HuttCity_TeAwaKairangi_BLACK_AGENDA_COVER

 

 

Long Term Plan/Annual Plan Subcommittee

 

 

17 September 2020

 

 

 

Order Paper for the meeting to be held in the

Council Chambers, 2nd Floor, 30 Laings Road, Lower Hutt,

on:

 

 

Thursday 24 September 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

 

 

PURPOSE

To carry out all necessary considerations and hearings, precedent to the Council’s final adoption of Long Term Plans (LTP) and Annual Plans (AP) which give effect to the strategic direction and outcomes set by the Policy, Finance and Strategy Committee through setting levels of service, funding priorities, the performance framework and budgets.

 

Determine:

       Development of a framework and timetable for the LTP and AP processes.

       The nature and scope of engagement and public consultation required.

       Statements to the media.

       Such other matters as the Subcommittee considers appropriate and which fall within its Terms of Reference.

       Informal engagement with the community, and the hearing of any formal public submissions.

       Consideration of submissions on Hutt City Council’s Assessment of Water and Sanitary Services.

 

Consider and make recommendations to Council:

      Levels of service, funding priorities, performance framework, budgets, rating levels and policies required as part of the LTP or AP, excluding any policies recommended to Council by the Policy, Finance and Strategy Committee.

      Consultation Documents.

      Council’s proposed and final LTP.

      Council’s proposed and final AP.

      Final content and wording, and adoption of the final Hutt City Council Assessment of Water and Sanitary Services.

Note:

Extract from the Controller and Auditor General’s October 2010 Good Practice Guide: Guidance for members of local authorities about the Local Authorities (Members’ Interests) Act 1968

 

Appointment as the local authority’s representative on another organisation

5.47         You may have been appointed as the authority’s representative on the governing body of a council-controlled organisation or another body (for example, a community-based trust).

5.48         That role will not usually prevent you from participating in authority matters concerning the other organisation – especially if the role gives you specialised knowledge that it would be valuable to contribute.

5.49         However, you could create legal risks to the decision if your participation in that decision raises a conflict between your duty as a member of the local authority and any duty to act in the interests of the other organisation. These situations are not clear cut and will often require careful consideration and specific legal advice.

5.50         Similarly, if your involvement with the other organisation raises a risk of predetermination, the legal risks to the decision of the authority as a result of your participation may be higher, for example, if the other organisation has made a formal submission to the authority as part of a public submissions process.

 

    


HUTT CITY COUNCIL

 

Long Term Plan/Annual Plan Subcommittee

 

Meeting to be held in the Council Chambers, 2nd Floor, 30 Laings Road, Lower Hutt on

 Thursday 24 September 2020 commencing at 2pm.

 

ORDER PAPER

 

Public Business

 

1.       APOLOGIES 

2.       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.       

3.       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.      

4.       Recommendations to Council – 8 December 2020

i)       The strategic context and key assumptions for the City Plan and Long Term Plan 2021 - 2031 (20/901)

Report No. LTPAP2020/5/210 by the Head of Strategy and Planning     6

Chair’s Recommendation:

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

 

ii)      Long Term Plan 2021-2031, Financial aspects (20/988)

Report No. LTPAP2020/5/212 by the Manager Financial Strategy & Planning       18

Chair’s Recommendation:

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

 

 

 

 

 

 

 

iii)     Revenue and Financing Policy review (20/863)

Report No. LTPAP2020/5/207 by the Manager Financial Strategy & Planning       68

Chair’s Recommendation:

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

 

iv)     Rating Policy Review (20/989)

Report No. LTPAP2020/5/209 by the Manager Financial Strategy & Planning       96

Chair’s Recommendation:

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

 

v)      Development Contributions Policy Review (20/909)

Report No. LTPAP2020/5/211 by the Head of Strategy and Planning 132

Chair’s Recommendation:

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

 

vi)     Three Waters investment options for the 2021-31 Long Term Plan (20/1001)

Report No. LTPAP2020/5/206 by the Strategic Advisor                        140

Chair’s Recommendation:

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

5.       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.   

 

 

 

Kate Glanville

SENIOR DEMOCRACY ADVISOR

            


                                                                                       8                                                 24 September 2020

Long Term Plan/Annual Plan Subcommittee

13 August 2020

 

 

 

File: (20/901)

 

 

 

 

Report no: LTPAP2020/5/210

 

The strategic context and key assumptions for the City Plan and Long Term Plan 2021 - 2031

 

Purpose of Report

1.    The purpose of this report is to:

a.      provide Council with the strategic context and key assumptions that will underpin the City Plan and Long Term Plan 2021-31; and

b.      seek Council’s agreement to the key assumptions and underlying assumptions/priorities

Recommendations

That the Subcommittee recommends that Council:

(i)      notes the strategic context for the development of the City Plan and the Long Term Plan 2021-31;

(ii)     agrees the key directions, assumptions, and priorities; OR

(iii)    modifies the proposed key directions, assumptions, and priorities, and agrees on a new set for the LTP and City Plan;

(iv)    agrees these key directions, assumptions, and priorities will underpin:

(a)     the planning, strategy and policy documents that make up the 2021 -31 Long Term Plan; and

(b)     all future planning, strategy and policy development. 

(v)       establishes a working group to provide ongoing guidance on the Long Term Plan consultation document and questionnaire to allow this to be submitted for typesetting by February; and

(vi)      agrees that the membership of the working group be Mayor Barry, Deputy Mayor Lewis, Cr Edwards and Cr Hislop.

Having agreed to develop a thirty plan for the city, the 2021-31 Long-Term Plan process is Council’s first opportunity to begin setting the strategic direction and priorities for Lower Hutt. It is an opportunity to consider global trends and local implications, and to develop our thinking about the kind of city we should be.

Agreeing the direction and priorities will help inform Council’s engagement with citizens on the LTP and its thirty year plan.

 

Background

2.     At the Council’s retreat in November 2019, Councillors indicated that they wanted to develop a longer-term, thirty to fifty year, plan for the city.

3.     These and subsequent discussions between Council, Corporate Leadership Team (CLT) and the community during the development of the draft 2018/28 LTP amendment (which did not progress), and the development and engagement on the emergency budget 2020/21 Annual Plan, confirmed the view that a longer term City Plan is needed to provide the basis for planning and investment in the city by council and its partners. 

4.     The outcomes from discussion at the Council hui on 21 September 2020 will further inform the directions, assumptions and priorities for the LTP and City Plan. This paper will be amended following the 21 September hui and prior to the committee meeting.     

5.     The City Plan will provide the strategic direction and priorities for Lower Hutt for the 30 year period from 2024 to 2054. The development of the plan is in its early stages and work so far has included analysis of global trends and their implications for Lower Hutt, research on issues locally, and a review of current strategies/plans. Findings from this work are summarised in the following sections of the report and the key messages that will inform development of the plan are:

·    Strong partnership with mana whenua;

·    Council’s role is to enable, facilitate, and provide opportunities for communities to exercise tino rangatiratanga and determine and shape their own futures. While there are numerous individual levers that local government can use it is crucial to adapt our overall organisational approach and way of thinking, including continuing to breakdown internal silos and focusing on joint working, to help achieve local goals. Council needs to know when to lead, and when to stand back and fade into the background.

With three key priorities:

·    our impact on the environment;

·    delivering equity, and

·    financial sustainability

 

6.     The current timetable for the City Plan is shown in table 1 below.

Table 1: Outline of the timetable for the City Plan

 

Timeline

Activity

March to June 2021

Work with mana whenua and Council to develop vision, outcomes, monitoring and reporting

July 2021

Council sign-off

August 2021

Begin community engagement

Annual Plan 2022

Consult on the City Plan vision, outcomes, monitoring and reporting;

30 June 2022

Council to agree the final vision , outcomes and monitoring framework;

July 2022

Begin work on strategic priorities; 30 June 2023 – Council to agree completed city plan

30 June 2023

Council to agree completed city plan and begin implementation in the first year of the 2024-34 LTP

 

7.     Developing the key priorities for the city is crucial to ensuring that we begin creating the foundation for Council’s longer-term direction. The three LTPs between 2024 and 2054 will be the delivery documents for the City Plan, taking forward the strategic priorities and ensuring that investment is planned for at the right time.

8.     Preparatory work for the Long Term Plan Council 2021-31 is underway and the timetable for this work is included in the Long-Term Plan 2021-2031 Financial Aspects paper on the Committee’s agenda. 

Key direction/s, assumptions, and priorities for the City Plan and Long-Term Plan 2021-31

 

9.     Having the key direction/s, assumptions, and strategic priorities agreed by the end of September 2020 will enable the LTP planning to continue with the overarching direction in place and this will help inform the engagement with residents.

10.   As part of the research and background work, officers researched the global forces and trends that are shaping and changing the world and their implications for New Zealand and Lower Hutt.

11.   We began with a PESTLE analysis.[1] This is an analysis of the political, economic, social, technological, legal, and environmental trends, and their implications for people, organisations, and regions.  This is what the research told us at a global level.

 

 

Table 2: Global trends

 

Global Trends

Impact

Rapid urbanisation

·    85% of global Gross Domestic Product (GDP) is generated in cities

·    Quality of life is more and more of a driving force in people’s decisions about where they live

Climate change and resource scarcity

·    Climate change is the number one global risk

·    Current models of production and consumption are unsustainable

·    Biodiversity loss, extreme weather and water – are identified as the 3rd, 4th, and 5th major global risks.

Shift in global economic power

·    Long standing frameworks of cooperation are being challenged

Demographic and social change

 

·    People are living longer and having fewer children

·    Increasing participation in workforce women and older people

·    Increasing mobility and migration; and

·    Increasing inequity

Technological breakthroughs

 

·    Over 50% of the world’s population is online

·    Huge opportunities but also inequality of access

 

12.   To help investigate and analyse the likely local impacts of these global trends, officers from across Council completed a series of papers providing a Lower Hutt view of the potential impacts of these trends on the social, cultural, economic, and environmental wellbeing of our communities. Research also explored the factors needed for our communities to thrive and local government’s role in ensuring these components are present in our communities.

13.   The following table provides a snapshot of what’s happening at a New Zealand level where it affects Lower Hutt, and also at some local level city data.

 

 

 

 

 

 

Table 3: New Zealand and Lower Hutt

Local

Impact/need

Political and legal

·      Relationship with mana whenua and Māori across a range of domains

·      Legislative and policy reform: LGA – the four wellbeings, RMA, Urban growth agenda – the Urban Development Act and the Infrastructure Funding and Financing Act

·      Environmental protection and sustainability is a priority

·      Growing focus on regional approaches

·        Developing the relationship with Māori is a priority

·        Numerous impacts or potential impacts on Council and City in terms of planning, capacity for housing, and funding and financing i.e. who pays and how?

·        Adapting to climate change in the directions we take

·        Joined up approach at regional level – urban development/housing/infrastructure e.g. through the Wellington Growth Framework

Economic

·      Lower Hutt GDP is lower than national average – 1.5% up in 2019 compared to 3% NZ – and earnings are lower overall

·      Hub of medium and high-technology industries - but slower growth and lower output compared to sector in NZ

·      The region has a vibrant Māori  economy

·       Support and grow a diverse economy that’s resilient to downturns – find our niche within the regional economy

·       Adapting to the economic cost of climate change e.g. on infrastructure, how and where we build, location of business and residential developments

·       How can we help develop and work with the Māori economy?

 

Population

·      By 2030 the population is projected to be120, 000. By 2043 it is expected to be between 124,000 and 130,000.

·      Smaller households and ageing population.

·      Increasing diversity and acknowledgement of diversity

·      Designing the city to enable the delivery of the required housing supply, ensure neighbourhoods have the amenities their population needs – connected neighbourhoods

·      Ensure we can provide opportunities to retain our younger population – more choice in employment/housing

·      Acknowledging and responding to diversity in the way we work and encourage civic participation

 


 

Local

Impact/need

Social

·      Poverty and entrenched areas of economic and social needs

 

·      Homelessness and housing hardship –

lack of suitable housing supply

 

·      Loneliness and social isolation

 

·     People struggle to feed their families, pay for housing, and beyond the direct cost to individuals and whānau there’s a cost to the city and an impact on what we want the city to be.

·     Increasing housing supply along the continuum and market intervention to help people access affordable homes

·     How do we enable communities to exercise tino rangatiratanga and thrive?

Environmental

•     The threat of climate change

 

•     Threats to biodiversity

 

•     Intensified land use and demand on resources

 

•     Greater iwi involvement on environmental issues

 

•   Adapting to climate change and the impact on transport, infrastructure, and planning.

 

•   Growing pressures on local government finance as we try to deal with these issues

•   Resource demands – consider user pays methods of managing demand

•   Partnerships to protect biodiversity

 

Technological

•     Changing community preferences

•     Electric vehicles, autonomous vehicles, robotics and AI

•     Big data, open data and transparency

 

•   Impact on communication channels, jobs and required employee capabilities, transport and other infrastructure

•   Enabling analytical and data management capability

•   The digital divide

 

 

Relationship with Mana Whenua and Māori

 

14.   Strengthening the relationship with mana whenua is a priority. Partnership and joint working with mana whenua and Māori is being strongly encouraged by central government and provides an opportunity to explore innovative new responses to our communities’ needs and aspirations. In terms of the City Plan the intention is for Council and mana whenua to work in partnership and subsequently involve, and engage with, other stakeholders.

 

Population

 

15.   Population growth in Lower Hutt was low for several years prior to, during, and after the 2008 global financial crisis. In response, Council developed the Urban Growth Strategy in 2011-12.

16.   Population growth in the city has increased considerably since 2013 with an average growth rate of 1.6% per annum since 2015. In the past 5 years Lower Hutt’s population has experienced growth from both net natural increase (births less deaths) and, net migration. The current population is 108,700 and is projected to reach 120,000 around 2030 and between 124,000 and 130,000 by 2043.  Council’s forecasts anticipate continued but slower growth. Population growth likely to continue over the next 20 years but rate of growth will slow over the period. Currently, we anticipate that the rate of growth begins to slow down from 2028. The projections take into account key trends, Statistics New Zealand assumptions, the analysis of multivariate data, and current residential and infrastructure developments.

 

17.   The population is ageing but not at the rates anticipated in 2013 as the households moving to Lower Hutt have a generally younger age profile.

 

Social

18.   Poverty means that households are struggling to feed their families, pay the rent and bills. Poverty and inequality undermine the aim of creating a city where people can thrive.

 

19.   Growing social housing register – the main register has increased 44% in the year since June 2019. There has been over a 1000% increase from the 51 households on the register in June 2015.  The main register for the city currently stands at 584 households. There are also 192 households on the transfer register. During the June 2020 quarter, 88% of the households are in severe housing need (category A). There is also a high level of need for emergency housing

 

Legislative context

 

20.   Government’s recent legislative programme spans a range of areas, including reforming the Resource Management Act and establishing Kāinga Ora as an urban development authority with sweeping powers introduced through the Urban Development Act. Additional borrowing powers have been introduced through the Infrastructure Funding and Financing Act. The Productivity Commission has undertaken a review of local government funding – with government’s further response to this still awaited, the Biosecurity Act, and the Climate Change Response (Zero Carbon) Amendment Act 2019.

 

21.   Government is demanding an increasingly joined up approach at regional level, particularly in relation to housing, urban development, and approaches to infrastructure and transport funding. The Wellington Regional Growth Framework (WRGF) and spatial plan is a key response in this respect.

22.   The WRGF is an opportunity to progress development as part of a Wellington region-wide initiative with central government and other key stakeholders. The purpose of the Plan is to provide a long range blueprint that details the investment required over the next 30 years to ensure the future success and improve the quality of life in the Wellington region. A key purpose of the WRGF is to enable the region to collectively have a conversation with central government about the region’s long term growth opportunities and constraints and identify new partnership models to achieve desired outcomes.

 

23.   With the increasing demands placed on local government in terms of addressing resource management, housing supply and urban renewal, and environmental protection, the local government funding framework is a key problem because of the reliance of many councils, including Hutt City Council, on rates as the key source of income. 

24.   There is more joint working with mana whenua and iwi and the potential for further work in terms of housing development, environment, and water. The recent housing agreement between Te Rūnanga o Te Ātiawa, Kahungunu Whānau Services, Hutt City Council and Urban Plus Ltd, focuses on creating pathways to the development of healthy, secure, affordable homes in Lower Hutt Te Awa Kairangi which reflect and are informed by te ao Māori values and practices. The agreement demonstrates the strengthening partnership between Council and mana whenua, and indicates the direction for the partnership in future.

Economic

25.   Economic growth in Lower Hutt City averaged 0.9%pa over the last 10 years compared with an average of 2.5%pa in the national economy.  Mean annual earnings in Lower Hutt City was $60,169 in the year to March 2019 and is lower than the New Zealand mean of $62,774. Mean earnings in Lower Hutt City increased by 2.9% over the year to March 2019 compared with an increase of 3.8% in New Zealand.

