of the work programme through changes to the Council’s financial strategy through:

-     Enabling rates increases to be above inflation, BERL Local Government Cost Index (LGCI), with a 7.9% increase  2020/21 and an average of about 3% thereafter

-     higher debt levels, projected to increase up to a peak of $321M compared to a peak of $233M in the LTP.

16. Other LTP amendment aspects included

-     Proposed changes to how rates are spread between different property categories, i.e. the rating differential policy. 

-     Proposed changes to recycling and rubbish collection from 1 July 2021.

17.  On 26 March the audit opinion on the Consultation Document was withdrawn in light of the government announcements relating to the Covid-19 pandemic and the need to review accounting standard requirements for “subsequent events.” Officers worked through a review of the underlying assumptions and considerations of the impact of Covid-19 on financial projects. This was particularly difficult given the high degree of uncertainty.

18.  On the 9 April Council considered options regarding the LTP amendment and the Annual Plan 2020/21 process. The pros and cons of options were considered together with a risk assessment.

19.  It was agreed that the LTP Amendment would not proceed and instead a one year “emergency budget“ for the 2020/21 draft Annual Plan was to be progressed. A proposed overall 3.8% rates revenue increase was approved together with a “light” engagement process.

20.  Following the engagement process, the “emergency budget” will be finalised in June 2020 in order to set the rates for the year ahead. An important part of the final budget for 2020/21 will be assessing how to strike the right balance between supporting the needs of the current community who are facing financial hardship as a result of Covid-19, without overly burdening future generations with an inappropriate level of debt and thereby reducing choices in respect of investments required in infrastructure. It is also important that Council takes a prudent approach – one that involves an overall assessment of circumstances, and ensures decision-making recognises the future impact of financial and non-financial consequences of decisions made. 

21.  Whilst the LTP amendment is not proceeding, the next LTP 2021-2031 will include a full review of the Infrastructure Strategy, Financial Strategy and key policies such as the Revenue and Financing Policy and Development Contributions Policy. This full review is required to be undertaken in 2020/21.

 

22.  Wellington Water provided early advice to Council in January 2020 indicating that in the LTP 2021-2031, Three Waters investment plans would potentially need to be doubled in order to meet community expectations about service levels and to address ageing infrastructure. Council will be required to work through the funding challenges related to this in the next LTP.

Section C – Revised high-level plan

23.  Table 1 provides a summary of the process completed to-date and the next stages and timing.  

24.  Table 1: High-level plan

Activity

Date

Status

Council adopts key assumptions and risks for  budgets and high-level consultation approach for Annual Plan and LTP Amendment

10 December 2019

Complete

Council agrees engagement plan, consultation process and key decisions

11 February 2020

Complete

External audit of Consultation Document and LTP Amendment 

February to  March 2020

Complete

Council meets to approve final Consultation Document for LTP amendment and adopt underlying information

18 March 2020

Complete

Covid-19 pandemic response plan developed. Review options for LTP amendment and Annual Plan.

26 March to 9 April

Complete

Council agrees to Covid-19 pandemic response plan and agrees to “emergency budget” Annual Plan 2020/21  and not to progress LTP Amendment

9 April

Complete

Council adopts “emergency budget” draft Annual Plan 2020/21

7 May

Today

Public engagement

8 May to 22 May

 

 

Not started

Council meets to hear public submissions and consider analysis of results from engagement 

29 May

Council meets to make final decisions on draft Annual Plan 2020/21

18 June 2020

Council sets the rates for 2020/21

30 June 2020

 


Section D – The “emergency budget” draft Annual Plan 2020/21

 

Revenue 

 

25.  Three Waters: Through the preparation of the DAP the Council has made decisions to prioritise Three Waters infrastructure budget requirements. The DAP includes additional operating expenditure across a range of areas:

-     $200k to fix water supply leaks,

-     $250k for infiltration issues with the wastewater network,

-     $200k for critical asset condition assessment,

-     And increased bulk water costs of $410k.

Capital expenditure budget increases include:

-     $2M to enable fast tracking construction of key renewals for water supply and wastewater pipes which are in poor condition, as well as renewing a number of critical wastewater pumps,

-     $1.2M for the seismic upgrade of the Seaview Wastewater plant.

26.  These budget changes have resulted in increases in the targeted rates for wastewater of 8.7% and water supply rates of 9.3% (refer table 2). These are fixed charges applied to each rating unit.

Table 2: DAP targeted rates for 2020/21

Differential

2019/20

DAP 2020/21

$ Change and %

Wastewater – per rating unit

$478.50

$520.00

$41.50    8.7%

Water supply rate – per rating unit

$448.50

$490.50

$42.00    9.3%

 

27.  The DAP rates revenue assumptions for the overall rates revenue increase has been reduced in line with the Council decision for the “emergency budget” for 2020/21 at 3.8% for 2020/21  (refer Table 3). Future years are assumed at LTP levels of LGCI inflation rates. For 2020/21 this equates to a reduction in rates revenue of $4.4M compared to the level included in the LTP amendment which had a 7.9% rates revenue increase. The 2020/21 increase of 3.8% represents the inflation LGCI of 2.8% together with an additional 1% to reflect the high risk that the assumed growth in the rating base will not occur due to the impact of the Covid-19 lockdown. 

Table 3: Overall rates revenue increase assumption for “emergency budget”

 

2020/21

2021/22

2022/23

Future years

Overall rates revenue increase1

3.8%

2.2%

2.2%

~2.5%

Note 1: Excludes growth in rating base of about 1%.