26.   During 2019, there were 17,052 jobs in Lower Hutt City's knowledge intensive industries. At 33.9% of total employment, this was higher than in New Zealand (31.7%).  There has been recent positive growth in businesses in the city although it is unclear how Covid-19 might affect that growth.  Early indications show that the Lower Hutt economy is demonstrating resilience to the shocks it has faced in 2020. Overall, because of its diversity, the economy has fared reasonably well and helped us to weather the worst effects of the Covid-19 level 2, 3 and 4 lockdown restrictions.

27.   The city needs to find its niche within the regional economy with competition, primarily from Wellington, on the doorstep. Lower Hutt has a hub of medium and high-technology industries. However, although it is in a good location for these industries, with Callaghan based locally, the sector has not grown markedly in the last few years.  Our economy will be even more resilient and able to offer higher quality employment opportunities if this sector grows. Government also focusses on supporting high-value and knowledge-intensive industries as well as increased residential construction to ease housing supply issues, and improving transport connections.

28.   The region has a vibrant Māori economy. Māori businesses have a particularly strong presence in film, technology and business services sectors while Māori owned entities have a key role in commercial, and social sectors, as well as being involved in housing development.[2]

Climate change

29.   Lower Hutt faces numerous environmental challenges, including coastal settlements at risk from sea level rise and flood-prone areas, increasing losses of biodiversity, issues of water quality, addressing food scarcity and managing our waste production and disposal effectively.

30.   The impacts of sea level rise, coastal erosion, and flooding will be most directly felt by those who live and work in the low-lying parts of the city. Other effects, including higher temperatures and an increase in the severity and frequency of rainfall and flooding will affect the city more broadly and impact on the provision of key services including roading, transport and infrastructure. These will, in turn, affect the functioning of the city and the well-being of our people.

31.   Council must meet these environmental challenges and transition to low emissions living while enabling the delivery of suitable homes and services for a growing population. Part of this transition will drive even greater intensification of developments.

32.   Mana whenua has specific values and interests attached to the natural environment and those values and interests should be reflected in decision-making in order for iwi to maintain their mana as kaitiaki of the natural environment.

Technology

33.   Technological changes bring both new employment opportunities and major changes in employment patterns and jobs. The Productivity Commission inquiry found that, although there will be disruption, technological development offers many opportunities for the future of employment, particularly by driving productivity.

34.   At a New Zealand level there will be a need for systems to protect people that are displaced e.g. better income smoothing. There will also be impacts on our infrastructure requirements – both transport and water.

35.   Wellington Water already utilises technology for real-time monitoring and control to increase their understanding of the water system and how it responds to different situations, and to help mitigate potential risks. This technology also presents an increased opportunity for demand management which are likely to become increasingly necessary as the effects of climate change begin to have greater impact.

36.   In the transport area, driverless cars are expected to become a key form of transportation in the future. This is likely to require significant infrastructure changes to road environment such as the installation of communication networks between the cars themselves, the roads, and traffic lights.

37.   Monitoring and analysis technology also enhance the capacity for better long term forecast of costs and investment options, this increases the capacity to strike a balance between cost (including asset replacement or renewal), level of service, and risk exposure.

38.   The increasing use of big data, cloud-based data storage, and data mining systems, continue to increase the ability to store and share data, and create new information. Improved data analysis tools will help Council gain a better understanding of our environment in the city and wider. As data and tools develop, the public will also have a greater expectation in relation to data availability and the potential to inform options and decisions.

39.   The way people communicate will continue to change rapidly. Council needs to stay ahead of changing communication patterns in order to deliver information in the way people want it. Closing the digital divide is vital to ensuring connectedness across population groups.

Discussion

LTP 2021-31 long term direction, key assumptions and priorities

 

40.  Agreeing the long term direction, key assumptions and priorities, is vital to the successful development of the City Plan and Long Term Plan 2021-31. These provide the rationale for key policies and plans such as the Financial Strategy, Development Contributions Policy the Revenue and Financing Policy, and Infrastructure Strategy.

41.  From the research, discussions with Council – at their retreat in November 2019, with the Corporate Leadership Team, as well as previous engagement with the community, Officers have developed the following directions, assumptions and priorities.

Table 4: Directions, assumptions, and priorities

Key direction/assumption

Priority

Strong mana whenua partnership

 

·       The relationship with mana whenua and Māori is essential for shaping the city across all four wellbeings.

Adapt and develop Council’s role to enable communities to shape and determine their future

·      Delivering a thriving city requires Council to challenge its own way of working, what it does and its priorities, in order to enable communities to exercise tino rangatiratanga and shape their own future.

Need to adapt to climate change and consider this across all business areas – it’s everyone’s responsibility

 

·       Take account of climate change in relation to where we live, how we’ll live, and how we’ll service communities. Protect and enhance environment and  biodiversity

Inequity will grow unless addressed

 

·       The city has entrenched areas of social need and poverty and inequality undermine the aim of creating a city where everyone can thrive.

Achieving our aims in a financially  sustainable way

·       Explore fair/equitable and sustainable means of paying for infrastructure and services, and ensure we are investing in services and development at the right time

Key direction/assumption

Priority

Population growth will be consistent with forecasts

 

·       Service demand will change as population changes, and pressure on housing will continue. The population is likely to continue becoming more diverse with smaller households.

Housing need and demand will continue to grow as will need for higher quality housing

 

·       Continue to grow housing supply and diversify the type of housing available. We need a focus along the housing continuum i.e. including dealing with housing hardship, affordability of rental and home ownership, and housing quality. We’ll also need to invest in the infrastructure required and creating places – connected neighbourhoods.

Significant investment is required in the water system 

 

·        Maintaining the quality of potable water and dealing effectively with storm and waste water, including the impact on the environment. Exploring ways of managing use/demand.

 

42.  In terms of direction, Council needs a strong relationship with mana whenua and Māori to develop its LTP and its longer-term plan. It also needs to examine and adapt its role to enable communities to shape and determine their futures.  The three key assumptions which we are proposing will underpin the development of the LTP and city plan are:

·    climate change – how will what we do line-up with the need to consider our impact on the environment?

·    equity – how will what we do help deliver equity? An active commitment to fairness, justice, and equality in the formulation of public policy, distribution of public services, and implementation of policy; and

·    financial sustainability – finding fair ways of paying for what we do.

 

43.  The directions, assumptions, and priorities are presented for discussion. Once agreed by Council, they will be used to underpin development of the 2021-2031 LTP and also the City Plan. Confirmation of the direction and assumptions will enable officers to continue with the reviews of strategies, policies, and plans required for the LTP, ensuring that the key directions, assumptions, and priorities are consistent across the business and support Council’s vision and strategic priorities.

Options

 

44.  Council can:

a.    agree to the proposed key directions, assumptions, and priorities; OR

b.    modify or change the key proposed directions, assumptions, and priorities.

Climate Change Impact and Considerations

 

45.  The matters addressed in this report have been considered in accordance with the process set out in Council’s Climate Change Considerations Guide.

46.  The report discusses the numerous environmental challenges faced by Lower Hutt, including coastal settlements at risk from sea level rise and flood-prone areas, loss of biodiversity, water quality, and managing our waste production and disposal more effectively. 

 

47.  Addressing climate change is a key assumption with a focus on planning for where and how we will live. Mana whenua, as kaitiaki, have a key interest in protecting the environment. 

Consultation

48.  Officers are developing the approach to engagement on the 2021-31 LTP and this will be discussed with the LTP/Annual Plan Subcommittee and Council in late September.

Legal Considerations

49.  Confirmation of the key assumptions and underlying assumptions/strategic priorities will mean that all relevant strategies, policies and plans that make up the Long Term Plan will be based on them as will business and activity plans achieve alignment across the business supporting the achievement of council’s longer term vision and strategic priorities.

Financial Considerations

50.  This paper does not have any direct financial impacts. The Long-Term Plan 2021-2031 Financial Aspects paper, on the agenda provides detail on financial aspects of the LTP.

Appendices

There are no appendices for this report.   

 

 

 

 

 

Author: Wendy Moore

Head of Strategy and Planning

 

 

 

Author: John Pritchard

Principal Policy Advisor

 

 

 

 

 

 

Approved By: Anna Welanyk

Director Transformation and Resources

 


                                                                                      43                                                24 September 2020

Long Term Plan/Annual Plan Subcommittee

11 September 2020

 

 

 

File: (20/988)

 

 

 

 

Report no: LTPAP2020/5/212

 

Long Term Plan 2021-2031, Financial aspects

 

Purpose of Report

1.    The purpose of this report is to progress initial finance related matters in relation to the Draft LTP 2021-2031.

Recommendations

That the Subcommittee recommends that Council:

(i)        agrees the high level plan as detailed in table 2 outlined in the officer’s report;

(ii)       endorses the proposed Financial Strategy principles to be included in the Draft LTP 2021-2031;

(iii)      agrees the proposed changes to the LTP activity structure as detailed in Section D of the officer’s report;

(iv)      agrees the proposed LTP revenue assumptions as detailed in the Section E of the officer’s report;

(v)       agrees the proposed LTP operating and capital expenditure assumptions as detailed in Section F of the officer’s report;

(vi)      agrees the proposed change to the debt to revenue limit to be included in the LTP, as detailed in the officer’s report in table 8;

(vii)     considers the budget matters as detailed in table 9 of the officer’s report and provides direction to officers in the preparation of the Draft LTP 2021-2031;

(viii)    considers any further direction and guidance to be provided to officers ahead of preparation of the draft LTP 2021-2031.

 

Acronyms:

AP - Annual Plan 2020/21

DLTP – Draft Long Term Plan 2021-2031

FLTP – Final Long Term Plan 2021-2031

CD – Consultation document

Capex – capital expenditure

Opex – operating expenditure

LGA – Local Government Act 2002

RFP - Revenue and Financing Policy

 

Section A – Background Annual Plan 2020/21

2.    In light of the unprecedented situation as a result of Covid-19, Council developed an “emergency budget” Annual Plan for 2020/21. The focus of this plan was on ensuring that investment in essential services continue with 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. The budget for 2020/21 included some tough choices to achieve $3 million of operational savings to help us “get through.

3.    We were progressing plans to consult on significant changes to the LTP 2018-2028. This included long term investment choices for Three Waters, Naenae Pool and fitness centre development, Cycleways and Cross Valley Transport Connections, together with proposed changes to funding solutions. The LTP amendment was put on hold as a result of Covid-19, with a plan to progress decisions further through the development of the Long Term Plan 2021-2031

4.    Table 1 provides a high level summary of the financial outlook when the Annual Plan 2020/21 (AP) was adopted, with a comparison to the LTP 2018-2028. The AP projected a deficit of $9.7M compared to the surplus projected in the LTP of $4M.  The AP included unbudgeted or higher than anticipated costs for range of matters which included Three Waters repairs and renewals, depreciation and insurance, the review of the District Plan, preparatory work for Naenae Pool, our homelessness strategy and the development stimulus package.

 

 

 

 

 

 

 

 

 

 

Table 1: Summary comparison of LTP 2018-2028 and Annual Plan 2020/21

 

Net surplus or deficit 2020/21

Balanced budget

Projected net debt

Debt to revenue ratio limits

Annual Plan 2020/21

Deficit $9.7M

Not achieved until 2027/28

Peak debt of $423M in 2030/31. Debt to revenue limits exceeded from 2022/23.

LTP year 3,  2020/21

Surplus $4.4M*

Achieved in 2020/21*

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

*Note range of risks and new cost pressures have eventuated, such as Three Waters  & Naenae Pool.

5.    The projected debt levels in the AP are significantly higher than previously projected in the LTP 2018-2028 and show the Financial Strategy debt limits being exceeded from 2022/23 onwards. In the context of a growing city, the financial challenges faced in the next LTP are significant to find sustainable solutions where there is sufficient revenue to match the costs of delivering services, and borrowing levels are maintained at affordable levels.

Section B – High-level plan for LTP 2021-2031 (LTP)

6.    The Council is required to prepare a LTP every three years. The preparation of the LTP draws upon a wide array of information, both on the current state of affairs within the local community and future expectations and intentions.

7.    Preparation of the LTP involves the review and consideration by Council of a number of strategies, policies, activities and related information. Table 2 provides a summary of the process completed to-date with the next stages and timing.  

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 2: High-level plan

Activity

Date

Status

Officers progress initial planning and preparation

July to August 2020

Complete

Waste Services Review -  LTP amendment  decision of Council

15 Sept 2020

Complete

Council endorsement of high level plan and key assumptions. Progress initial decisions on strategic direction and key policies (e.g. Development contributions policy, Revenue and Financing policy).

24 Sept 2020

 

Today

Further progress decisions on strategic direction and policies. Present findings of base budget review, including cost pressures and funding options.

27 Oct 2020

 

 

 

 

 

 

Not started

 

Relevant policy reviews completed and approved for consultation. Key decisions progressed to inform Draft LTP (DLTP).

30 Nov 2020

DLTP  and draft CD approved

Late Jan 2021

DLTP and CD audited (six weeks)

Feb 2021

Council adopt CD for public engagement

Mar 2021

Public consultation

April 2021

Hearing of submissions and related advice

May 2021

Council meets to make final decisions

June 2021

Council adopts the LTP and sets the rates

30 June 2021

 


 

Section C – Strategic financial context

8.    Council’s total assets are worth $1.6B and include infrastructure assets, land and buildings; whilst total liabilities are lower at $0.3B and include borrowings and payables to suppliers. The Annual Plan 2020/21 includes capital investment plans for the year of $81M, which comprises $24.6M to replace existing assets, $43.7M to improve the level of service and $12.3M to meet additional demand for services.

9.    The AP comprises income of $178.5M and operating expenditure of $188.2M, with a net deficit of $9.7M budgeted. These budgets fund the wide range of services delivered by Council and cover the cost of asset maintenance.

10.  Council’s Financial Strategy promotes the sustainable funding of services and is based on the key principles of:

-     affordability of rates,

-     delivering services effectively and efficiently

-     achieving intergenerational equity by spreading the costs between both present and future ratepayers

-     maintaining prudent debt levels

-     strengthening Council’s financial position.

These principles provide the foundation to drive towards sustainable financial management.

11.  As part of the development of the LTP amendment in early 2020, Council’s Financial Strategy was reviewed and a number of changes were proposed. As a result of Covid-19 lockdown the amendment was not progressed. The review of the Financial Strategy is being further progressed through DLTP.

12.  The principles that follow were developed as part of the LTP amendment and were included in the Annual Plan 2020/21 (Refer Appendix 1). Officers propose that these principles are retained in line with previous Council decisions. Officers also recommend three additions to these principles: 

-  The first principle relates to ensuring financial decisions consider environmental sustainability.

- The second principle relates to the funding of growth and aligns with the broader strategic focus of a growing city and the Development Contributions Policy.

- The third principle relates to the distribution of benefits for the activities and services delivered by Council, and the related funding allocations. The Revenue and Financing Policy provides further detail related to this principle.

Council is requested to endorse these principles for inclusion in the DLTP. The three new principles have been highlighted for easy reference. 

Principles for the LTP 2021-2031

 

1. That the financial strategy enables Council’s contribution to the vision for Lower Hutt.

2. Fairness and equity

The funding of expenditure is equitable across both present and future ratepayers.

a)   Intergenerational equity – the cost of long term assets should be met by ratepayers over the life of that asset. This is reflected by debt funding new assets and funding the replacement or renewal of assets from rates.

b)   Balanced budget – projected operating revenue over the lifetime of the LTP is set at a level sufficient to meet projected operating expenses, ensuring that current ratepayers are contributing an appropriate amount towards the cost of the services they receive or are able to access, i.e. ‘everyday costs are paid for from everyday income’.

3. Prudent sustainable financial management – budgets are managed prudently and in the best interests of the city in the long term. Debt must be maintained at prudent levels and be affordable.

4. Ability to pay (affordability) – affordability is an important consideration as it ensures that the ability of our diverse community to pay rates is transparently considered as part of the decision-making process. Consideration will be given at both the macro level (i.e. generally affordable to most) and also at the micro level (i.e. for a specific individual where rates rebates, remissions or postponement policies may be required).

5. Value for money – any proposals must contribute to the strategic outcomes agreed with the community and the total cost must be reasonable. The cost effectiveness of the funding mechanism must be considered.

6. Prioritisation of investment choices – careful consideration is given to investment choices and options, with priority given to core infrastructure investment and ‘invest to save’ options.

7. Environmental sustainability - Funding decisions will consider community outcomes being sought, including wider environmental and climate change impacts.

8. Distribution of benefits – consideration is given to the distribution of the benefits from Council activities over identifiable parts of the community, the whole community or individuals (users). Where there are identifiable direct benefits the proportion of costs associated with these benefits should be covered by the user(s).

9. Growth pays for growth – the capital costs incurred to develop infrastructure that supports growth within the city should be primarily covered by those causing the growth and increasing the demand on Council infrastructure.

10. Good financial governance and stewardship

Good stewardship of Council’s assets and finances requires Council to ensure that its actions now do not compromise the ability of future councils to fund future community needs. Under this principle:

a) Assets must be maintained at least at current service levels to avoid placing a financial burden on future generations.

b) Debt must not be used to fund operating expenditure other than in specific exceptional circumstances.

c) The level of debt is regularly reviewed to ensure that it is at a level that will not restrict a future council’s ability to fund new assets through debt.

d) The consequential operational expenditure implications of capital expenditure decisions are considered.

 


 

Section D – Proposed changes to the LTP activity structure

13.  The purpose of local government is, among other things, to promote the social, economic, environmental and cultural well-being of the community in the present and for the future.

14.  The rationale for service delivery (the why council delivers this service) acts as a link between Council’s strategic direction, and its actual choice of activities. How we group activities and then define individual activities have implications for:

·    Transparency and accessibility of the LTP to our community

·    The level of detail disclosed in the LTP

·    The financial and planning information systems supporting the LTP

15.  The current LTP 2018-2028 activity framework does not reflect key changes relating to the wellbeing framework for local government and there is an opportunity to improve the transparency in the “integrated community services” area.  The  grouping of activities is a critical level as this is the level at which plans are set for the LTP and will inform future performance monitoring through the Annual Report. 

16.  The Corporate Leadership team has undertaken a review of Council’s activity structure and has attached a new proposed structure for Council consideration – refer Appendix 2.

 


 

Section E – LTP 2021-2031, revenue overview and key assumptions

17.  The initial stage of the DLTP process includes a review and update of the base budget assumptions and parameters. The purpose of the content that follows is to review these base assumptions and parameters and ensure Council is supportive of the proposed approaches in each area.

Income

18.  The key components of Council income of $178.5M in the Annual Plan 2020/21 are rates funding $113M (63%) and user charges (e.g. building consents fees) $39.9M (22%), together with other revenue and capital contributions (e.g. NZTA funding). 

Graph 1: HCC sources of income, Annual Plan 2020/21


 

Part 1- Rates revenue

19.  National context

A comparison of the 2018-2028 Long Term Plans for peer local authorities shows Hutt City Council (HCC) rates increases as significantly lower than peers. Whilst HCC has a 38% average rates increase over ten years, the average of all peers is 62%.

Graph 2: Comparison of Councils 10 years rates increases from last LTP

Source of data: LGFA

20. The Productivity Commission Report ‘Local government funding and financing’ published in late 2019 showed the average yearly rates per person by council from 2000 to 2018. HCC was second to lowest across all these councils.  

Graph 3: Average yearly growth in rates per person, 2000 to 2018


 

Balanced budget requirement and financial prudence

21.  In determining the rates revenue requirements for the LTP 2021-2031, the legislative requirements related to a balanced budget and financial prudence are fundamental considerations.

22.  Section 101 of the LGA requires all local authorities to “manage its revenues, expenses, assets, liabilities, investments, and general financial dealings prudently and in a manner that promotes the current and future interests of the community.”

23.  Section 100 subsection 1 of the LGA states:

A local authority must ensure that each year’s projected operating revenues are set at a level sufficient to meet that year’s projected operating expenses.

Section 100, then goes on to say:

2) Despite subsection (1), a local authority may set projected operating revenues at a different level from that required by that subsection if the local authority resolves that it is financially prudent to do so, having regard to—

(a) the estimated expenses of achieving and maintaining the predicted levels of service provision set out in the long-term plan, including the estimated expenses associated with maintaining the service capacity and integrity of assets throughout their useful life; and

(b) the projected revenue available to fund the estimated expenses associated with maintaining the service capacity and integrity of assets throughout their useful life; and

(c) the equitable allocation of responsibility for funding the provision and maintenance of assets and facilities throughout their useful life; and

(d) the funding and financial policies adopted under section 102.

24.  There is a legislative requirement for all Councils to report on the “Balanced Budget benchmark” as part of the LTP and Annual Report. In simple terms this benchmark is an indicator as to whether Council operating revenues match/balance with operating expenditure levels.  Graph 4 shows the average result over the last five years. HCC results are below the target level and are comparatively low compared to peers. A key reason for this is the limited revenue growth to match increasing operating expenditure.


 

Graph 4: Balanced budget from Annual reports – average over 5 years

Source of data: LGFA

25.  At the time of preparation of the Council’s LTP amendment pre-Covid and the AP, the Council was carefully considering the long term balanced budget projection, alongside both debt projections and rating revenue.  

26.  Graph 5 provides the projected balanced budget position at 30 June 2020 when the AP was adopted.  This shows a balanced budget position is not achieved for many years until 2027/28.  As part of the DLTP, officers will provide advice with an aim to improve this position.  

Graph 5: Projected balanced budget target, as at Annual Plan 2020/21

Note: Graph X 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.

27.  Rates revenue budgets in the LTP

There are two key base assumptions which need to be established as part of the rates revenue requirements.

28.  Estimated average growth in the rating base (i.e. growth in rateable property in the city).

Rates income is expected to be received from growth in the rating base as a result of new builds and property investment.  This will increase the net rates revenue earned without impacting on existing ratepayers. The proposed base assumption for the DLTP is shown in table 3. This has been aligned to the broader growth projections of the DLTP which take into account known developments and plan changes. As the LTP is developed over the period up to June 2021, this growth assumption will be adjusted to reflect latest information available, particularly in the short-term.

Table 3: Proposed assumption for rates revenue from growth in rating base

 

2021/22

2022/23

2023/24

2024/25

2025/26

2026-2031

Growth in rating base

1.1%

1.1%

1.1%

1.1%

1.1%

1.1%

 

29.  Inflation - The published BERL Local Government Cost Index for New Zealand (LGCI) is applied. This is standard practice across New Zealand Councils. Table 4 shows the published BERL projections from 2019. The next publication by BERL is expected in October 2020 and the HCC assumptions can be updated at that point. This component of the rates revenue adjustment reflects the inflationary cost increase for Council’s core services – for example roading and parks maintenance inflationary cost increases. 

Table 4: Proposed assumption for rates revenue increase for inflation

 

2021/22

2022/23

2023/24

2024/25

2025/26

2026-2031

Rates increase for inflation (BERL LGCI 2019)

2.2%

2.2%

2.3%

2.3%

2.47%

2.47%

 

30. Other changes to the rates increase will be determined later in the DLTP process after assessing the balanced budget requirement, together with Council decisions about investment priorities, cost pressures and other revenue decisions.     

Changes to refuse and recycling services will also impact on the rates revenue requirements in the LTP.  The targeted rate for recycling is estimated to cost $105 per residential property, an increase of $65 from the charge in 2020/21.  The targeted rate for the refuse/rubbish collection service is estimated to cost $144 per residential property (assuming 120 litre bin). There are offsets for the households as the purchase of rubbish bags or commercial operator fees are no longer required, and in many cases result in a net cost savings to households.     

Table 5 provides an initial view of the key components of the rates revenue increase, with further decisions to be progressed through the DLTP. 

Table 5: Initial indicative summary of rates revenue changes

 

2021/22

2022/23

2023/24

2024/25

2025/26

2026-2031

Rates increase for inflation 

(BERL LGCI 2019)

2.2%

2.2%

2.3%

2.3%

2.47%

2.47%

Balanced budget requirement – based on the LTP amendment decisions from March 2020, to be reviewed through LTP 2021-2031

4.1%

1.6%

1.6%

 

 

 

Further Three Waters investment

To be determined


Part 2 – Development contributions revenue

31. National context

Development contributions (DCs) are charges levied on developers under the LGA to recover the portion of new infrastructure that is related to growth. Developers can be charged for the capital costs of connections to trunk infrastructure and for needed expansions to bulk infrastructure (water, wastewater, stormwater, roads and other transport), and for community infrastructure (such as neighbourhood halls, reserves, playgrounds and public toilets).

32. The Productivity Commission Report ‘Local government funding and financing’ report includes reference to a study of four high growth councils in NZ (Auckland, Tauranga, Hamilton and Queenstown Lakes). Figure 6.4 from this report shows the quantum and trend of revenue from 2007 to 2017. This is clearly an important revenue source for these councils.

 HCC Development contributions revenue

33. Whilst Council has a DC policy, historically revenue has been very minor. For 2019/20 total revenue from DCs was $0.8M (prior year $0.6M).

34. Council’s DC policy is the subject of a separate report in this agenda. The report seeks agreement in principle that “100% of the capital cost of providing growth related infrastructure for water, wastewater, transport and stormwater are funded by development contributions”. This aligns with the principle from the Financial Strategy that “Growth pays for growth – the capital costs incurred to develop infrastructure that supports growth within the city should be primarily covered by those causing the growth and increasing the demand on Council infrastructure.”

35. As Council progresses decisions on the DC policy and growth related capital investment, officers will prepare modelling to better understand the DC funding impacts. Further advice will be presented to Council as the DLTP is progressed. Given the growth projections for the city and the infrastructure costs to service that growth, there will be an opportunity to utilise DCs as a funding source into the future. 

Part 3 - Other revenue

36. For the LTP the revenue budgets for 2020/21 will be used as a starting point and adjusted for known price and volume changes (for example resource consents and building consents).

37. In the Annual Plan 2020/21 there were some changes to fees and charges (largely inflationary adjustments). A full review of fees and charges is underway as part of the development of the LTP. This review is being done in conjunction with the Revenue and Financing Policy review.

38. As a starting assumption for the DLTP, officers propose that all fees and charges will be adjusted to reflect inflationary increases annually to provide an offset to expected increases in the cost of service delivery. This will ensure that revenue received will maintain pace with rising costs of activities. There will be some exclusion, such as fees and charges set by bylaw or other legislative means.


 

Section G – Operating and capital expenditure budget process and assumptions

39. There are a range of cost pressures facing Council for both existing services and assets (such as contractual cost escalations), as well as for new funding and investment needs.  Some examples of cost pressures include additional funding requirements for Three Waters and transport infrastructure.

40. A range of financial risks were identified in the preparation of the AP. The impact of Covid-19 is a key risk that continues, with impacts on revenue continuing and Council continuing to prioritise work programmes in response to the impacts. Other financial risks identified which have not been budgeted include: the Events Centre and hotel development, Fraser Park Sportsville, living wage for contractors and the climate change response amongst others. In the preparation of the DLTP, officers will provide advice to Council to support decisions on these and other risks.    

41. Base budget review

Image 1: What are rates spent on?

 

42. During the AP process, a commitment was made to complete a base budget review as part of the LTP (Refer image 1, which summarises the cost of services delivered from rates funding). A detailed base budget review process is underway by the Corporate Leadership Team. The outcome of this will be reported to this Subcommittee on 27 October 2020, and decisions/direction sought ahead of DLTP activity management plans being developed. The information will indicate what money is spent on and what the options are to consider for the future; these include strategic priorities, service levels, fees and charges, capital investment choices and timing etc.

43. For the DLTP, the base budgets will be used as a starting point and adjusted for specific circumstances as detailed as follows:

-     Unavoidable increases (such as known rent reviews, contractual cost escalations and reviews, salary increases).

-     Known decreases (such as one-off items, items no longer required, known savings such as contract rate reductions).

-     Approved service level changes (such as recycling and rubbish).

-     Other justifiable changes approved.

44. The BERL inflation indicators will be applied to adjust for inflation cost increases across the ten years of the plan (Refer table 4).

45. Employee cost budgets: As part of the AP the assumed annual salary increase of 2.5% was reduced to 0%. Alongside this, there were overtime budgets removed, training budgets reduced and a vacancy assumption applied. Following union negotiations it was agreed that a 1.5% increase would be applied to eligible staff from January 2021 (with some exclusions).

46. Council’s remuneration advisors Strategic Pay complete staff salary surveys and provide advice on the likely market movement cost increases. The March 2020 data has forecasted movements for local government to be 2.1%, whilst market movements for private sector are 2.75% and public sector 2.3% with a combined general market rate of 2.5%. Council’s remuneration policy is to pay on average, market median. The framework is designed to ensure staff initially paid at the lower end of the salary range for a position can make progress towards the salary midpoint of that position and enables higher increases where required to address market pressures, for performance recognition, to retain key staff retention or other purposes.

47. Officers recommend an annual 2.5% assumed budget increase to employee costs for the LTP. This is expected to enable Council to meet market movement increases and to continue to pay the living wage and make other relativity related adjustments which come about as a result of the living wage rate. All vacant approved employee positions will be budgeted for although a vacancy assumption would continue to apply. Further advice will be provided to Council on employee matters following the preparation of activity management plans.

48. Project budgets will be updated to reflect latest information relating to projects, which will include likely timing and latest estimated costs of projects. Organisational capacity and capability to deliver the full work programme is also a critical consideration.

49. The Asset Management Plans (AMP) of Council provide detailed information about Council’s assets based on service levels set for each activity. These are being reviewed and updated as part of the LTP. This information will help inform LTP decisions, in particular in relation to capital renewal and maintenance budgets.

50. Interest cost of borrowings: Specialist treasury advice is being provided to inform the DLTP. Initial base interest rate assumptions for borrowings are proposed in table 6. This is based on information from Council’s treasury portfolio and market conditions.

51. Table 6: Proposed assumption for interest costs of borrowings

 

2021/22

2022/23

2023/24

2024/25

2025/26

2026-2031

Average interest cost

3.04%

2.94%

2.93%

2.91%

2.91%

2.54%

 

Part 2 - Capital investment plans

52.  Council has $1.6B of assets, mainly relating to core infrastructure of roads, Three Waters and solid waste. Council has a significant capital investment programme projected into the future which includes both renewal/replacement of existing assets together with the new assets to meet the needs of a growing city. Graph 5 provides the AP projected capital investment plans over the next ten years.

Graph 5: projected capital expenditure plans (LTP 2021-2031 decisions) 

53.  Our asset management plans identify the timing for renewals based on the condition of assets. An ongoing programme of condition assessment helps to build a detailed picture of assets. There are some activities where the asset condition information could be improved (e.g. council facilities) and there are related risks which need to be managed.

54.  When we look at our planned renewals and our forecast depreciation together, the annual depreciation can be considered a reasonable estimate of annual renewals’ cost. If over time, renewals expenditure is approximately equal to depreciation, it can be reasonably assumed that the assets and services that they are providing are sustainable.

55.  For Council the estimated cost of capital renewals is less than the forecast depreciation (refer Graph 6, from Annual Plan 2020/21). However with better asset information about the ageing assets (for example Three Waters) it is expected that the annual cost of renewals in the DLTP will be adjusted to be higher. Further advice will be provided to Council as we progress through the LTP.

56.  Graph 6: Comparison of projected depreciation and capital renewals (Annual Plan 2020/21)

57. Including depreciation in our operating expenses each year is a way of ensuring ratepayers pay their fair share, of the assets they use and benefit from – it ensures intergenerational equity.

58.  Capital delivery performance: There has been a history over the last few years of significant under delivery of capital expenditure plans, with a large number of projects experiencing delays for a range of reasons. In 2019/20 this was further compounded by Covid-19 and resulted in a 68% delivery of the programme. This has flow-on financial impacts, such as reduced debt.

59.  There will be the opportunity for Council to potentially stop, pause or delay projects where possible, or consider opportunities to review the level of service planned with the proposed programme. Council may have early direction or guidance for officers ahead of the preparation of these budgets and options. A $10M delay in capital expenditure for one year, results in lower debt and savings in interest costs of about $300k for the year the project is delayed.

Section H - Financial strategy, proposed changes to debt to revenue limit

60.  The capital programme was revised as part of the LTP amendment earlier this year. A proposed change to the debt to revenue limit was also developed as part of the LTP amendment. Graph 7 shows the projected debt to revenue ratio at the time of adopting the AP. 

Graph 7: Projected debt to revenue ratio

61.  The Local Government Funding Agency (LGFA) has a primary objective of optimising the debt funding terms and conditions for participating local authorities. This includes providing savings in annual interest costs, making longer-term borrowings available and enhancing the certainty of access to debt markets. HCC has been a shareholding council in LGFA since 2012.

62.  When councils borrow from LGFA they agree to comply with financial covenants. Table 7 provides a comparison of the LGFA covenants with the Hutt City Council financial strategy limits in the LTP 2018-2028. It is clear from this that Council’s financial strategy requirements are far more restrictive than the LGFA equivalents.