28.  Due to the three yearly property revaluations completed in late 2019, the average residential property across the city has increased in value from $476,000 to $627,000 (32%), whilst the average central business property has increased from $1.38M to $1.69M (22%). As a result individual property rates for 2020/21 will vary depending on the changes in the property revaluation. The average residential property rates increase will be $122 per annum or $2.35 per week. Of this annual increase 68% or $83.50 relates to the changes to the wastewater and water supply targeted rates. The DAP includes examples of rates on a range of typical properties.

Table 4: Projected rating impact for average residential property

 

Per annum

Per week

Average increase

$122

$2.35

 

Graph 1: Projected rating impact for average residential ratepayer

 

 

29. The DAP includes proposed changes to the rating differential policy. The estimated average increase in Table 4 assumes this change in policy proceeds. If this does not happen then the average increase would be $28 p.a. higher.

30. The DAP includes proposed changes to fees and charges which are detailed in the plan.

Operating expenditure

 

31.  On 9 April 2020, Council agreed to prepare an “emergency budget” for 2020/21. The lower rates increase of 3.8% compared to the previously budgeted 7.9% has resulted in reduced rates revenue of $4.4M. Since this decision, officers have progressed a review and update of budgets with an aim to find further budget savings.

32.  A range of budget updates and savings have been included in the revised budget. The focus has been largely on operating expenditure to address the forecast deficit result for 2020/21. The initial $1M of savings target has been reviewed and increased up to just under $3M.

33.  Specific areas of savings have been identified and budgets have been reduced accordingly:

a)   Libraries $100k - Savings in a number of areas including continuing to offer some programmes online rather than with onsite materials; reduction in travel/accommodation costs for staff training and closing War Memorial Library on Sundays and earlier on weeknights when there is reduced demand for onsite services.

b)   Pools $100k- Season for three summer pools shortened by three weeks, aligned to times of lowest-use.  

c)   Parks $100k - Reduced service specifications for upkeep of some parks and reserves, with a focus on areas that are least-used, or where lower-quality is acceptable for planned activities.  

d)   Community Engagement $250k - Delayed implementation of our planned community engagement approach and focus on increasing capability in existing roles to fulfil this function in the interim.

e)   Museums $50k - Savings in a range of areas including slowing the exhibition programme, reducing expenditure on non-essential works, moving some programmes on-line and reduced use of casual staff.

f)    Technology Valley $45k - The savings could be achieved by operating a different business model, which officers believe will still achieve good outcomes for this sector.

g)   Events $180k - Eliminate the major events budget for several reasons, including:

-     the HighLight Festival of Lights is no longer being delivered

-     we are changing the way events are delivered in the future

-     the “lead in” time for the delivery of a major event for the next financial year has been compromised with the lock-down.

This will result in an alternative offering in the events space, which will not necessarily reduce outcomes for the city, but will look and feel different.

h)   Roading $200k- Slightly reduced service provision across a number of areas including road reconstruction, minor safety improvements (speed calming, mid-carriageway pedestrian refuges, street and intersection realignments) local area traffic management and Carpark resurfacing – only in areas where this can be achieved without compromising safety.

i)    Accommodation $263k - With an increasingly agile workforce, plans are being progressed to rationalise our office space and transition more staff to hot-desking and remote working, which will decrease the space required for our staff to operate. The initial focus will be to end our tenancies at Market Grove and Ricoh Sports Centre.

j)    Staffing costs net saving of $1.2M – A range of updates across staffing including -  the assumed annual salary increase of 2.5% has been reduced to 0%, the overtime budget removed, training budget reduced and a vacancy assumption has been added.  Budgets have been updated to reflect latest staffing levels information including increased staffing for regulatory functions serving a growing city and reduced staffing in some areas where there are current vacant roles. 

k)   Fleet review $150k: The fleet review is a part of the work being undertaken to reduce Council’s internal carbon emissions, but also achieves budget savings by way of reducing the number of take-home vehicles, and the total number of Council vehicles.  By fast-forwarding this work, budget changes can be achieved more quickly than anticipated.

l)    The focus has been on savings in operating expenditure and the capital expenditure budgets are largely unchanged except for some minor items such as a 20% reduction in the Library book restocking budget $170k. Officers will further review capital budgets as part of the advice provided in late May and look for further projects that could be delayed or reprioritised.

m)  There are some other minor updates to budgets based on the latest information available. This includes an increase in consenting revenue of an estimated $200k.

34.  Council is reminded about further budget savings that were achieved through earlier decisions of Council during the preparation of the DAP:

a)   Hutt Valley Gym Sports (HVG) $1.5M - operational grant funding of $0.5M included in the DAP in support of a new option of a redeveloped facility at Fraser Park. The proposal includes Council providing a loan guarantee of $0.5M to HVG.  This is a budget reduction of $1.5M from the original budget.

b)   Hutt Valley Tennis (HVT) $850k - operational grant funding of $0.5M included in the DAP towards seismic strengthening works. This is a reduction of $0.85M from the budget in the Annual Plan 2019/20.

c)   International co-operating cities $40k – budget reduced from $45k to $5k.

d)   Regional Amenities Fund $200k – budget reduced from $200k to zero.

e)   Suburban Shopping Centre Fund $50k - the two-yearly budget reduced from $300k to $200k.

f)    Biodiversity assistance for landowners $65k – reduced from $265k to $200k.

g)   Community funding $100k – reduced as a one-off for unused funding.

h)   Wainuiomata Sportsville $2.7M – removal of planned capital works.

i)    Wainuiomata Hub $3.7M – reduction in planned capital works.