63.  Table 7: Comparison of LGFA and HCC

LGFA Financial covenant for Councils with external credit rating

HCC LTP 2018-2028

Net debt/total revenue

<300%

<150% in years 1 to 3, <130% in years 4 to 6,<110% in years 7 to 12, <90% in years 13 and beyond

Net interest/total revenue

<20%

<10%

Net interest/annual rates income

<25%

-

Liquidity

>110%

>110%

 

64. The Financial Strategies of Councils across New Zealand have a range of different debt to revenue constraints – refer graph 8. The LGFA debt to revenue limit was recently increased from 250% to 300%, with a plan to revise this down by 5% each year until it reaches 280%. Whilst some Councils set their self-imposed limits at the LGFA level of 250% (e.g. Porirua, Tauranga) most Councils are at 175% and above level. All the Councils have a flat line approach across all years of the LTP. HCC is the only Council with staggered levels across different years of the LTP.    

Graph 8: Comparison of peer Council’s debt to revenue limits   

 

65.  Given the current economic environment with low interest rates, it is proposed that in the DLTP Council revises the debt to revenue limit to a higher level whilst retaining the limits of net interest to revenue. Table 8 summarises the proposed change to the financial strategy debt to revenue limit. The proposed change aligns with the Financial Strategy guiding principles, in particular the intergenerational equity and prudent financial management principles. 

Table 8: Proposed changes to HCC Financial Strategy limits on borrowing

 

Current limit per LTP 2018-2028

Proposed limit for DLTP 2021-2031

Net debt/total revenue

<150% in years 1 to 3, <130% in years 4 to 6,<110% in years 7 to 12, <90% in years 13 and beyond

<200% for all years

Net interest/total revenue

<10%

<10%

66.  While the current financial strategy allows for debt levels to be 150% of revenue in years 1 to 3 of the plan, the lower debt limits in the outer years of the plan (130%, 110% and 90%), means the 150% limit cannot be utilised in years 1 to 3 unless there is a large planned reduction in the capital programme in the next three year period of the plan. As debt is repaid over the long term and not in short term, the staggered debt limits restricts Council’s ability to plan long term and effectively restricts debt down to the lower outer year debt limits.   

67.  As the DLTP is progressed the projected debt and revenue will be assessed in tandem to ensure there is sufficient revenue to fund capital investment plans whilst meeting financial prudence requirements.

68.  In the event of a “significant natural disaster” the 2018-2018 LTP allows for a revised maximum of 170% debt to revenue limit. It is recommended that a higher limit for a significant natural disaster is retained in Council’s revised financial strategy and that this is 20% higher than the proposed limit to be consulted on.  

69.  Council has a strong AA credit rating from Standard and Poors. Other Councils with the same rating include Wellington City Council, Dunedin City Council and Porirua City Council. There are a range of Councils with lower ratings such as Tauranga AA-, Christchurch City Council A+, Hamilton City Council AA- and Rotorua AA-.

The proposed change to Council’s debt to revenue limit is not expected to result in any change to Council‘s credit rating, particularly given that there are proposed increases in rates revenue to ensure affordability and progress to achieving a balanced budget in the medium term.  


 

Section I - Budget matters for consideration by Council

70. There are a range of projects and initiatives where there is new information now available. In order to progress the development of the DLTP Council is requested to consider each of these budget matters and provide direction to officers as to the approach to be taken.

 

Table 9: Budget matters requiring Council review and decisions

 

Brief description

Financial impact

Further information(Appendix 3)

1.

Naenae pool – central government funding

The capital cost of this project is estimated at $54M, of which central government “shovel ready” grant funding of $27M has been agreed.

Officers seek confirmation to adjust the DLTP budgets in line with the latest information for both capex and opex as detailed in the appendix.

Refer Attachment  A

2.

Eastern Bays Cycleway  update, including  central government funding

The latest cost estimate for this project is $30M with central government funding of $22.4M (being “shovel ready” funding $15M, NZTA $7.4M); this is an increase of $1.8M capex and $8M additional revenue. The timing of the works has also updated to reflect consenting and delivery plans.

Officers seek confirmation to adjust the DLTP budgets in line with this latest information.

Refer Attachment B

3.

Three Waters investment options

A separate report in this agenda details proposed options for the DLTP which include significant cost increases.

Refer LTPAP2020/5/206.

4.

Cross Valley Transport Connections Programme Business Case (CVTC)

Following the CVTC being reported to Council in July 2020 (refer HCC2020/4/24); Council resolved that the project report to the LTP subcommittee on this project.

Officers advice is to revise the cost estimate for CVTC to $160M capex with assumed NZTA funding of $81.6M; this is an increase of $40M capex and $20.4M revenue from previous estimates included in the AP.  Phasing of the works as proposed in the business case being stage 1 from 2021-2027, improvements around the Gracefield/ Wainuiomata Hill Road Interchange in Stage 2 from 2028 – 2031 and the bulk of the project in Stage 3 from 2029 onwards to align with other significant projects in the region that impact this project.

Officers seek confirmation to adjust the DLTP to align with the proposed CVTC programme business case with the budgets and timing as detailed in the appendix.

Refer Attachment  C

5.

Homelessness Prevention

Council agreed funding of $1.6M over the three year period from July 2019 (or $0.56M per annum).

The Homelessness update 2019/20 report was presented to the Policy, Finance and Strategy Committee on 7 September 2020 and reported on progress in the year since July 2019, including data from services. (PFSC2020/5/177). 

Officers recommend that this funding is extended into future years of the LTP - a proposed increase in operating expenditure of $0.56M p.a. in 2022/23 and future years.  

Refer Attachment D

6.

Wainuiomata Summer Pool – thermal cover for main outdoor pool

The project is an initiative in the Council’s internal energy and carbon reduction plan 2020-2024.  The project will realise cost savings in consumption of natural gas estimated at $16,000 per season and realise greenhouse gas emission reductions estimated at 56 tonnes per season.

The business case was not available at the time of the preparation of the AP.

Officers recommend that funding of $65k capex be approved for 2020/21, and that the DLTP be updated to reflect expected cost savings resulting from this investment.

Refer Attachment E

7.

Budget cuts from emergency budget Annual Plan 2020/21

In the preparation of the emergency Annual Plan there were a wide range of budget cuts. Officers are seeking confirmation that these budget cuts were intended to be permanent and not one-off for 2020/21 only. If these budget cuts are only one-off then this will impact on the rates funding requirements that are needed for the DLTP.  

Total operational savings of $0.73M p.a. (libraries $0.1M, pools $0.1M, parks $0.1M, museums $50k, events $0.18M, Regional Amenities fund $0.2M). 

Officers recommend that these savings are assumed to be permanent budget reductions for the DLTP in order to reduce the rates funding requirements. Following the preparation of the activity management plans there will be further advice provided.  

Refer Attachment F

8.

Akatarawa Cemetery Extension

Capital contribution towards extension of shared cemetery at Akatarawa. Additional funding of $0.3M capex sought (total costs $2.55M). Project brought forward by two years to 2022-2025.

Officers recommend these changes.  

Refer Attachment G

 

Climate Change Impact and Considerations

34.  The matters addressed in this report have been considered in accordance with the process set out in Council’s Climate Change Considerations Guide.  There are no direct climate change impacts or considerations arising from this report other than those identified within the report.

Legal Considerations

71. The most relevant legislation includes the Local Government Act 2002, Local Government (Rating) Act 2002 and the Rating Valuations Act 1998. 

Financial Considerations

72. There are no further financial considerations apart from those detailed in the report.

Appendices

No.

Title

Page

1

Appendix 1 : Annual Plan 2020/2021 -extract of financial strategy

44

2

Appendix 2 - Proposed new Activity Structure for the LTP 2021-2031, showing comparison to previous structure used for the LTP 2018-2028

46

3

Appendix 3 : Detail project information to support decisions

48

    

 

 Author: Daniel Koenders

Manager Financial Strategy & Planning

 

 

Reviewed By: Jenny Livschitz

Chief Financial Officer

 

Reviewed By: Anna Welanyk

Director Transformation and Resources

 

Approved By: Jo Miller

Chief Executive  


Attachment 1

Appendix 1 : Annual Plan 2020/2021 -extract of financial strategy

 


 


Attachment 2

Appendix 2 - Proposed new Activity Structure for the LTP 2021-2031, showing comparison to previous structure used for the LTP 2018-2028

 

 

Theme

Group of Business Unit Activities

Activities

Economic wellbeing

Transport

Roading and traffic assets

Roading Maintenance & Infrastructure contracts

Road safety services

Parking enforcement services

Active modes

Water supply

Water supply

Wastewater

Wastewater

Stormwater

Stormwater

Solid Waste

Disposal / Landfills

Refuse services

Recycling services

City development

Urban Design

Business support and city growth

Housing

District Plan

Social and cultural wellbeing

Community partnering and support

Community funding, Community hubs, Community Partnerships

Open Spaces, Parks and Reserves

Open spaces, Parks and reserves

Connectivity, creativity, learning, and recreation

Libraries

Recreation Programmes

Swimming pools and fitness

Art and Museums

Promotions & Events

Environmental wellbeing

Regulatory services

Building consents

Resource consents

Public health

Animal control

Sustainability and resilience

Climate change, Biodiversity, Emergency management

Governance , strategy and partnerships

City governance

Democratic services

Mana whenua

Community Funding Panels, Community of interest Panels

 LTP 2021-2031 – Proposed new Group of Activity structure

 


 

LTP 2018-2028 – Current Group of Activity Structure

Group of Business Unit Activities

Activities

Roads & Accessways

Roading and traffic assets

Roading Maintenance & Infrastructure contracts

Road safety services

Parking enforcement services

Active modes

Water Supply

Water supply

Wastewater

Wastewater

Stormwater

Stormwater

Solid Waste

Disposal / Landfills

Refuse services

Recycling services

City Development

Business support and city growth

Promotions & Events

City Environment

Urban Design

Promotions & Events

District Plan

Parks & Reserves

Open spaces, parks and reserves

Integrated Community Services

Libraries

Recreation Programmes

Swimming pools and fitness

Art and Museums

Community funding, Community hubs, Community partnerships

Community Facilities Development

Facilities Development, community hubs

Consent & Regulatory Services

Animal control

Public health

Building consents

City Resilience

Climate change, Biodiversity, Emergency management

City Governance

Democratic Services

 


Attachment 3

Appendix 3 : Detail project information to support decisions

 

 

Appendix 2:  Akatarawa Cemetery Extension

1.

Project/

initiative

Capital contribution towards extension of shared cemetery at Akatarawa

2.

LTP Activity

Social and Cultural Wellbeing

Open Spaces

Parks and Reserves

3.

Business lead

Marcus Sherwood

Andrea Blackshaw

 

4.

Brief project description

(problem/opportunity statement)

With Taita Cemetery at capacity and no longer accepting new interments Hutt City Council entered a shared service agreement with Upper Hutt City Council in regards to provision of services at Akatarawa Cemetery.

 

The shared cemetery including built assets is co-owned by both Councils with operations undertaken by Upper Hutt City Council. Hutt City Council’s share of operating costs and new capital developments is around 75%.

 

Based on current burial rates the capacity at Akatarawa Cemetery is estimated to be six years before additional land is required.

 

Hutt City Council has currently budgeted $2.25M in capital costs to further develop the site commencing from 2024/25 however with significant population growth projected for both cities, and risks associated with pandemics, Upper Hutt City Council has now planned for this development to occur earlier. Capital costs have also been revised for the project.

 

Officers are recommending that HCC capital contributions be aligned with Upper Hutt City Council expenditure increasing budget allocations by $300k and bringing forward funding by two years to 2022 – 2025.

5.

Strategic alignment and desired outcomes sought

Cemeteries provide services for the Social and Cultural wellbeing of communities.

 

 

 

 

 

 

 

 

6.

Community engagement

Hutt Valley Services committee and Upper Hutt City Council have considered this issue.

 

No community consultation or engagement is required at the detailed construction design or consent stage, however the allocation of segregated areas for cultural or ethnic groups would need to occur once the cemetery infrastructure has been developed.

 

 

 

 

 

 

 

7.

Overview of project costs and funding source (refer tables below)

Total estimated project cost of $3.4M of which HCC would contribute around 75% or $2.55M.

 

This would be by way of a capital contribution over the proposed 3 years of the project as Upper Hutt City Council would manage the project.

 

 

 

 

 

 

 

 

8.

Risks and mitigation plans

 

None at this stage.

 

 

 

 

 

9.

Annual Plan/LTP key assumptions

 

HCC co-owns the development and therefore this is a capital contribution and treated as an owned asset.

 

 

 

 

 

Further budget information

Table 1: Operating budgets

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

 

 

 

 

 

 

 

LTP 2021-2031

 

 

 

 

 

 

 

Variance

 

 

 

 

 

 

 

 

Table 1: Capital budgets

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

 

 

 

 

0.75M

1.5M

2.25M

LTP 2021-2031

 

 

0.84M

0.85M

0.85M

 

2.55M

Variance

 

 

 

 

 

 

 


 

Further detailed content on specific budget matters follows. Below is a summary of the contents of this attachment:

Attachment A: Naenae Pool

Attachment B: Active Transport – Cycleways projects

Attachment C: Cross Valley Transport Connections Project

Attachment D: Homelessness Prevention

Attachment E: Wainuiomata Summer Pool – Main Pool Covers

Attachment F: Budget cuts from emergency budget Annual Plan2020/21

 

 


 

Attachment A: Naenae Pool

1.

Project/ initiative

Naenae Pool + Fitness New Build

2.

LTP Activity

Social and Cultural  Wellbeing

Connectivity, creativity, learning and recreation

Swimming Pools and Fitness

3.

Business lead

Marcus Sherwood, Head of Parks and Recreation

Andrea Blackshaw, Director Neighbourhoods and Communities

4.

Brief project description

(problem/opportunity statement)

Naenae Pool closed in April 2019 due to earthquake concerns.  This had a significant impact on both the local community and pool users from across the region.   For the Naenae community, the pool was a focal point and ‘the’ place to gather, particularly for tamariki and rangatahi. It also provided local access to many programmes and services, including learn to swim, water safety, recreational swimming, school holiday programmes and gym services.

As well as being a valued community asset, Naenae Pool was also a significant regional aquatic facility. Two thirds of pool users came from across the wider Wellington region to take part in aquatic sports and activities. The Pool also generated a lot of foot traffic in the town centre, so made a significant contribution to the local economy.

This project is to return a pool that responds to the needs and ambitions of pool users, the wider city and the Naenae Community as detailed in the Voice of the Community Report.

5.

Strategic alignment and desired outcomes sought

Leisure and Wellbeing Strategy – the project assists meeting the outcomes for the people of Naenae and the wider city in their physical, educational and mental wellbeing.

New Zealand is a country which is surrounded by water and where most people live within a 30min drive of a beach or lake and therefore it is no surprise that New Zealanders like to spend so much time in and around the water.  Our love affair of the water however has a downside with drowning being the third highest cause of accidental death in this country.  The importance therefore of learning to swim and survive at a young age and building a lifetime appreciation of the water can not be understated.

 

As the largest providers of aquatic facilites in the country, Local Council’s have a major role to play in ensuring our children are water safe. Council ownership allows the burden of cost of these facilities to be shared between ratepayers and users making them accessible to all.

 

The Swimming Pool Strategy 2006 states that; the priority is to have accessible and high quality leisure activities and facilities, and to increase awareness of, and participation in, recreational activities.

 

Swimming Pool facilities will:

·      provide a range of activities to engage and support all sectors of the community to increase participation in aquatic activity,

·      be accessible and affordable to all communities and users,

·      and be of good quality.

 

Swimming Pools contribute to the physical, social and cultural wellbeing of individuals and communities.

 

6.

Community engagement

Naenae Voice of the Community Project, Pool user survey (2,800 respondents), Stakeholder workshops, Community feedback on voice of the community report

7.

Overview of project costs and funding source (refer tables below)

High level Quantity Surveyor estimate of a new pool is $54M including inflation, with $27M being funded from Central Government as part of the “shovel ready” support, and the balance ($27M) proposed to be funded by Council borrowings. This estimate is based on known user requirements and a pool 33% larger than the present facility.

Project operating expenditure will amount to $2.1M, with $1.5M spent in 2020/21 for design and demolition work.

Until the completion date which is currently estimated as the 1st of Aug 2024, temporary activities to support Naenae are budgeted to cost $0.9M pa uninflated. These costs include; public access to Naenae Primary school pool, extension of hours and services at other pools, Naenae activation fund, Hillary Court pop-up gym, site security and building insurance. It is assumed that these costs will cease or return to normal levels when the new pool opens.

With regards to the ongoing operating model, post completion of the new pool, the budgeted expenditure and revenue assumes continued operation of the service in-house by Council. The operating cost projections are based on a building 33% larger than current (the same assumption made for capital costs), with previous Naenae Pool operating costs increased by this factor. Ongoing operating costs also include depreciation and interest, which has been significantly reduced by the shovel ready funding.