35.  A report to Council on 9 April 2020 on the DAP included advice about an option to have a zero per cent rates revenue increase while maintaining current service levels. The advice was that it would not be possible to achieve this while maintaining current service levels, and that the service level cuts needed would be likely to trigger a LTP Amendment.  Further information on this is available in Appendix 9. This includes further potential budget cuts identified. The key concerns raised are the significant rates impost that would be passed onto future ratepayers, together with the concern that this would not support post-Covid-10 economic recovery. The Corporate Leadership Team does not recommend a zero per cent rates rise.

36.  Table 5 that follows provides a summary of the updated operating budgets following the budget amendments detailed above. In summary the key results show:

-     Net deficit of $9M projected for 2020/21, compared to surplus of $4.4M projected in the LTP

-     Operating expenditure has increased by $16M compared to the LTP, largely due to unbudgeted Three Waters cost $1.8M, depreciation $3.3M, Development Stimulus Package $4M, insurance $1.3M, District Plan $1.2M, Naenae Pool demolition and planning $1.5M, Homelessness Strategy $0.5M and $1M between HVT and HVG. 

 

Table 5: Summary financial results 

$Millions

Actual 2018/19

Annual Plan 2019/20

LTP year 3

2020/21

(A)

DAP 2020/21 (B)

Variance (B – A)

Operating revenue

53.0

54.8

52.2

53.3

1.12

2.1%

Operating expenditure

179.0

186.8

169.6

185.9

(16.3)3

(9.6%)

Net operating deficit before rates income

(126.0)

(132.0)

(117.4)

(132.6)

(15.2)

(12.9%)

Rates income

105.3

108.1

110.8

113.3

2.54

2.2%

Net operating deficit

(20.7)

(23.9)

(6.6)

(19.3)

(12.7)

(192.4%)

Capital contributions

11.1

10.6

11.0

 

10.3

(0.7)

 

Net deficit before adjustments

(9.6)

(13.3)

4.4

(9.0)

(13.4)

 

Other non-operating adjustments

(17.7)1

-

 

-

-

 

Net deficit

(27.3)

(13.3)

4.4

(9.0)

(13.4)

 

 

Note 1 - 2018/19 net deficit of $27.3M includes loss of $17.7M includes asset impairment losses (incl. Naenae Pool) $9.4M, fair value loss on derivatives $11.6M and gain on asset disposal $3.3M. 

 

Note 2: DAP 2020/21 increased revenue $1.1M - Mainly due to higher consents revenue $1.9M , reserve contributions $0.8M offset by reduced fees and charges in Community Hubs and due to closure of Naenae Pool $0.9M and reduced parking and infringement fees $0.7M. 

 

Note 3: DAP 2020/21 increased operating expenditure $16.3M - Mainly due to the following costs that were not in or are now higher than the 2020/21 year of the LTP but are now included in the DAP:  Development Stimulus Package $4M, Naenae Pool demolition and design $1.5M, District Plan $1.2M, Hutt Valley Tennis  $0.5M, Gym Sport $0.5M, Homelessness Strategy $0.5M, biodiversity assistance for private landowners $0.2M, community engagement $0.15M, community resilience $0.3M, climate change $0.2M, Naenae CBD activation and activities $0.3M, Landfill operational costs $0.5M, refuse and recycling collection $0.8M, Information Services $2.1M, Three Waters $1.8M (includes $0.6M of additional bulk water costs), higher insurance costs $1.3M, and higher depreciation $3.3M. These are offset by reductions from operational savings and reduced interest expense $2.2M.

 

Note 4: Rates income change $2.5M - The difference in rates is because the LTP had a lower amount for inflation and a lower amount for growth.

 

Refer to Appendix 6 and 7 attached to the report for further detailed analysis.

 

Capital expenditure

 

37.  A capital programme of $67M is proposed for 2020/21, which comprises $46M of capital improvement works and $21M for capital renewals.

 

 

 

 

 

 

 

 

 

 

 

 

Graph 2: Projected capital programme split by activity

 

38.  Table 6 provides a summary of the updated capital budgets by activity and provides a summary of the changes compared to the LTP. Further detailed analysis is available in Appendix 8 attached to the report.


 

 

Table 6: High level summary of 2020/21 capital investment plans

$M

LTP year 3 2020/21 (A)

DAP 2020/21 (B)

Variance B-A

 

Commentary

Total capital expenditure

74.3

67.2

7.1

               

Details are covered below. The most significant change is due to moving $9M for the Naenae Pool that was in the LTP but has been moved to later years.

Comprising:

Roading and Accessways

 

19.6

 

 

14.2

 

 

5.4

 

Mainly due to the Riverlink - East Access Route $3.5M projects and Cycleways/Shared Path Eastern Bays $1.9M projects that were included in the LTP but moved to later years.

Three Waters

26.8

27.5

 

(0.7)

 

Mainly due to additional funding for network renewal of about $3M offset by deferring $2.3M for Trunk Wastewater projects in the LTP. 

Leisure and Wellbeing

15.7

6.6

9.1

Reduction is mainly due to the Naenae Pool project which had $9M in the LTP but has now been moved to later years.

City Growth

6.7

7.6

(0.9)

Increase is mainly due to extra funding for Riverlink $2.3m and $0.3M for a Dog Park offset by a reduction in the Urban Growth Strategy budget $1.7.

Solid Waste

4.0

4.4

(0.4)

 

Mainly due to extra funding is for landfill building improvements.

Other

1.5

6.9

 

(5.4)

 

Mainly due to extra investment in IT of $4M plus $1.3M for Seismic Strengthening work of buildings.

 

39.  Please refer to the detailed DAP Appendix 5, which includes further details about the consolidated financial budgets as well as a breakdown for each activity (including project lists) together with service performance metrics.


 

Projected debt and balanced budget position

 

40.  The revised lower rates revenue results in significantly increased borrowings and a delayed balanced budget result until 2027/28. The Council’s financial strategy will be required to be amended as part of the LTP 2021-2031 in order to achieve a financially prudent and sustainable solution. 

-     A balanced budget  is not achieved until 2027/28 (refer graph 5),

-     Debt is projected to peak at $407M in 2030/31. This is $179M higher than the peak projected in the LTP of $233M (refer graph 3).

-     The debt to revenue ratio limit is exceeded from year 4(2023/24) onwards with a peak at 184% in 2024/25 (refer graph 4).

These projections are based on Council decisions to date on capital priorities. Through the development of the LTP 2021-2031 there will clearly need to be a significant reduction in the capital investment plans for the city if lower revenue levels are to continue. These projections do not include Wellington Water early advice re. the LTP that investment needs to double to fund ageing infrastructure and a growing city. As the emergency budget is a one year budget only for 2020/21, all capital projects from 2021/22 onwards are effectively on hold pending reprioritisation and funding solutions through the LTP 2021-2031.

 

Graph 3: Projected debt

 

 

 

 

 

Graph 4: Projected debt to revenue ratio

Graph 5: Projected balanced budget target

41.  Graph 5 is based on the HCC Balanced Budget definition which is the Local Government (Financial Reporting and Prudence) Regulations 2014 definition for the balanced budget benchmark (Clause 19) [Council Revenue excluding development contributions, vested assets, gains on derivatives and revaluations of property, plant and equipment…and  operating expenses excluding losses on derivatives and revaluations of property, plant and equipment” modified to exclude the NZTA “ring fenced” capital subsidies for capital improvement works from revenue.  Refer to Council report 18 March 2020 LTPAP2020/2/31.

42.  Through the LTP 2021-2031, the investment priorities and financial strategy of the Council Group will be reviewed. Whilst there is a net deficit projected for the “emergency budget” in 2020/21 and this does not meet the S100(i) balanced budget provision of the Local Government Act, it can be resolved as financially prudent due to the one off nature, with revenues recovering and repayment of the debt occurring over the medium term to avoid a significant impact on future ratepayers.

Section E – Next steps

43.  Officers will prepare information and advice for Council’s 29 May 2020 meeting on the financial impacts of the Covid-19 lockdown. This will include:

-     project changes (including delays, projects brought forward and cost changes),

-     cash flow impacts from revenue reduction and extended payment terms for ratepayers and debtors,

-     Latest rating database updates.

Further options and advice will be provided to support Council decisions on possible budget cuts or project delays that could be actioned to offset the impact of the Covid-19 lockdown.

 

44.  The preparation of the LTP 2021-2031 will start in July 2020 shortly after the adoption of the Annual Plan 2020/21. This will include a full review of Council’s strategies and priorities, together with a full base budget review.

Section F – Further information about the public engagement process

45.  Council’s decision that the LTP Amendment would not proceed and that instead a one year “emergency budget “for a 2020/21 draft Annual Plan would take place has resulted in changes to the planned engagement process.

46.  The key message is “Getting Through”.  The engagement document provides some information on operational savings, the deficit position as opposed to the $4.4M surplus in year three of the LTP, the capital expenditure programme that people can expect for the rates revenue increase and the importance of continuing to invest where we can to prepare for the future.

47.  Covid-19 continues to add challenges to the communication and engagement of the DAP. People’s attention is focused on keeping themselves and their families safe. Even with a move to Alert Level 3, our community is still in lockdown and the social and economic impacts of this continue to affect communities and businesses.

48.  This situation does present us with opportunities to focus on digital engagement and also to reach residents in different ways. This includes utilising staff and councillors to connect with people to be their ‘neighbours’ news’ (see current messaging on Council’s social media channels).

49.  Social media, live feeds and digital promotion will be used. We will use print materials in a limited capacity if we can, given the alert level.

50.  During the engagement period, advertising would be focused on Face Book and Neighbourly and any local publications which have an online presence or where they have indicated they may be able to publish. Video and audio conferencing will be extended to the submission process where people who wish to present to council will be able to do this via video or by ringing in.

51.  The detailed information that supports the DAP including financial information, project lists, performance measures and targets, proposed fees and charges and other detailed supporting information will be published on our key engagement channel ‘Bang the Table’ and also made available via Council’s website.

52.  As part of reporting back to Council following the engagement process we will measure the effectiveness of our engagement against previous data.  This will be reported in the context of a shortened and “lighter” engagement.

Section G - Legal Considerations

53.  Council resolved on 9 April 2020 to progress the development of an Annual Plan for 2020/21 that would not require a material or significant change to the current LTP.  In these circumstances, Council is not required to consult under s95(2A) of the Act. Regardless, Council is progressing a lesser form of engagement on a voluntary basis.

54.  If Council was to reconsider this decision and make a decision to either go with the previously contemplated 7.9% rates increase or to go with a 0% increase, this would likely trigger an amendment to the Long Term Plan.  This is because either of those options would likely involve one or more decisions to “alter significantly the intended level of service provision for any significant activity undertaken by or on behalf of the local authority, including a decision to commence or cease any such activity.” Under s97 of the Act, this can only be done if it is provided for in the Long Term Plan. Refer Appendix 9 to the report which provides further information related to a 0% rates rise and the possible service impacts that would result from this option.