The facility is expected to achieve 520k visits in the third year of operations (2026/27) which equates to a per visit operating cost before council overheads of $5.04 per visit.

8.

Risks and mitigation plans

In late July 2020 officers held a ‘pre-mortem’ workshop on the Naenae Pool project, to identify risks and ensure they were being appropriately managed. A high level risk register has been developed.

 

Two of the key risks identified were: 

 

i.      Potential misalignment of the pool and spatial plan projects leading to a less than optimal outcome

ii.     Managing the uncertainties around funding (including confirmation of both detailed costs and Council’s contribution, meeting the requirements of crown funding and ongoing uncertain impacts of COVID 19 on the successful constriction, delivery and operation of the pool)

The risk register will be updated once the full project team is established.

9.

Annual Plan/LTP key assumptions

To assist officers with timeframes and costs they have been using the high level concept plan developed for the pool which was assessed by a quantity surveyor and estimated at $52M in June 2019 as a baseline.

 

As detailed design has not been completed as yet, there is uncertainty about the future operating model of the pool. It has been assumed that the previous Naenae pool operating model will continue with the new facility and that the net operating cost to Council (excluding interest and depreciation) will be similar.

 

As part of the detailed design process, the future operating model will be reviewed and reported back to Council.

 

10.

Other relevant information

Beca Seismic Report – December 2018 and April 2019

Voice of the Community Report

Officers Report to Council July 2019 with options and high level cost estimates

 

Naenae Project Update to Risk and Assurance Committee

 

 

Further budget information

Table 1: Revenue budget

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

0.0

 

 

 

 

 

0.0

LTP 2021-2031, Subtotal

0.0

7.6

12.3

6.5

1.6

7.6

35.6

User Fees

0.0

0.0

0.0

0.0

1.0

7.6

8.6

Capital Subsidies *

0.0

7.6

12.3

6.5

0.6

0.0

27.0

Variance

0.0

7.6

12.3

6.5

1.6

7.6

35.6

*Shovel ready funding pays for $27M of the Capital outlay.

 

Table 1: Operational budgets

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

2.4

 

 

 

 

 

2.4

LTP 2021-2031, Subtotal

2.4

1.4

1.4

1.8

3.8

23.4

34.4

Project OPEX Costs

1.5

0.6

 

 

 

 

2.1

Operating Costs

0.9

0.9

1.0

1.0

1.9

12.6

18.3

Depreciation

0.0

0.0

0.0

0.0

1.0

6.4

7.4

Interest

0.0

0.1

0.4

0.8

0.9

4.4

6.6

Variance

0.0

1.4

1.4

1.8

3.8

23.4

31.8

*this is inclusive of estimated interest costs of debt as well as depreciation of the new asset.

 

Table 2: Capital budgets – This is aligned with the signed crown funding agreement

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

0.2

 

 

 

 

 

0.2

LTP 2021-2031

0.00

15.1

24.6

13

1.3

 

54

Variance

(0.2)

15.1

24.6

13

1.3

 

53.8


 

Attachment B: Active Transport – Eastern Bays Shared Path

1.

Project/ initiative

Cycleway Projects

2.

LTP Activity

Cycleway / Shared Path – Eastern Bays

 

3.

Business lead

John Gloag

4.

Brief project description

(problem/opportunity statement)

Over the 2015 – 18 funding round Council programmed the construction of 3 cycleway/shared path projects, these projects were:

 

·   The Eastern Bays Shared Path

·   The Beltway

·   Wainuiomata Hill Shared Path

 

All 3 of these projects had been on Council’s LTP albeit either in the out years or funded incrementally over an extended timeframe. The projects were brought forward or accelerated to capitalise on the $100M Urban Cycleway Funding which was available during the 2015 – 18 period.

 

The Hutt City Cycling Improvements Strategic case for investment, developed as part of the Beltway project, identified that currently the transport network within Hutt City is unattractive and unsafe for people who cycle. This resulted in the following problem / opportunity statements being identified:

 

1) The transportation network does not meet cycle and scooter needs or expectations, leading to an increase in urban congestion.

2) A low and declining number of children are cycling to school contributing to increased vehicular congestion around schools.

3) Cycling and micromobility infrastructure is unsafe, resulting in an unacceptable number of crashes involving cyclists and scooter users.

 

The development of the three core routes (The Beltway, Wainuiomata Shared Path and the Eastern Bays Shared Path) has gone some way to address the identified problem statements. However, these routes alone will not deliver the benefits sought unless they are complemented by connectivity and activation plans which are being developed.

 

5.

Strategic alignment and desired outcomes sought

The development of the Hutt City cycle and micromobility network aligns well with both central and local government policies. A key theme of the Government Policy Statement (GPS) across all four focus areas relates to the promotion of cycling as a safe, convenient and sustainable mode of transport.

 

In addition, the development of the cycle and micromobility network aligns with the Transport Agency’s and Hutt City Council’s intent for the sustainable operation of the transport network whilst also ensuring that Hutt City is a great place to live, work and play.

The cycle and micromobility routes developed will help address the intentions behind the Hutt City walking and Cycling Strategy (2014-2019) and will specifically address most of the key challenges identified in the strategy such as developing safe routes to school and completing a connected and coherent walking and cycling network.

 

The outcomes identified through the development of the Strategic Case were:

Benefit 1. Improved safety for network users.

Benefit 2. Increased participation in sustainable transport.

Benefit 3. Reduced traffic volumes.

6.

Community engagement

The community has been engaged significantly across a number of workshops, drop ins, letter drops, individual community sessions and this will be continue to be the case going forward

7.

Overview of project costs and funding source (refer tables below)

This project is funded by HCC with subsidy from NZTA at the normal Funding Assistance Rate (FAR) of 51%.

 

It should be noted that during the development of this project a revised estimate of cost for the completion of the Eastern Bays Shared Path was undertaken and a forecast of $30M resulted. Reasons for the significant increase in forecast cost include;

·    Cost escalation since the original estimate was made

·    An unfavourable contractor market

·    Work in a coastal marine environment

·    Unknown resource consent conditions

·    Challenging and constrained environment

·    Unresolved project risks

·    Specialist works.

 

Recently HCC have been successful in gaining a government grant of $15m for this project as part of the economic stimulus package following Covid 19.

 

8.

Risks and mitigation plans

These have been and will continue to be developed. Particular focus has now been placed on mitigating the risks to the $15m government grant which has some demanding conditions, particularly around the achievement of Project Milestones.

9.

Annual Plan/LTP key assumptions

It has been assumed the project will satisfy the NZTA subsidy and government grant funding conditions.

10.

Other relevant information

Comprehensive detail on the project is available from the Business Case documents produced to date.

 


 

Further budget information

Table 1: Operational budgets (Capital Subsidy Revenue)

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Cycleway Shared Path - Eastern Bays

Annual Plan 2020/21

0.102

0

7.121

4.632

2.550

-

14.405

LTP 2021-2031

0.510

3.775

2.643

4.530

3.775

7.173

22.406

Variance

0.408

3.775

(4.478)

(0.102)

1,225

7,173

8.000

 

Table 2: Capital budgets

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Cycleway Shared Path - Eastern Bays

Annual Plan 2020/21

0.2

0

13,962

9.082

5.0

-

28.244

LTP 2021-2031

1.0

5.0

3,500

6.000

5.0

9.5

30.000

Variance

(0.8)

(5.0)

10.462

3.082

-

(9.5)

(1.756)


 

Attachment C: Cross Valley Transport Connections Project

1.

Project/initiative

Cross Valley Transport Connections Project

2.

LTP Activity

Cross Valley Connection – Investigation/Design

Road Network Improvements - Construction

3.

Business lead

John Gloag,

4.

Brief project description

(problem/opportunity statement)

For some time now, The Esplanade has struggled to balance the competing demands placed on it as major arterial road, conveying around 30,000 vehicles each week day, while also having a dominant bearing on the character and accessibility of Petone’s foreshore as a place. It is becoming increasingly congested and is also prone to natural hazards such as earthquake, tsunami, liquefaction and sea level rise.

 

The Business Case Approach, required for NZTA subsidy support, for this project commenced in 2016 with the completion of the Point of Entry phase and a Strategic Business Case, which was endorsed by NZTA.

 

The Programme Business Case, the programmes of work that could deliver the investment objectives, is almost complete and this is jointly funded by HCC and NZTA. Key messages from the Business Case include;

 

Problem Statements;

-     Lack of Transport Network Resilience (75%)

Southern Lower Hutt’s transport network lacks resilience to major natural events, future sea level rise, and regular network interruptions, which will cause economic and / or social disruption for Lower Hutt and the Wellington region.

-     Limited Access (25%)

The existing transport system in southern Lower Hutt:

• limits modal choice

• constrains access to social and economic opportunities, and

creates safety issues for active mode users

Benefit Statements;

-     Improved network resilience (50%)

-     Improved transport choices (25%)

-     Improved accessibility and safety (15%)

-     Sup

-     ports development of urban growth areas in southern Lower Hutt (10%)

 

Investment Objectives;

-     To improve the resilience of southern Lower Hutt by enhancing the transport networks ability to withstand and respond in a timely manner to HILP and LIHP events

-     To improve access to and from key destinations and key urban growth areas in southern Lower Hutt

 

5.

Strategic alignment and desired outcomes sought

Strategic alignment with local, regional and national outcomes and objectives has been comprehensively assessed during the Business Case process and been confirmed. Plans, policies and strategies considered include;

-     HCC LTP 2018 – 28

-     HCC Infrastructure Strategy

-     HCC UGS 2012 – 2032

-     Petone Spatial Plan 2040

-     HCC Central City Transformation Plan

-     Lower Hutt Growth Story

-     GPS 2018 – 21

-     NZTA Long Term Vision

-     Wellington RLTP 2015 – 21

6.

Community engagement

Key stakeholders have been involved in the Business Case development but it is too early in the process to engage with the community. Once more certainty is gained over the preferred programme/s of work, the community will be consulted.

7.

Overview of project costs and funding source (refer tables below)

It is intended that this project is funded by HCC with subsidy from NZTA at the normal Funding Assistance Rate (FAR) of 51%.

Budgets for the Investigation/Design and Construction have been set in the HCC LTP as reflected in the tables that follow. It should be noted that during the development of the Programme Business Case a revised estimate of cost for the programme of works was made and it is now in the range $100M - $160M. Reasons for this increase include;

·    Cost escalation since the original estimate was made

·    An unfavourable contractor market

·    A more defined programme of work

·    Accommodating multi modal considerations

·    Increased seismic standards

For the purpose of our Long Term Plan we recommend budgeting for the upper end of the cost estimate range, and $160M has been proposed accordingly. It is assumed we will receive NZTA subsidy of $81.6m which will be aligned with the expenditure timing.

Note, the current 2020/21 budget of $680k for investigation and design has been spread across this year and the next two years in line with the current forecast of expenditure.

The Programme Business case proposes a three staged implementation with some quick wins around Public Transport and Active Modes in Stage 1 from 2021 -2027, improvements around the Gracefield/Wainuiomata Hill Road Interchange in Stage 2 from 2028 – 2031 and the bulk of the project in Stage 3 from 2029 onwards to align with other significant projects in the region that impact this project. However, this proposal still needs to be accepted by the funding agencies – HCC and NZTA.

 

Refer Annual Plan/LTP key assumptions below.

8.

Risks and mitigation plans

These have been and will continue to be developed as part of the Business Case process. Risks to this project include;

·    NZTA funding – successfully navigating the business case process and funding availability when required

·    HCC funding – increased cost and priority against other projects

·    Community and stakeholder support for the preferred programme of works. There will be many competing priorities within this project which are likely to get varying levels of support from stakeholders and the community.

9.

Annual Plan/LTP key assumptions

It has been assumed the project will successfully navigate the Business Case process and receive NZTA funding subsidy.

It is proposed that this project is revised in the LTP to a more likely timing when NZTA funding would be more probable, and that the budget is revised to reflect a more up to date costing, partially offset by assumed NZTA funding. The revised timing reflects our best estimate for each of the three stages proposed for the project implementation.

10.

Other relevant information

Comprehensive detail on this project is available from the Business Case documents produced to date, including the Point of Entry document, the Strategic Business Case Report and the almost complete Programme Business Case Report.


 

Further budget information

Table 1: Revenue - Capital Subsidy Revenue

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

0.347

 

 

 

 

61.2

61.5

LTP 2021-2031

0.143

0.102

0.102

5.3

4.2

72.1

81.9

Variance

(0.204)

0.102

0.102

5.3

4.2

10.9

20.4

 

Table 2: Capital budgets

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

0.68

 

 

 

 

120

120.7

LTP 2021-2031

0.28

0.2

0.2

10.3

8.3

141.4

160.7

Variance

0.40

(0.2)

(0.2)

(10.3)

(8.3)

(21.4)

(40.0)

 

Note, if a staged approach is endorsed by HCC and NZTA then Stage 3 of the project implementation, where the majority of the cost is involved, will likely be pushed beyond 2030.


 

Attachment D: Homelessness Prevention

1.

Project/

initiative

Homelessness Prevention

2.

LTP Activity

 

3.

Business lead

John Pritchard, Principal Research and Policy Advisor

Matt Boggs, Director Strategy and Engagement 

 

4.

Brief project description

(problem/opportunity statement)

Council currently provides funding for three actions as part of the response to homelessness under the Lower Hutt Homelessness Plan. Council funded actions relate to the strategic priorities of preventing homelessness, improving the supply of suitable accommodation, and also improving the understanding of homelessness in Lower Hutt. 

 

This briefing proposes extending the current funding for the period of the Long-Term Plan 2021-2031. The three actions are:

 

·    Access to settled accommodation – deliver settled housing in the private rented sector for households that are threatened with or have experienced homelessness, and that consequently often have difficulty competing in the market. 

 

·    Legal Housing Advice and Advocacy – specialist legal service to help households in the city with their housing rights and help prevent homelessness.

 

·    Homelessness prevention programme – kaupapa Māori strengths based and mana-enhancing approach to supporting households to retain homes in the private rented sector.

 

The Homelessness update 2019 – 2020 report was presented to the Policy, Finance and Strategy Committee on 7 September 2020 and reported on progress in the year since July 2019, including data from services. (No. PFSC2020/5/177)

 

Council is currently involved in a number of aspects of housing, including a new Statement of Intent for UrbanPlus Ltd. with a focus on improving provision for needs across the housing continuum, initial work on a housing plan, and discussing opportunities provide additional support to organisations working to end homelessness in the city. This work may lead to further proposals for Council to consider as part of the 2021-2031 LTP.

5.

Strategic alignment and desired outcomes sought

The three current actions align with the findings from the research in terms of the service gaps, lack of access to settled accommodation – and therefore high use of temporary and unsuitable accommodation – and the lack of capacity to respond to the needs of people who are at risk of homelessness or who are experiencing homelessness. The actions align with the strategic priorities in the Lower Hutt Homelessness Plan, particularly homelessness prevention improving access to suitable accommodation, and improving the understanding of homelessness in Lower Hutt.

 

The outcomes include:

 

-     Preventing homelessness

-     Increasing access to settled accommodation

-     Improving health and wellbeing of households

 

6.

Community engagement

The city homelessness plan was developed as a result of in-depth research and engagement during 2018 and 2019.

 

The actions that Council is funding emerged from this work and were identified both through the research stage and engagement with individuals and organisations in the city.

 

7.

Overview of project costs and funding source (refer tables below)

Council agreed funding of $1.6M over the three year period from July 2019. The funding is operational expenditure which is funded from general rates.

 

Additionally, funding of $40,000 from the Strategy & Planning budget has been provided to support the housing advice contract in year 2 and agreed for year 3.

 

Discussion of services, procurement processes, and contracts, means that the services began at different times during 2019/20 and will therefore end at different times in 2022 and 2023 if the current three year funding is not extended. The end dates are between end of August 2022 and end of February 2023.

 

The current funding is as follows:

Access to settled accommodation:             $110,000 per year

Homelessness prevention programme:     $370,000 per year

Legal Housing Advice and Advocacy:          $80,000 per year

Total                                                                 $560,000*

*The total agreed through the annual plan in year 2021-2022 is $520,000 with $40,000 agreed from operational funding.

8.

Risks and mitigation plans

Each partner has expertise and experience in delivering the services.

 

Council officers are regularly in contact with each provider in relation to its specific contract and also meet with the three partners to discuss the work collectively, identify opportunities, potential issues, and to discuss homelessness issues in the city more broadly.

 

Council is also supporting partners to develop services and joint working e.g. by supporting funding applications where relevant.

 

9.

Annual Plan/LTP key assumptions

Responding to homelessness and housing hardship is a priority. This requires immediate actions in response to homelessness and includes the delivery of suitable housing supply.

 

That Council continues its support for the homelessness actions at a similar level during the period of the 2021-2031 LTP.

 

To maintain the delivery of service, that $40,000 is added to the Housing Advice funding each year from July 2021.

 

Further budget information

Table 1: Operating budgets

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

0.52

0.56

 

 

 

 

1.04

LTP 2021-2031

0.52

0.56

0.56

0.56

0.56

3.36

6.12

Variance

-

-

(0.56)

(0.56)

(0.56)

(3.36)

(5.08)

 

Due to the timing of contracts:

2020 – 2021: In addition to the $520,000, approximately $183,000 will be carried forward from 2019/20. Actual amount spent in 2019/20 is approximately $377,000.

This pattern will continue into the third year:

2021 – 2022:  In addition to the $560,000, approximately $183,000 will be carried forward from 2020-21.

Attachment E: Wainuiomata Summer Pool – Main Pool Covers

1.

Project/ initiative

Thermal cover for the main outdoor pool at Wainuiomata

2.

LTP Activity

Integrated Community Services

Leisure and Wellbeing

3.

Business lead

Stephen Keatley

4.

Brief project description

(problem/opportunity statement)

In May 2019 Powell Fenwick completed an Energy Audit of the Hutt City Council owned swimming facilities (refer to DOC/19/49012). In this report it was identified that reasonable savings can be realised by introducing a pool cover. The Pool cover reduces heat loss and reduces gas consumption, therefore reducing expenditure.

5.

Strategic alignment and desired outcomes sought

The project is an initiative under the umbrella of Council’s internal Energy and Carbon Reduction Plan 2020-24. The project assists with meeting the plan’s objectives by realising cost savings associated with the consumption of natural gas (estimated at $16,000 per season) and realising greenhouse gas emission reductions (estimated at about 56 tonnes per season).

6.

Community engagement

No community engagement has been undertaken for this project, as it is relatively small scale and would have no impact on the experience of users at the pool.

7.

Overview of project costs and funding source (refer tables below)

The capital cost of the preferred option has been quoted at $65,500. This is requested to be council debt funded using the projected net cost savings of $16,000 per annum to repay the debt over approximately 4 years. Any operating cost related to the covers can be covered through current approved budgets.

There is expected to be $22,000 of savings in energy expenditure. This is offset by increases in supplier recommended maintenance, depreciation, staff time to manage the covers, estimated at $6,000, to give a $16,000 net saving. There will also be an associated interest cost over approximately 4 years further reducing the net savings by approximately $1,000, after which the savings will have paid off the investment.

Current total gas energy cost at Wainuiomata summer pool is approximately $65,000 per year/season.

8.

Risks and mitigation plans

Cost of carbon: The business case tested various carbon price scenarios. Increases in the cost of carbon (which flows through to higher gas costs) would improve the net present value of the project further.

Unexpected costs: Reduced energy savings and/or increased capital costs would lengthen the pay-back period at the margin. To mitigate this risk, the business case utilised conservative assumptions for calculating net present value. In addition, even with a lengthened pay-back period, the project remains very good value for money.

Safety: There is risk of intruders being caught under the cover or vandalism to the cover outside of pool opening hours; this is mitigated by the secure fencing surrounding the facility and CCTV cameras.

9.

Annual Plan/LTP key assumptions

This project is not budgeted for in 2020/21. However, if approved for implementation by the end of September 2020, the new pool covers could be in place ready for the 2020/21 summer season. This would maximise cost and carbon savings.

0.

Other relevant information

A full business case, including sensitivity analysis, has been completed for this project.

 

 

Further budget information

Table 1: Operational budgets

$000

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

(15)

 

 

 

 

 

(15)

LTP 2021-2031

n/a

(15)

(15)

(15)

(16)

(80)

(141)

Variance

-

15

15

15

16

80

156

 

Note: figures rounded

Table 2: Capital budgets

$000

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

66

 

 

 

 

 

66

LTP 2021-2031

66

 

 

 

 

 

66

Variance

-

 

 

 

 

 

-


Note: figures rounded

* These figures are to reply the loan on the capital


 

Attachment F: Budget cuts from emergency budget Annual Plan2020/21

1.

Project/ initiative

Budget cuts from emergency budget Annual Plan 2020/21

2.

LTP Activity

Various

3.

Business lead

Jo Miller, Chief Executive

4.

Brief project description

(problem/opportunity statement)

As a result of Covid-19 pandemic Council decided to progress an emergency Annual Plan 2020/21 budget (AP). The focus was on “getting through” whilst prioritising three waters infrastructure investment and addressing concerns about rates affordability.  The rates increase was adjusted from 7.9% originally proposed to a lower 3.8%. To achieve this a range of operational savings and budget cuts totalling about $3M were included in the AP.

 

In the drafting of the LTP 2021-2031 there is again a lot of competing priorities and cost pressures and continued concern about rates affordability. 

 

Council is requested to provide direction to officers as to whether the budget cuts made in the AP are one-off for 2020/21 only or permanent adjustments to budgets.

 

If they are one-off budget cuts then there will be impacts for the rates revenue requirements for 2021/22. If the budget cuts are permanent budget cuts then this funding could be applied to other priorities of Council.

5.

Community engagement

Public engagement took place on the draft Annual Plan 2020/21. Following this engagement process Council decided to retain all the budget cuts that had been made.

6.

Overview of project costs and funding source (refer tables below)

Officers are seeking clarification as part of the development of the LTP 2021-2031 as to whether the budget cuts from the Annual Plan 2020/21 are permanent budget cuts for all the years of the LTP or only one-off for 2020/21.

Officers recommend that the following budget cuts are permanent budget cuts:

 

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.

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

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.  

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.

Events $180k – Major events budget removed, with HighLight Festival of Lights no longer being delivered and an alternative offering being developed.

Regional Amenities Fund $200k

 

There are a wide range of other budget cuts which do not require clarification from Council due to the nature of the budget cut which has meant they have been implemented (or in progress to be implemented). This includes staffing budget net savings of $1.2M, accommodation changes to rationalise office space $0.3M p.a. and savings from the fleet review $0.15M.  There were also a number of other budget cut decisions where Council was very clear at the time that these were permanent budget cuts (e.g. international co-operating cities $40k).

 

7.

Risks and mitigation plans

When the activity management plans for these activities are developed there will be a further review of service levels and budget reviews. Following this process officers will provide further advice to Council. There may be the need to seek additional budget increases in some of the areas, for example due to planned growth in the city.


 

Further budget information

Table 1: Operational budgets

$000

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

(0.73)

-

-

-

-

-

(0.73)

LTP 2021-2031

(0.73)

(0.73)

(0.73)

(0.73)

(0.73)

(3.65)

(8.03)

Variance

-

0.73

0.73

0.73

0.73

3.65

$7.3M

 

 


 

 

Appendix G:  Akatarawa Cemetery Extension

1.

Project/

initiative

Capital contribution towards extension of shared cemetery at Akatarawa

2.

LTP Activity

Social and Cultural Wellbeing, Open Spaces, Parks and Reserves

3.

Business lead

Marcus Sherwood, Andrea Blackshaw

 

4.

Brief project description

(problem/opportunity statement)

With Taita Cemetery at capacity and no longer accepting new interments Hutt City Council entered a shared service agreement with Upper Hutt City Council in regards to provision of services at Akatarawa Cemetery. The shared cemetery including built assets is co-owned by both Councils with operations undertaken by Upper Hutt City Council. Hutt City Council’s share of operating costs and new capital developments is around 75%. Based on current burial rates the capacity at Akatarawa Cemetery is estimated to be six years before additional land is required.

 

Hutt City Council has currently budgeted $2.25M in capital costs to further develop the site commencing from 2024/25 however with significant population growth projected for both cities, and risks associated with pandemics, Upper Hutt City Council has now planned for this development to occur earlier. Capital costs have also been revised for the project. Officers are recommending that HCC capital contributions be aligned with Upper Hutt City Council expenditure increasing budget allocations by $300k and bringing forward funding by two years to 2022 – 2025.

5.

Strategic alignment and desired outcomes sought

Cemeteries provide services for the Social and Cultural wellbeing of communities.

6.

Community engagement

Hutt Valley Services committee and Upper Hutt City Council have considered this issue. No community consultation or engagement is required at the detailed construction design or consent stage, however the allocation of segregated areas for cultural or ethnic groups would need to occur once the cemetery infrastructure has been developed.

7.

Overview of project costs and funding source (refer tables below)

Total estimated project cost of $3.4M of which HCC would contribute around 75% or $2.55M.

 

This would be by way of a capital contribution over the proposed 3 years of the project as Upper Hutt City Council would manage the project.

8.

Risks and mitigation plans

 

None at this stage.

 

9.

Annual Plan/LTP key assumptions

 

HCC co-owns the development and therefore this is a capital contribution and treated as an owned asset.

 

Table 1: Capital budgets

$M

2020/21

2021/22

2022/23

2023/24

2024/25

2025-2031

Total

Annual Plan 2020/21

 

 

 

 

0.75

1.5

2.25

LTP 2021-2031

 

 

0.84

0.85

0.85

 

2.55

Variance

 

 

(0.84)

(0.85)

(0.1)

1.5

(0.3)

 


                                                                                      76                                                24 September 2020

Long Term Plan/Annual Plan Subcommittee

02 September 2020

 

 

File: (20/863)

 

 

 

Report no: LTPAP2020/5/207

 

Revenue and Financing Policy review

 

Purpose of Report

1.    The purpose of this report is to progress decisions in relation to the review of the Revenue and Financing Policy as part of preparation for the Long Term Plan 2021-2031.

Recommendations

That the Subcommittee recommends that Council:

(i)        notes that as part of the preparation of Draft LTP 2021-2031, that the Revenue and Financing Policy is being reviewed;

(ii)       endorses the proposed approach to the review of the Revenue and Financing Policy as detailed in Section C contained in the report;

(iii)      endorses the proposed ‘Funding Needs Analysis’ section of the Revenue and Finance Policy section, attached as Appendix 1 to the report;   

(iv)      notes this ‘Funding Needs Analysis’ will underpin further work to be undertaken in relation to setting fees, rates and other funding sources for the Long Term Plan 2021-2031 and in future years;

(v)       notes the work completed to date on updates to the Revenue and Finance Policy; and

(vi)      considers any direction to be provided to officers ahead of the next stage of the review of the Revenue and Financing Policy.

 

 

Acronyms:

AP - Annual Plan 2020/21

DLTP – Draft Long Term Plan 2021-2031

LTP – Long Term Plan 2021-2031

LGA – Local Government Act 2002

RFP - Revenue and Financing Policy   

Section A – What is the Revenue and Financing Policy

2.      The Revenue and Financing Policy (RFP) sets out the policies that Council has on funding operating and capital needs. This policy is an important step in the process for rate-setting and setting fees and charges.

3.      The RFP includes Council’s approach to rating in the City. This includes:

·    Which activities are funded by targeted rates

·    How properties are differentiated in applying rates

·    The differentials to apportion rates between different property types.

4.      The RFP shows how the Council complies with section 101(3), 102 (1) and 103(1) of the LGA. A good policy will provide predictability and certainty about sources and levels of funding available to the Council.

 

Section B – Background to our HCC policy

5.      A review of the RFP was last undertaken as part of the 2018-28 LTP.

6.      The 2019 three yearly revaluation in Lower Hutt saw residential property values increase substantially more than business values. As a result the Council amended the RFP and adopted a holding position for the 2020/21 Annual Plan to keep the allocation of general rates at the same percentage levels between all property rating categories as was the case in 2019/20, that is, not continuing with the direction of reducing the proportion of rates paid by businesses.

7.      Council agreed that through the Long Term Plan 2021-2031 a full review of the RFP would be completed from a first principles approach.

 

Section C – Proposed approach to the review of the policy

8.      A separate report in this agenda entitled “LTP 2021-2031 – Financial aspects” includes a proposed approach to the review of the Financial Strategy as part of the LTP 2021-2031. 

9.      The review of the RFP has been conducted under the key principles outlined in the Financial Strategy. These are:

·    affordability of rates

·    delivering services effectively and efficiently

·    achieving intergenerational equity by spreading the costs between both present and future ratepayers

·    maintaining prudent debt levels

·    strengthening Council’s financial position.

10.   Appendix 1 contains the draft RFP with a revised funding needs analysis section.  The review of the RFP is a two-step process. Step one being the funding needs analysis which is set out in appendix 1 for the Council’s consideration.   Step two then considers the overall impacts including the rating impacts.  Note the section related to rates differentials in the draft RFP is not updated as yet. There is a separate report in this agenda entitled “Rates Policy” which seeks direction from Council on a number of specific rates matters. Following Council decisions on the funding needs analysis and the rating policy matters, the RFP will be further updated and reported back to the Subcommittee.

11.   The legislative requirements as detailed in section 101(3) for the development of a RFP is a sequential two-step process.  The funding needs analysis in Appendix 1 represents step one of this process.

The RFP explains this two-step process, outlining the following:

‘How does council decide what is funded from where?

Appropriate funding sources are determined using a two-step process on an activity by activity basis.

Step One

The funding needs of Council must be met from what Council determines to be the most appropriate funding source for each activity following consideration of:

·    The community outcomes to which the activity contributes

·    The distribution of benefits between the community as a whole and any identifiable parts of the community and individuals

·    The period over which the benefits are expected to occur

·    The extent to which the action or inaction of particular individuals or groups contributes to the need for the activity to take place

·    The costs and benefits of funding an activity distinctly from other activities

Step Two

The second step in the process is for Council to apply its judgement to the overall impact on the community. In exercising this judgement Council considers the following;

·    The impact of rates and rates increases on residential properties, and in particular on the affordability of rates and rates increases for low, average and fixed income households.

·    The impact of rates and rates increases on businesses and on the competitiveness of Lower Hutt as a business location.

·    The fairness of rates (and changes in rates) relative to the benefits received for ‘stand- out’ properties with unusually high capital values.

·    The special characteristics of particular classifications of property - including their purpose and proximity to the city.

·    The complexity of the rating system and the desirability of improving administrative simplicity.

·    The change in relative rateable values between types of properties.

As the General rate is a general taxing mechanism, shifting the ‘differential factor’ for  each sector’s share of the city’s overall capital value is the principal means that Council has used to achieve the desired overall rates impact on the wider community.’

12.   This report outlines the results of step one of the process which analyses the Council’s funding needs. A separate report in this agenda entitled “Rating policy” progresses step two of the process providing rates approach options for the Council to consider.

13.   The funding needs analysis remains largely the same as previous LTP’s. However, some updates are proposed:

·    Updating to align with the proposed new activity structure,

·    Updating language used in the policy to follow best practice and ensure legislative compliance with the Local Government Act(LGA),

·    Improved definition of funding sources to align with reporting in activity statements.

 

Section D – Detailed review of the policy

New Activity Structure

14.   An initial review of the activity structure has been undertaken. This is covered in a separate report in this agenda – refer “LTP 2021-2031 – Financial aspects”. The RFP has been updated to align with the new proposed structure. 

Legislative considerations

15.   A RFP must comply with the following requirements of various sections of the Local Government Act 2002 (LGA) including:

101(3)(a)

the need to identity the funding needs of a local authority for each activity,

101(3)(b)

having completed the funding needs analysis consider the overall impact on the social, economic, environmental and cultural wellbeing of the community.

102(1)

provide predictability and certainty about sources of funding,

103(1)

the need to list the funding sources of both operating & capital expenditure

 

16.   The current policy, while generally meeting the requirements of section 101(3)(a), has been improved to better demonstrate how the Council has considered each of the five areas below for each activity.

LGA requirement

Explanation

(i) the community outcomes to which the activity primarily contributes

The reason for this provision requires the Council to identify the reason it is providing the service and link it back to the outcome. It is important to note that this requires Council to consider the primary outcome rather than a number of outcomes.

(ii) the distribution of benefits between the community as a whole, any identifiable part of the community, and individuals

This requires Council to consider who benefits from the activity. Broken down into the three considerations being;

·    the whole community or city/district

·    parts of the community being identifiable groups or identifiable physical locations

·    individuals or specific users of the activity

(iii) the period in or over which those benefits are expected to occur

Also known as the intergenerational component and the purpose here is to identify when Council needs to recover this expenditure over more than one financial year. Generally, councils use at least 10 years as a generation

(iv) the extent to which the actions or inaction of particular individuals or a group contribute to the need to undertake the activity

This is known as the exacerbator provision where the requirement is to identify identifiable groups or individuals that cause an additional cost either by their action or inaction. Generally, this is not applicable to general beneficiaries as in ii above

(v) the costs and benefits, including consequences for transparency and accountability, of funding the activity distinctly from other activities

 

The intent of this clause is to allow Council to aggregate or disaggregate activities for consideration. Generally, there is a trade-off between transparency and incurring additional costs to identify the particular costs to either an activity or sub-activity.