55. Under ss99(4) and (5) of the Act, Council may amend the Long Term Plan at any time, but it must use the special consultative procedure to do so.

56. Section 83 sets out the requirements of the special consultative procedure.  For a Long Term Plan (and any amendment) these consultation requirements are amended so that a consultation document is required.  Section 93D sets out the content required of a consultation document for an amendment to the Long Term Plan.

57. If Council did want to move slightly away from the decision to proceed with an “emergency budget” (i.e. just following the current Long Term Plan), then it also needs to be aware that any changes that result in “significant or material differences” from the content of the current Long Term Plan would trigger a requirement for consultation (s95(2) of the Act), including the requirement to produce and make publicly available a consultation document.  This consultation is not the special consultative procedure required for a Long Term Plan amendment but it will still present some challenges in the Covid-19 emergency environment.  Simpson Grierson Lawyers have produced some guidance for LGNZ on what would and wouldn’t be required in these circumstances.  This is attached as Appendix 3 to the report.   

Section H - Financial Considerations

58.  There are no further financial considerations apart from those detailed in this report.

Appendices

No.

Title

Page

1

Appendix 1 Covid-19 Response Plan

43

2

Appendix 2 Covid-19 response - submission to central government on shovel ready projects

46

3

Appenddix 3 - Local Government Sector Advice from Simpson Grierson

52

4

Appendix 4 - Draft Annual Plan 2020/21, summary engagement document

62

5

Appendix 5 - Draft Annual Plan 2020/21, full detailed document for public engagement

82

6

Appendix 6 - Detailed analysis, comparison operational expenditure DAP 2020/21 and LTP year 3

210

7

Appendix 7 - Detailed analysis, comparison of operational expenditure for DAP 2020/21 and Annual Plan 2019/20

212

8

Appendix 8 - Detailed analysis, comparison of capital expenditure plans for DAP 2020/21 and LTP year 3

215

9

Appendix 9 Zero per cent rates increase, not recommended by Corporate Leadership Team

217

10

Appendix 10 -  Detailed rates information, including indicative rates changes by suburb

223

    

Author: Philip Benseman

Budgeting and Reporting Manager

 

Author: Wendy Moore

Head of Strategy and Planning

 

Author: Bradley Cato

Chief Legal Officer/General Counsel

 

Author: Jenny Livschitz

Chief Financial Officer

 

Approved By: Jo Miller

Chief Executive

 


Hutt City Council COVID-19 Response Plan (as at 23 April 2020)

Council has responded to Covid-19 with a range of initiatives to support the Lower Hutt community. The environment is changing rapidly and there is a need to continue to be responsive and provide immediate benefits that reduce financial stress and provide social support to our residents. 

There are several aspects to Hutt City Council’s COVID-19 Response Plan. These include:

Ø Rates and Charges

Ø Support to Businesses

Ø Focus on Welfare

Ø Other initiatives

Rates and Charges

1.   Proposed rates revenue rise of 7.9% reduced to 3.8% (plus 1% for growth – at risk in current environment) with a one-year emergency draft budget prepared for consideration by Council on 7 May 2020. The Draft Annual Plan reflects the lower rates revenue. A public engagement process is planned from the 8 May 2020 for two weeks. Final budget decisions will be made on the 30 June 2020.

2.   A revised rates postponement policy is being finalised for publication. The new policy extends to businesses (i.e. non-residential properties) with a capital value of up to $1.5M. Events like COVID-19 are included in the policy.

3.   New rates payment arrangements for those experiencing financial hardship. People are encouraged to contacted council where they are having difficulty paying their rates. Payment arrangements are offered to people which extend the payment term over a longer period and there are no rates penalties.

4.   National initiative to defer the application of recent general property revaluations to rates to at least the 2021/22 financial year. Requesting government to review this so that suburbs with the greatest increases in rates due to the recent revaluation experience no change in rates%. This would particularly reduce the rates increase for suburbs like Wainuiomata, Naenae, Stokes Valley and Taita who had % changes in property values in excess of 40% due to the recent three-yearly general revaluation. If the current rules apply this would result in residents in these areas paying a higher proportion of the rates bill for the city.

5.   Requesting government extend the existing rates rebates scheme[1] to a greater number of households (particularly those that can demonstrate loss of income as a result of COVID-19).

6.   No parking charges effective 23 March and for the duration of the lockdown. Parking charges are reinstated as of midnight Monday 27 April to reflect the move to Alert level 3.

7.   No library fines, extensions re. library books for the duration of the lockdown and into Alert level 3. An online membership service launched.

8.   Online payment of rates promoted and communications with ratepayers who pay in cash or cheque to move to online. 2,643 letters were sent out and we have 226 people to date who have moved to direct debits.

9.   Communicating with all stakeholders to encourage online applications and payments for consent applications.

10. Extending due dates for food licensing fees.

Support to Businesses

1.   Submission on major infrastructure projects which are ‘shovel ready’ and can get underway within 6 months. This is a proposal to the Infrastructure Reference Group which has been created as a national response to COVID-19. This will act as a key stimulus to the economy and get people working when the alert level is raised. It will also provide certainty to businesses.

2.   Keeping our suppliers going - online payments to suppliers processed in 5 days (as opposed to 30 days).

3.   Working in partnership with the Hutt Valley Chamber of Commerce and Upper Hutt City Council to provide support to local businesses including the Love Local campaign, networking opportunities and business advice.  An online resource hub has been established along with a business Facebook group (currently more than 600 members).  Livestreams and webinars are being hosted 4 days a week with local experts providing advice on issues relevant to businesses. Further sector based networking opportunities are being explored and we are encouraging businesses to connect locally with suppliers.

4.   Proactive direct contact with Chamber of Commerce businesses has been expanded and issues and concerns are being either directly responded to or passed to appropriate experts.  Summary information is being shared with WellingtonNZ and with the Ministry for Business, Innovation and Employment for collation of data on issues affecting businesses regionally and nationally. Proactive contact has been made with around 600 other businesses – in particular, supermarkets, pharmacies, accommodation suppliers, medical centres and vets to offer support and gather information.

5.   Providing ongoing information on our website and Facebook and in some cases sending this directly to food and alcohol operators via e-mail.

Focus on Welfare

1.   Grants to Food Banks and charities supporting food distribution. Funded via a proportion of the Chief Executive’s pay given up to help during COVID-19 and recovery.

2.   Redirected $100K towards a new Community Resilience Fund which is operating. This is for organisations, groups and initiatives during COVID-19 and recovery. The fund allows for maximum grants of $2k to support community-led solutions and wellbeing.

3.   Welfare support – our staff in the Emergency Operations Centre (EOC) are leading welfare efforts around regional needs assessment and commissioning established local organisations to meet demand. We are further supporting this by providing the following:

A pool of staff working remotely to answer Lower Hutt calls to the national welfare hot-line and carrying out needs assessments by way of survey

Staff and vehicles to support local organisations to pick up and deliver food, medicine etc across our city

Providing vehicles to the local Runanga (Te Rūnanganui o Te Atiawa ki te Upoko o Te Ika a Maui) for the delivery of food and sanitation packages

A pool of staff working remotely to call Lower Hutt-based MSD clients who are aged over 70 and housebound to ensure their welfare needs are being met

Other initiatives

1.   Brought forward investment in IT to enable online services to be activated so that council business can continue and staff can work from home. This includes the contact centre to working fully online.

2.   Extending Contact centre service through extended hours and a local service over weekends when needed.

3.   Partial payment of consenting fees. This allows applicants to pay in smaller instalments so they can maintain cashflow.

4.   Apply a leniency approach to resource consent and building consent enforcement, whilst maintaining safety

5.   Virtual events, activities and resources for the community – through Hutt@Heart and the HCC Facebook page. This includes online content from all areas of the business such as health and fitness videos, arts and craft activities, competitions for tamariki and ideas on how to safely connect with and support neighbours. 

6.   Providing for public notices for alcohol applications to be published on our website. Note that licences cannot be issued for premises under Alert levels 4 and 3 unless the Ministry of Health etc have reported favourably.



 



 


 




 


 


 


 


 


 


 


 


 



 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 



 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 



 



 


 



 


Zero per cent rates increase - not recommended by Corporate Leadership Team

 

1.    A report to Council on 9 April 2020 on the DAP included advice about an option to have a zero per cent rates revenue increase while maintaining current service levels. Officers’ advice was that it would not be possible to achieve this while maintaining current service levels, and that the service level cuts needed would be likely to trigger a LTP Amendment.  There is also insufficient time to complete an LTP Amendment process ahead of the rates setting decision in June 2020.

2.    If Council attempted to achieve a zero rates increase by debt funding further operating costs this would not be financially prudent, and therefore would not be consistent with Section 101 (Financial Management) and section 100 (Balanced Budget) of the Local Government Act. It also passes a significant rates impost onto future ratepayers. The Corporate Leadership Team does not recommend a zero rates rise.

3.    Subsequent to the Council meeting on 9 April, officers have worked through looking at options to reduce budgets. A range of budget cuts have been included in the DAP – refer Section D operating expenditure in main body of the report. Further options to reduce operating expenditure are detailed below.  These are largely more significant service cuts and likely to require consultation which is best handled through an LTP amendment. A targeted savings of at least $5M operating expenditure would be required. This would include staff redundancy costs related to these service cuts of up to $1M. Some options are detailed below however these are insufficient and further budget cuts would be required.  These options would not support economic recovery for the city but would rather have the opposite effect, creating more unemployment.

a)    Libraries $0.3M - Closure of two of our community libraries, with services provided for those affected either in a near-by community, or as a ‘pick up and drop off’ service from one of our other near-by facilities.  

b)   Libraries $0.4M - Suspension of some of the additional programmes provided by Hutt City Libraries, specifically Clubhouses in Naenae and Taita. We would endeavour to provide some of the Clubhouse services for rangatahi through libraries and community hubs in these communities.   

c)   Naenae Pool planning and demolition works $1.5M – this budget has been retained in 2020/21. It could be removed and no works progressed until the next LTP is finalised.

d)   Riverlink - $5M - eliminate funding of Phase One of the Riverlink project with the consequence being that Riverlink would not be delivered, our partnership agreement would be broken, and it would bring into question governmental funding.

e)   Pools $0.2M - closure of McKenzie Baths Summer Pool, given the local community is in close proximity to Huia Pool. This would result in a change in service level and employment of fewer local pool staff.  

f)    Public safety $0.2M -   Suspension of the Safe City Ambassadors service. Instead we would have existing staff focus on building more voluntary Neighbourhood Support teams and Community Patrols across the city. ($35K factored in to fund this) This is a contracted service and would likely result in staff losses for the contractor.

g)   Eliminate all business support: $0.24M. This would remove all business recovery work being conducted in partnership with the Chamber of Commerce and Upper Hutt City Council.  This includes connecting businesses with central government funding and aid, advising and supporting businesses, promoting #lovelocal campaign and servicing the HuttValleyNZ.com website which is operating as a business hub.

h)   Community Halls $50k - Closure of two community halls. This would focus on low-use facilities and/or areas where there are other, similar facilities available.

i)    International Relations $80k: Council could decide to stop any work in the International Relations area.  The result would be no support for the International Education Cluster (local initiatives planned around supporting attraction of international students into Lower Hutt schools and tertiary institutions), no support for Hutt Minoh House Friendship Trust and no support for the Hutt Sister City Foundation. There would not be any ability to help to deliver exchanges or host inbound delegations.

j)    Range of other ideas across removing budgets for the Heritage Incentive Scheme $52k, Suburban Shopping Centre Fund $0.2M, Keep Hutt City Beautiful $48k, Love Wainuionata/Seaview Business Association $49k.