 

17.   The existing Policy uses terminology public and private good. However, the legislation uses alternative terms such as the distribution of benefits between the community as a whole, parts of the community or individuals.  It is considered good practice to use these terms rather than public versus private good which indicates an economic assessment has been undertaken.  There is no requirement to undertake an economic assessment.

Consideration of funding needs

18.   The proposed funding needs analysis would complete the requirements of section 101(3)(a) of the Local Government Act 2002.

19.   For all activity areas a process of review was undertaken to ensure that the rationale for funding types and who benefits remains relevant and is clearly articulated.

20.   Funding split between revenue types applied in the policy were reviewed against actual revenue in the 19/20 financial year and the planned revenue for the 2020/21 Annual plan to identify any significant non-compliance with current policy parameters.

21.   One key change has been made to the proposed policy in relation to the funding settings for Animal control, and building consents and resource consents activities that are within regulatory services.

22.   Previously for building consents and resource consents the policy settings for recovery through user charges has been at “medium” being 40% to 59% of costs. Officers propose that this is increased to “high” being 80% to 100% of costs. The proposed change to the user charge portion is to reflect the level of private benefit associated with the activity. The activity predominantly benefits those individuals obtaining consents, fees, or permits.  Therefore, it is considered appropriate that the greater share of the costs is paid by those individuals.

23.   Previously for animal control the policy settings for recovery through user charges has been at “medium” being 40% to 59% of costs. Officers propose that this is increased to “medium/high” being 60% to 79% of costs the proposed change to the user charge portion is to reflect the level of private benefit associated with the activity. The activity predominantly benefits those individuals who are animal owners. There are elements of benefit to the wider community from a safer environment because of animal control.

24.  The proposed change in approach would have limited actual impact on costs currently charged by the Council as user charges are already set at rates that intend to fund these activities within regulatory services in line with the proposed new level in the policy.

 

Section E - Next steps

25.   Officers will undertake further work on developing a draft RFP for inclusion in the Draft LTP following consideration and direction on approach provided by Council. Officers will report further to the Subcommittee on 27 October.

26.   The RFP will be potentially updated following Council’s decision on Rubbish and Recycling LTP amendment proposals on 15 September 2020 to include the impact of the decision.

27.   Officers will undertake further detailed work in regards to future fees and charges to be proposed in the LTP 2021-2031. A detailed base budget review is currently underway and the funding sources reviewed as part of this process. This has included undertaking comparisons of key fees and user charges details of some of which are included in the graphs below (Note: graphs provide a high level comparison and does not represent the full complexity of fee structures around some activities). Further information on this will be reported back to the Subcommittee.

Graph 1: Resource consent hourly rate comparison to other Councils

Graph 2: Building consent hourly rate comparison to other Councils

Graph 3: LIM fee comparison to other Councils

Graph 4: Responsible dog owner fee comparison to other Councils

Graph 5: swimming pool entry fee comparison to other Councils

Climate Change Impact and Considerations

28.      There are no direct climate change impacts or considerations arising from this report. However, it is noted that fee and user charge settings can influence behaviours by creating incentives/disincentives that may have indirect impacts. Where there are potential indirect effects these will be considered as part of specific decisions on those areas.

Legal Considerations

29.      The most relevant legislation includes the Local Government Act 2002, Local Government (Rating) Act 2002 and the Rating Valuations Act 1998. 

Financial Considerations

30.      External specialist advice is being provided in support of the proposed changes to the policy included in this report. This is being funded from within existing budgets.

 

 

 

 

Appendices

No.

Title

Page

1

Appendix 1: Draft Revenue and Financing Policy

77

    

 

 

 

 

 

Author: Daniel Koenders

Manager Financial Strategy & Planning

 

 

 

 

 

 

Reviewed By: Jenny Livschitz

Chief Financial Officer

 

 

 

Reviewed By: Anna Welanyk

Director Transformation and Resources

 

 

 

Approved By: Jo Miller

Chief Executive

 


Attachment 1

Appendix 1: Draft Revenue and Financing Policy

 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


                                                                                     115                                              24 September 2020

Long Term Plan/Annual Plan Subcommittee

07 September 2020

 

 

 

File: (20/989)

 

 

 

 

Report no: LTPAP2020/5/209

 

Rating Policy Review

 

Purpose of Report

1.    The purpose of this report is to progress rating policy decisions as part of drafting the LTP 2021-2031 ahead of the public consultation process.

Recommendations

That the Subcommittee recommends that Council:

(i)        notes that rates affordability is a key consideration in the Council’s Financial Strategy, as detailed in Section A contained in the report;

(ii)       notes that in approving the rating policy in the Annual Plan 2020/21, Council agreed to a rates policy review being undertaken from a first principles approach, as part of the LTP 2021-2031;

(iii)      notes that the rates policy will be consulted on a part of the Draft LTP 2021-2031 process, with relevant details included in the Revenue and Financing Policy and the Rates Funding Impact Statement;

(iv)      notes the overall approach to the rating review as outlined in Section C contained in the report;

(v)       agrees that there is to be no change to Council continuing to set general rates based on the capital value of properties, refer Section E contained in the report;

(vi)      agrees that there is no change to targeted rates, apart from those changes relating to refuse and recycling, refer Section F contained in the report;

(vii)     agrees that a Uniform Annual General Charge is not implemented, refer Section G contained in the report; 

(viii)    agrees in principle that the Community Facilities differentials and related rates remission policy continue unchanged, refer Section H contained in the report; 

(ix)      agrees in principle to progressing changes to rural rates to align with the District Plan rural activity description, refer Section I contained in the report;

(x)       considers the method of setting general rates differentials and provide direction to officers, refer Section J contained in the report; 

(xi)      considers the other options to change general rates differentials and provide direction to officers, refer Section K contained in the report; 

(xii)     notes that Hutt City Council has six rates instalments per annum whilst comparative data from other Councils shows most Councils have four rates instalments per annum; refer Section L contained in the report;

(xiii)    agrees in principle to reduce to four rates instalments per annum to be included in the Draft Long Term Plan 2021-2031 for public feedback; and

(xiv)    notes that officers will report back to the Subcommittee on
27 October 2020 with further analysis and advice in relation to rating policy review.

 

Acronyms:

AP - Annual Plan 2020/21

DLTP – Draft Long Term Plan 2021-2031

LTP – Long Term Plan 2021-2031

CD – Consultation document

UAGC – Uniform Annual General Charge

LGA – Local Government Act 2002

LGRA – Local Government (Rating) Act 2002

RFP - Revenue and Financing Policy

FIS – Rates Funding Impact Statement

Section A – Financial Strategy

2.    A separate report in this agenda entitled “LTP 2021-2031 – Financial aspects” includes a proposed approach to the review of the Financial Strategy as part of the LTP 2021-2031. 

3.    The affordability of rates is a key principle of the Council‘s Financial Strategy, and is described as follows:

Ability to pay (affordability) – affordability is an important consideration as it ensures that the ability of our diverse community to pay rates is transparently considered as part of the decision-making process. Consideration will be given at both the macro level (i.e. generally affordable to most) and also at the micro level (i.e. for a specific individual where rates rebates, remissions or postponement policies may be required).

4.    As we progress through the development of the LTP 2021-2031, officers will provide Council with comprehensive rating impact information to support decision making and to ensure the affordability of rates is a key consideration. 

5.    The impact of Covid-19 on the Lower Hutt economy and ratepayers is uncertain. This has further highlighted the need for a rates policy that provides greater certainty over the medium to long term for ratepayers.

Section B – Annual Plan 2020/21 (AP)

6.    The three yearly property revaluation in Lower Hutt saw residential property values increase substantially more than business values. Council decided to progress a review of the rating policy mainly due to concerns about the affordability of rates for residential properties impacted by these changes in property values. 

7.    The draft AP included various rating policy options for 2020/21 as an interim one-year solution. Following engagement with the community the council adopted a holding position for the AP to keep the allocation of general rates at the same percentage levels between all property rating categories as was the case in 2019/20. Further information about these options is included later in this report in Section J.

8.    The Council agreed that through the LTP 2021-2031, a full review would be completed, from a first principles approach, of the Revenue and Financing Policy (RFP) and the associate rating policy aspects.

Section C – Proposed approach to the rating policy review

9.    A separate report in this agenda entitled “Revenue and Financing Policy” includes an initial review of the policy, being specifically a review of “step one” stage which is the funding needs analysis.

10.  Step two of the process is more specifically focused in the rates policy area and is the focus of this report. Extract of RFP:

“Step Two

The second step in the process is for Council to apply its judgement to the overall impact on the community. In exercising this judgement Council considers the following;

·    The impact of rates and rates increases on residential properties, and in particular on the affordability of rates and rates increases for low, average and fixed income households.

·    The impact of rates and rates increases on businesses and on the competitiveness of Lower Hutt as a business location.

·    The fairness of rates (and changes in rates) relative to the benefits received for ‘stand- out’ properties with unusually high capital values.

·    The special characteristics of particular classifications of property - including their purpose and proximity to the city.

·    The complexity of the rating system and the desirability of improving administrative simplicity.

·    The change in relative rateable values between types of properties.

As the General rate is a general taxing mechanism, shifting the ‘differential factor’ for  each sector’s share of the city’s overall capital value is the principal means that Council has used to achieve the desired overall rates impact on the wider community.”

11.  The rating policy review is complex and will require a number of progressive decisions by Council. This report is the first step in this process and it is expected that a series of reports will be delivered to Council over the next three months as the draft LTP is developed for consultation.

12.  The proposed approach to this rating review is as follows:

a)   Comparing HCC rates policy to other similar Councils across New Zealand.

b)   Reviewing how each of the rating tools is being applied at HCC and the options for the future.

c)   Considering the impact on ratepayers of various options.

d)   Requesting Council to provide direction to officers on the options ahead of progressing further. This is likely to involve a few cycles.

e)   Prepare a revised draft rates policy for consultation in the Draft LTP.

f)    Consider public feedback ahead of finalising the policy.

g)   Obtain specialist legal and technical rating advice throughout this review.

13.  Overview of the rating tools considered in this report

Rating basis (Section E)

Targeted rates (Section F)

Uniform Annual General Charge (Section G)

Community facilities differentials and related rates remission (Section H)

Rural properties differentials (Section I)

Methodology for setting general rates differentials (Section J)

Other options to consider for general rates differentials (Section K)

Rates instalment/billing cycles (Section L).

Section D – Rating comparison to other Council’s

14.  Appendix 1 provides a rating comparison between HCC policy and nine other Councils, including Wellington City Council, Porirua City Council, Tauranga City Council, Hamilton City Council and Dunedin City Council.  This comparison includes rating basis, UAGC, targeted rates and general rate differentials.

Section E – Rating basis – capital value and land value

15.  Extract from RFP: Council sets general rates based on the capital value of their properties. Capital value is used because, in the main, it reflects ability to pay better than the alternatives of land value or annual value. 

16.  The comparison of rating basis in Appendix 1 shows that all Councils use capital value with one exception. HCC uses capital value which better aligns with our key principle of rates affordability in the Financial Strategy. Officer advice is not to propose any changes in the rating basis.

Section F – Targeted rates

17.  Extract from RFP:

Targeted rates are used where Council has decided that the cost of a service or function should be met by a particular group of ratepayers (possibly even all ratepayers) or in order to provide greater transparency about the use of the funding. There is considerable scope to set rates for a specific function (e.g. water) or target a rate on a specific geographic area (e.g. Jackson Street) or set different levels of rates for different property types (e.g. promotion levy targeted on Business Central properties). The targeted rates charged by Hutt City Council are:

o   Water supply, per property

o   Wastewater services, per pan

o   Jackson Street upgrade project, per business property in Jackson Street

o   Recycling, per property.

18.  The comparison in Appendix 1 shows that other Councils have a range of targeted rates, with most having some form of targeted rates for three waters similar to HCC.

19.  While the Productivity Commission recommended the removal of differentials, and replacing them with targeted rates, the overall impacts on the ratepayers could be the same.

20.  Depending on decisions in relation to the recent waste services review, there could be further changes to the targeted rates for recycling and rubbish collection.

21.  Officer advice is not to propose any further changes to the targeted rates.

Section G – Uniform Annual General Charge (UAGC)

22.  To assist in the development of options for step two, it is important that Council gives direction as to its overall philosophy for the UAGC and the differential on the general rates. 

23.  Extract from RFP:

Council also has the option to levy a uniform annual general charge(UAGC). A UAGC recovers a portion of general rates costs as a fixed amount per property. Such fixed charges tend to have a disproportionate impact on low income households as the charges make up a higher proportion of such a household’s income. For this reason, Council does not currently propose using a UAGC. Council does, however, use fixed charges for some targeted rates.

24.  Council identifies as part its current RFP that it does not have a UAGC however this option is still available for Council to reconsider as part of the review of the RFP. Table 1 shows the general rates impact on a range of properties based on a UAGC set at $100 or $300 (also refer Appendix 2).

 

 

 

 

 

Table 1: Impact for general rates in 2020/21 with UAGC of $100 or $300.

Property examples and categories

Capital Value 1 July 2020

Change in general rates based on  a UAGC $100

Change in general rates based on UAGC $300

Low value Haywards 

$405,000

Increase $56

Increase $159

High value Woburn

$950,000

Decrease $3

Decrease $30

Averages

Residential

$625,042

Increase $32

Increase $83

Business Central

$1,690,799

Decrease $438

Decrease $1,430

Business Suburban

$1,625,545

Decrease $359

Decrease $1,176

Business Accommodation

$3,127,121

Decrease $805

Decrease $2,616

Rural (no services)

$867,386

Increase $29

Increase $74

Business Queensgate

$240,000,000

Decrease $64,388

Decrease $210,535

Utilities

$2,630,700

Decrease $693

Decrease $2,258

 

25.  The UAGC being a fixed (uniform) rate, which is part of the General rate, is regressive in nature. The total amount collected by the UAGC reduces the amount to be collected by the capital value. The greater the value of the UAGC, the greater the reduction in general rates for those properties with a greater value than the average weighted capital value ($922k) compared with those properties with a capital value less than the average, which will pay more.  This is in conflict with the principle of rates, which are generally a taxation instrument for the recovery of services provided to the community as a whole.  Those properties close to average will only have a minimal impact, while those at either end of the valuation spectrum will be most affected i.e. the greater the value of the UAGC, the greater the effect. 

26.  The advantages of a UAGC is that all properties make a minimum contribution to the services provided by Council, and also as the percentage of the UAGC increases, compared with the general rate, this reduces the volatility of different property categories and the total rates payable. The volatility reduction is proportional to the UAGC to the general rate percentage – i.e. the higher the UAGC the less volatility. An example of changes is set out in the Appendix 3 – in summary this shows that the UAGC has to be large ($600 is used in the example) to reduce the volatility.

27.  UAGC 30% Limit: The maximum amount that can be collected is limited by the Local Government (Rating) Act 2002 (LGRA), which states the rates revenue sought by a local authority from the UAGC and targeted rates set on a uniform basis (excluding targeted rates that set are solely for water supply or sewage disposal) must not exceed 30% of the total rates revenue. As an indication, assuming there was no change to the refuse and recycling targeted rates for HCC, a UAGC of $600 would result in Council being at 21%.   

28.  Mechanism for setting UAGC: It is generally accepted that the quantum of the UAGC is set using two methods which are either as a levelling tool (based on some policy) or as a basket of activities.

29.  When a local authority decides to use the levelling tool, the local authority normally uses either a percentage of the general rate to be collected by way of the UAGC or as a percentage of total rates revenue excluding water and sewage disposal. The other approach is to use a basket of activities, where the council examines each activity and allocates a percentage of the cost of that activity to the UAGC.  The advantages and disadvantages of each approach are summarised in table 2.

Table 2: Comparison of mechanisms for setting a UAGC        

Advantages

Disadvantages

Levelling tool

Provides consistent application over a number of years

Perceived as not being transparent

Reduce the risk of breaching the 30% cap

May require the policy to be changed to modify the amount or percentage

Can provide flexibility in managing the changes in incidence of rating

 

Basket of activities

Can easily identify which activities are being funded from the UAGC

If the costs associated with the UAGC change, so does the UAGC, and therefore the incidence of rating

Perceived as being transparent

Can lead to a breach of the 30% cap

 

Can be inflexible thus requiring a change to the RFP

 

30.  It is important for Council to give direction to officers as to whether it wishes to consider a UAGC prior to considering the method for setting differential general rates. As noted above, the amount of the UAGC does impact the incidence of rating, (the movement of the general rate between ratepayer categories) as does the amount of the differential between ratepayer categories.

Officer advice: Do not implement a UAGC. While there may be some long term benefits of a UAGC to reduce volatility in rate charges from significant property revaluation changes, the UAGC would need to be set relatively high to achieve this. There is also a large degree of uncertainty about future property valuation changes, particularly given the uncertainty of Covid-19. Implementing a UAGC would result in higher rates charges to lower value properties due to the regressive nature of this rating tool and negatively impact rates affordability, particularly for lower value properties.  