4.    Council 9 April 2020 report on the DAP included information about the comparison of different rates increase options. This was provided to support decisions by Council regarding the preferred option to progress. This information is repeated below.

 

Extract of Council report 9 April 2020 on Draft Annual Plan 2020/21

Reviewing the LTP Amendment and Annual Plan 2020/21 options in the context of the Covid-19 pandemic

5.    With the fast-changing events of the past month it is important that Council reviews the planned LTP Amendment and Annual Plan 2020/21 process, and considers the options available ahead of progressing further. Officers have reduced the options down to three key options which are summarised below.

6.    Option 1 - LTP Amendment progresses, with 7.9% rates revenue increase in 2020/21

The previously approved LTP Amendment progresses with a 7.9% rates increase and updated content to reflect Covid-19, together with messaging about working to reduce the rates increase down.

 

If the rates increase was reduced and smoothed then any gap in revenue in 2020/21 would be funded through additional debt as a one-off solution and resolved over the medium term therefore not significantly impacting future ratepayers.

 

This option would require a 30 day consultation process, with changes to reflect the lockdown and better use of digital platforms.

 

This option has significant reputational risks as there may be misunderstanding about Council progressing a large works programme and high rates increase of 7.9% and not taking into consideration Covid-19 impacts. 

There are challenges with progressing through the external audit process with this option due to the uncertainties due to the Covid-19 pandemic. 

 

Whilst this option is considered the most prudent of the options, it is not recommended by officers in the current context of Covid-19.

 

7.    Option 2 - Emergency budget with 3.8% rates revenue  increase in 2020/21

Do not progress with the LTP Amendment. Instead prepare an “Emergency Budget” for the Annual Plan 2020/21 with a proposed 3.8% rates increase in 2020/21. This would be a one year budget only.

This option would involve a two week “light” engagement process that would not be the special consultative procedure required for an LTP Amendment.

Proposed changes to rates differentials would be included in the process. All 2020/21 budgets would be retained as per the LTP Amendment approved 18 March 2020, including Three Waters and Naenae Pool operational funding of $1.5M in 2020/21 (to progress the early stages of project, including consenting and demolition).  Funding for projects from 2021/22 and beyond (e.g. Cycleways, Cross Valley Connection) would effectively be placed on hold pending decisions from the LTP 2021-2031 process, which concludes in June 2021. Recycling and refuse service changes consultation would be deferred to August 2020 to progress consultation.

Any gap in revenue in this option would be funded through additional debt as a one-off solution and resolved through the LTP 2021-2031.

In the context of Covid-19, Officers recommend this option as the preferred option.

8.    Option 3 – zero rates revenue increase in 2020/21

Officers have also reviewed the option of a zero rates increase while maintaining current service levels. Officers’ advice is that we cannot reduce costs to this extent while maintaining current service levels. If service level cuts were proposed this would trigger a LTP Amendment.

There is insufficient time to complete an LTP Amendment process of this nature ahead of the rates setting decision in June 2020.

If Council attempted to achieve a zero rates increase by debt funding further operating costs this would not be financially prudent, and therefore would not be consistent with Section 101 (Financial Management) and section 100 (Balanced Budget) of the Local Government Act. It also passes a significant rates impost onto future ratepayers.

Officers do not recommend this option.

9.    All these three options are based on an assumption of 1% growth in the rating base, although there are currently significant risks of this being achieved due to the Covid-19 lockdown.

10.  All the options include a zero based budget review being completed with an aim to find savings and to reduce the rates funding requirements.


 

11.  The table below summarises the pros and cons of the options.

 

Option 1

LTP Amendment with full consultation

Option 2

Emergency budget with “light” engagement

Option 3

Zero rates increase, with “light” engagement

Rates increase 2020/21

 

7.9% with option to reduce/ spread

3.8% with option for minor changes

 

Rates increase 2021/22

 

LTP 2021-2031 to determine rates increase. Lower rates increases in 2020/21 likely to result in higher increases in future years, depending on service level decisions.

Rates differential policy change progressed

Yes

Yes

Yes

Fees and charges updated

Yes

Yes

Yes

Naenae pool progressed

Yes

Progress planning (incl. demolition) in 2020/21.  Construction pending LTP 2021-2031

No

Refuse &recycling service changes progressed

Yes

Deferred LTP Amendment until August 2020

No

No reduction in service levels (apart from minor changes)

Yes

Yes

No

Debt funds shortfall in revenue, reducing the impact on ratepayers in 2020/21

Yes

Yes

Yes

Additional debt funding is “one-off” so minimal impact on future years

Yes

Yes however risks

No

Unlikely to require  additional LTP Amendment changes

Yes

Yes

No

Likely to meet financial prudence test

Yes

Yes as one off

No

Meets balanced budget requirement

No

No

No

Likely that Standard and Poors AA credit rating retained

Yes

No Downgrade likely

No Downgrade likely

Recommended by officers

No refer risks

Yes in Covid-19 context

No

 

12.  Option 2 provides a pragmatic balance between managing the pressures on current ratepayers and ensuring the Council remains financially sustainable into the future, whereby the actions of today do not significantly impact unfairly on ratepayers in the future.

13.  The lower rates increase for 2020/21 is expected to be met favourably by ratepayers. The reduction in rates revenue of about $4M would require additional borrowings to offset this. Additional borrowing is for a specific purpose, in funding the one-off shortfall in operating revenue in 2020/21. While this does not meet the S100(i) balanced budget provision of the Local Government Act, it can be resolved that it is financially prudent due to the one off nature, with revenues recovering and repayment of the debt occurring over the medium term to avoid a significant impact on future ratepayers. In the context of Covid-19 this option is recommended by officers.

 

Further financial information and analysis of options 1 and 2

14.  Both the options include the same capital programme and assumed operating costs. The timing of rates revenue increases is the variable that changes between options, with flow on impacts to debt and interest costs.

15.  Tables A, B and C provide a comparison of projected rates increases and projected debt and operating results for options 1 and 2.  Option 2 assumes from 2021/22 LTP rates increases of inflation only per LTP 2018-2028. A balanced budget would not be achieved until 2029/30 in this scenario and debt would increase to $425M with a peak of debt to revenue ratio of 188%. If the LTP 2021-2031 adjusts the rates increase to be average of about 4% in future years, then a balance budget is achieved in 2024/25 and debt is reduced to $337M with a peak of debt to revenue ratio of 166%.

Table A: Projected rates revenue increases with comparison to options

 

2020/21

2021/22

2022/23

Future years

Option 1- CD LTP Amendment

7.9%

3.8%

4.3%

2.5%

Option 2 -Emergency budget, per LTP inflation only

3.8%

2.2%

2.2%

~2.5%

Option 2 adjusted – emergency budget post LTP 2021-2031

3.8%

4.4%

4.4%

4%

 


 

Table B: Other key financial projections with comparison of options

 

Net profit and loss* 2020/21

Balanced budget **

Projected net debt and debt to revenue ratio peak

Option 1- CD

 Deficit $6.5M

Achieved in 2023/24

Peak debt of $321M in 2024/25,  debt to revenue ratio 157%

Option 2 -Emergency budget

Deficit $10.9M

Not achieved until 2029/30 (ten years)

Peak debt of $425M in 2030/31. Debt to revenue ratio at 188%

Option 2 adjusted emergency budget post LTP 2021-2031

Deficit $10.9M

Achieved in 2024/25

Peak debt of $337M in 2024/25. Debt to revenue ratio at 166%.

*Statement of Comprehensive revenue and expenditure result 

** As per definition developed for LTP Amendment financial strategy

16.  Rating impact for ratepayer

The impact on the average residential property is as follows

Table C: Projected rating impact with comparison of options

 

2020/21 average rates revenue increase

Average residential property rates impact in 2020/21

Per annum

Per week

Option 1- LTP Amendment

7.9%

$212

$4.07

Option 2 -Emergency budget for 2020/21

3.8%

$122

$2.35

Difference

4.1%

$90

$1.72

Note that this assumes that changes to the rating differentials are progressed in 2020/21 (i.e. freeze differentials at same level as 2019/20).

 


Detailed indicative rating impact information

Notes:

-     Includes impact of property revaluation changes.

-     Assumes rating differential split maintained at same splits as per 2019/20, as per Council’s preferred option.

 

Table A: By property category


 

 

Table B: Average residential property by suburb


Hutt City Council

04 May 2020

 

 

 

File: (20/388)

 

 

 

 

Report no: HCC2020/3/99

 

Financial Strategy

 

Purpose of Report

1.    For Council to receive the report and advice in relation to the Financial Strategy developed for the proposed amendment to the 2028-2028 Long Term Plan.

Recommendations

That Council notes the report on the Financial Strategy, attached as Appendix 1 to the report.

 

Background

2.   At the request of the Mayor a report has been prepared on the proposal to amend the 2018-2028 Long Term Plan and the existing financial strategy, refer Appendix 1. The report was prepared independently by Phillip Jones of PJ & Associates, and has been peer reviewed by Bruce Robertson of RBruce Robertson Ltd. Their bios are attached as Appendix 2 and 3 to this report.

3.   Extract from the report

In conclusion, the proposed financial strategy and the approach taken in the development of the proposed amendment to the 2018-2028 Long Term Plan is a significant improvement. The reason for this improvement from the existing strategy is by clearly explaining the need to increase expenditure and move to a tighter balanced budget rest consistent with good practice. This will assist in forming a sound and financially prudent approach for the development of the 2021-2031 Long Term Plan.

Legal Considerations

4.    The relevant legislation is referenced in the report, attached as Appendix 1.

Financial Considerations

5.    There are no further financial considerations apart from those referenced in the report, attached as Appendix 1.

Appendices

No.

Title

Page

1

Appendix 1 - Report on Council financial strategy

228

2

Appendix 2 - Philip Jones bio

250

3

Appendix 3 - Bruce Robertson bio

256

 

 

 

 

Author: Jenny Livschitz

Chief Financial Officer

 

 

 

Approved By: Jo Miller

Chief Executive

 



 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 



 


 


 


 


 



 



[1] www.govt.nz/browse/housing-and-property/getting-help-with-housing/getting-a-rates-rebate/