Section H – Community facilities differentials and related rates remission

31.  As part of the LTP 2018-2028 the rates remission policy was extended to provide rates relief for Community facilities. There are three rates differentials for Community facilities, refer table 3 (details in Appendix 4). The Council’s rates remission policy allows for rates remissions for properties in the Community Facilities 1 and Community Facilities 2 categories if certain criteria are met.

Table 3: Summary of Community Facilities differentials

Category

Differential

 

Rates in 2020/21

Description

Community Facilities 1 (CF1)

1.028

$55,102

All rating units deemed non rateable or 50% non-rateable as per  Local Government (Rating) Act 2002

Community Facilities 2 (CF2)

0.497

$118,074

All rating units occupied by charitable trusts and not-for-profit organisations which use the land for non-trading purposes for the benefit of the community

Community Facilities 3 (CF3)

2.344

$102,331

All rating units occupied by not-for-profit community groups or organisations whose primary purpose is to address the needs of adult members for entertainment or social interaction, and which engage in recreational, sporting, welfare or community services as a secondary purpose.

 

32.  Officer advice: Given the review of the rates remission policy through the LTP 2018-2028, Officer advice is that there is no need to make changes to the CF1 and CF2 categories. Depending on decisions on the broader approach to business rates differentials there may be a need to make a change to CF3. This will be revisited at a later stage.

 

Section I – Rural property differentials

Background

33.  Currently there are 491 properties in the city classified as rural from a rating policy perspective. They collectively pay $679,525 or 0.9% of the general rate. The rural differential set in the Annual Plan 2020/21 is 0.747.

34.  As part of the review of the RFP, the current approach to the rural differential has been considered by officers. This review noted that there are currently aspects that do not align between the Rates Funding Impact Statement (FIS) and the principles underlying the transition in rates differentials as set in 2012. 

35.  The FIS describes the rural rate as:

“All rating units in the city which are:

used primarily for residential purposes, having an area in excess of 3,000 m2, but not connected to either water or sewerage reticulation;

East Harbour Regional Park;

not otherwise categorised in the Definition of Rating Categories table.”

36.  The RFP describes the rationale for a lower rural rate as:

“rural properties often experience a lower level of service because of the longer distances between rural properties and Council facilities”.

37.  The differences between the RFP and the FIS demonstrate a need to review these definitions. As part of the first principles review of rating policy, it is also important to consider the rural differential from a fairness perspective and the rates affordability impacts of this policy.

Consideration of definition

38.  Consideration does not cover significant direct services such as water supply and wastewater as these are subject to a targeted rate, therefore they are already only paid by those with access to the service.

39.  The basis for a separate rural differential is driven by the level of access to Council services. For example there are some direct Council services which are more limited such as street lighting.  Proximity to urban areas may indirectly indicate services such as parks and reserves may be utilised less. However, given the overall size of the city and proximity to urban areas, most rural properties would benefit from all Council activities covered by the general rate.

40.  The definition currently applied also creates an inconsistency with the Council description of properties under the District Plan. Refer Extract from District Plan to describe rural activity areas:

Rural Activity Area:

Some areas on the Western Hills of the Hutt Valley, at the extension of Fitzherbert Road Wainuiomata, at the beginning of Coast Road Wainuiomata, and in Moores Valley are in the Rural Residential Activity Area.

The Rural 
Residential Activity Area consists of areas where the subdivision pattern has already allowed for the establishment of rural residential lifestyle development. It also includes areas where future urban development may occur as the land adjoins residential activity areas.

The more intense subdivision pattern allows for a greater intensity of buildings and development than in the General Rural Activity Area.

General Rural Activity Area

The remainder of the rural area falls into the General Rural Activity Area. In this activity area more extensive rural activities occur. The Activity Area includes land adjoining the coast with high amenity values which should be protected from inappropriate subdivision, use and development.

Refer Appendix 5 which shows a map of Lower Hutt and the District Plan zoning.

Comparison to other Councils

41.  Appendix 6 is a comparison of rural rates for similar Councils.  From a differential perspective HCC is on par with similar Councils. However, there is more variance in definition with the many referring to the District Plan and/or the land use.  For example both Porirua City Council and Upper Hutt City Council link their rating policy to the District Plan classification of rural.

Options

42.  Potential options for Council to consider are:

Option 1a – Align the definition in the FIS with the definition currently in the RFP. This would result in a rate differential that is primarily based on property size and access to reticulated services.

Option 1b – Align the definition in the RFP with the definition that is currently in the FIS.  This would result in rate differential that is primarily based on distance from Council facilities. If this option was pursued, further work would be required to define and measure distance from Council services to capture properties.

Option 2 – Change the definition in the RFP and FIS to align with the District Plan descriptions of a Rural General and Rural Residential property. This option would provide alignment to how Council assesses rural properties. Refer Appendix 5 which visually shows the properties which are rated as rural properties but fall outside the District Plan rural categories.
Officer advice is that option 2 is a far more logical and practical solution, and that option 1a and 1b should not be progressed further.

Option 3 – Remove the separate rural differential. This would mean that those currently rated as rural would instead be rated as residential. This option would be pursued on the basis that services covered by the general rate are reasonably accessible by all properties in the City.

Table 4: Advantages and disadvantages of options

Option 2

Option 3

Advantages

Disadvantages

Advantages

Disadvantages

Improves definition clarity and supports legal compliance

Some properties will no longer be classified as rural and will have increased rates

Improves definition clarity and supports legal compliance

Increased burden of general rate for “rural” ratepayer

Fairer share of general rate activities

 

Fairer share of general rate activities

 

Provides longevity as will change with land use over time.

 

 

 

 

Impact on rural ratepayers

43.  Any change in the definition of the rural differential (or the removal of the differential) will result in rates increases on the affected properties. Appendix 7 provides a detailed assessment of the rating impact on ratepayers of the options. This is summarised in table 5.

 

 

Table 5: Comparison of rating impact on options for rural properties

Property Category

2020/21 Rates

Option 2

Option 3

$ Change in Rates

% Change in Rates

$ Change in Rates

% Change in Rates

Average Residential

$2,599

$0

0%

($1.86)

(0.07%)

Average Business Central

$13,628

$0

0%

($14.58)

(0.11%)

Average Business Suburban

$11,812

$0

0%

($12.60)

(0.11%)

Average Business Accommodation

$24,711

$0

0%

($22.91)

(0.09%)

Business Queensgate

$1,906,376

$0

0%

($2,376.20)

(0.12%)

Average Rural General Rate (no services)

$1,608

N/A

N/A

$542

33.69%

Average remain Rural (430 properties)

$1,643

$0

0%

N/A

N/A

Average change from Rural to Residential (54 properties)

$1,353

$457

33.81%

N/A

N/A

Average change from Residential to Rural (11 Properties)

$2,042

($516)

(25.27%)

N/A

N/A

Utilities

$18,294

$0

0%

($18.24)

(0.10%)

 

Officer advice

44.  Officer advice is that on balance option 2 is the best option for the long term however the rating impacts need to be further considered. Council is requested to consider the options and provide direction to Officers.

 

Section J – Method for setting general rates differentials 

Background

45.  In 2012, general business rates were almost four times the amount of residential rates. In the 2012-2022 Long Term Plan the priority focus for the Council was on “growth and rejuvenation of the city”. Council began a process of adjusting the share of general rates paid by businesses, residential and rural ratepayers. A gradual transition over 10 years of the rates differentials was introduced. This was considered to be a more equitable allocation between property categories. The intention was that by 2021/22, the general rates paid by business ratepayers would be 2.3 times that of a residential ratepayer (with a minor revision from 2.30 to 2.29 included in the LTP 2018-2028).

46.  In 2016 and 2019 the Council decided to make changes from its policy position to moderate the effect of the three-yearly property revaluation on residential properties caused by the significant increase in residential property values compared to other property types. 

47.  In addition, Council noted the increasing financial pressures on households.  Housing costs increased at a much faster rate than household incomes. Therefore allocating rates based on the differential transition policy was considered to place an unreasonable financial burden on residential ratepayers.

48.  Modelling indicated that about a 60% residential share of general rates was intended based on this initial approach from 2012. However, by 2019/20 the apportionment had reached 63% residential as shown in the graph 1. Council chose to maintain the apportionment at the 63% level as part of the Annual Plan 2020/21.

Graph 1: General rates revenue percentage by property category

49.  As part of the Annual Plan 2020/21(AP) deliberations, the Council considered that continuing the differential transition policy created an unfair burden on residential ratepayers.

50.  Appendix 1 presents a range of councils and their current size of business differentials. The HCC target of 2.29 is low compared to other Councils within the Wellington region. HCC levels adopted as part of the 2020/21 Annual plan are more comparable.

Methodology options

51.  The setting of the differential always requires rational and careful consideration.  Council in the current RFP has a range of considerations as detailed in paragraph 10 of this report. Council considered the application of this in terms of affordability for all sectors in setting the 2020/21 general rate differentials.

52.  This provides for significant flexibility in applying a differential. Generally, there are two methods in setting the value of the differential.

53.  The first is using a multiplier, where the Council has concluded that identifiable categories of properties should pay an appropriate differential amount compared with residential properties.  The appropriate amount is based on the overall assessment using the provisions of section 101(3)(b) LGA.  Prior to the AP, this was the Council’s preferred method as it was Council’s view that the overall differential for all business and utility categories should be 2.29 by July 2023 with Rural and some Community Facilities having a different rate.

54.  Table 6: Using a multiplier to set the general rates differential

Advantages

Disadvantages

Common practice across Councils.

Over a period of time, because of changes of capital value between the identifiable categories of properties, that percentage amount being collected by each category changes over time and without review the original rationale for the differentials becomes diluted.

Aligns with the principle of rates, which are considered a tax based on relative property value.

If there are significant different changes in the rateable value between different rating categories, then this will result in significant volatility of rates payable between those categories.

Enables properties to estimate what future rates will be based on expected property values changes.

 

 

55.  The second method is where the Council has identified that some property categories should contribute to a fixed percentage of the general rate. Again, the Council should use the provisions of section 101(3)(b) to arrive at that percentage. This percentage together with the current capital values is then used to calculate the appropriate differential.


 

 

56.  Table 7: Using a fixed percentage to set the  general rate differentials

Advantages

Disadvantages

Likely to be more stability in rates collected from each property category and better alignment with rationale for allocation to general rates to various categories.

The differential amount disclosed each year changes due to the changes within the capital values, and every three years there is a significant change in the differential amount, but not the percentage (or share) of rates being paid by a particular category.

Note - the Council does have the option of setting the differential every three years based on either revalued amounts or the expenditure proposed in the Long term plan.

More stability of rates charges for properties results in improved affordability of rates for those property categories. There is greater certainty provided to ratepayers over the medium to long term in relation to rates bills.

Not common practice across Councils currently, although historically was used by HCC and other Councils.

Where there are significant increased property values in a property category then those specific properties will experience an increase in rates and the other properties in that category will see a slight decline.

More complex for ratepayers to understand that differential will change each year depending on movement of property values changes across the city.

This approach is appropriate when there are a number of different types of ratepayers within the various categories.

There is an expectation that as there is a change in properties rateable value, there will be an associated change in rates payable, this may not occur with this approach.

 

57.  In 2020/21 Council allocated the general rate using modified differentials to ensure the percentage of 2020/21 general rates collected from each of the categories used in 2019/20 remains close to the same as the percentages of general rates collected in 2019/20 (except for Queensgate). Refer Appendix 4 which provides details of the differentials set in the AP, and summarised as:

•Business Accommodation       2.687

• Business Central                     2.946

• Business Queensgate              3.165

• Business Suburban                 2.6141

• Community Facilities 1          1.028

• Community Facilities 2         0.497

• Community Facilities 3          2.344

• Rural                                       0.747

• Utility                                      2.803.

58.  Council is requested to consider the two methodologies and provide direction to officers.

Indicative rating impact of different methods – using a fixed percentage

Option 1 – Maintain apportionment of rates between differential categories at the current level.  This would represent the view that the current share of the general rate between categories is considered by Council to be an equitable and affordable level across all categories.

Option 2 – adjust the share of the general rate to reflect a 60% allocation to residential ratepayers as was intended when the 2012 approach was agreed.

Option 3 – adjust the share of the general rate to reflect a 1% change from option 1 – i.e. at 62% allocation to residential ratepayers as was intended when the 2012 approach was agreed.

Table 8 - Rating impact with options

Option 1  Residential at 63% of total general rates

Option 2 Residential at 60% of total general rate

Option 3 residential at 62% of total General Rate

 

Property Category

Capital Value 1 July 2020

1 July 2020 Rates Actual

$ Change p.a.

%

$ Change p.a.

%

Average Residential

$625,042

$2,599

($70)

(3%)

($20)

(1%)

Average Business Central

$1,690,799

$13,628

$1,320

10%

$504

4%

Average Business Suburban

$1,625,545

$11,812

$1,096

9%

$402

3%

Average Business Accommodation

$3,127,121

$24,711

$2,297

9%

$917

4%

Business Queensgate

$240,000,000

$1,906,376

$192,669

10%

$68,796

4%

Average Rural

$867,386

$1,608

$0

0%

$0

0%

Utilities

$2,630,700

$18,294

$0

0%

$0

0%

 

Indicative rating impact of different methods – using a multiplier

59.  Table 9 provides details of the indicative impacts assuming that the multiplier methodology is retained. There are a range of scenario options available. Option 4 – retain differentials at the same level as set in 2020/21.

60.  Option 5 – Continue to reduce the business rates in line with the 2012 approach. Amend the differentials to reflect the next step in the transitional differential plan, i.e. 2.37 differential for business central. 

61.  Option 6 – Adjust business rates in line with the 2012 approach to the final differential intended of 2.3 for business categories.

 

Table 9 : Comparison of options for multiplier method

 

 

Option 4 – no change

Option 5 – one year progression towards 2.3 differential

Option 6 – transition to 2.3 differential completed

Property Category

Capital Value 1 July 2020

1 July 2020 Rates Actual

$ Change Amount annual

%

$ Change Amount annual

%

Average Residential

$625,042

$2,599

$69

3%

$91

4%

Average Business Central

$1,690,799

$13,628

($1,670)

(12%)

($2,144)

(16%)

Average Business Suburban

$1,625,545

$11,812

($393)

(3%)

($722)

(6%)

Average Business Accommodation

$3,127,121

$24,711

($1,644)

(7%)

($1,954)

(8%)

Business Queensgate

$240,000,000

$1,906,376

($367,584)

(19%)

($434,914)

(23%)

Average Rural (no services)

$867,386

$1,608

$123

8%

$215

13%

Utilities

$2,630,700

$18,294

($2,479)

(14%)

($2,399)

(13%)

 

62.  Further detailed analysis of these options in presented in Appendix 8. This includes detail analysis of impact for suburbs. 

63.  Council is requested to consider the options and provide officers with direction.

Section K – Other options to change general rates differentials

64.  The Council needs to consider not only the method of setting the differential as noted above, but what are the categories of properties that the differential should be applied to.  When considering the categories, Council must consider the locations, both differences and similarities between the categories as well as the overall impacts on all ratepayers. Officers have reviewed a range of options and refined these as follows:

65.  Option  1 : Status quo

The current policy has nine different property categories for the differential; there would be no change in this option.

66.  Option 2 - merge differentials for Business Central and Business Queensgate:

The separate differential for Business Queensgate was created as part of the Annual Plan 2020/21 largely as a result of the difficulties of the significant reduced property value of Queensgate. Going forward these differentials could be merged together to reflect the similarity of level of services. The differential for Business Central and Business Queensgate would continue to be higher than the Business Suburban category as these have a greater impact or requires a higher level of service than the remaining business activities within the city. Activities that are likely to be impacted on the central business district, compared with other business categories are parking, street cleaning and roading.

67.  Option 3 – remove differential for Business accommodation, merge into either Business Suburban or Business Central depending on location

There is difficulty in explaining the rationale for these properties being separated out from other businesses.

68.  Council is requested to provide initial direction to officers in regards to the merging of differentials. Officers will provide more analysis and advice following this initial direction from Councillors. 

69.  As part of the updates to the Policy the language will be adjusted to use the word “commercial” instead of the word “business” as this better reflects the nature of the properties.

Section L – Review of rates instalment/invoicing cycles

Rates legislation background

70.  Section 24 of the Local Government (Rating) Act 2002 (LGRA) provides Councils with the ability to set the date by which rates should be paid by instalment as long as it is stated in the Rates Resolution.  HCC has had six instalments in place for a number of years. Rates invoices are issued every two months and are due the following month. The details of the number of instalments and the due dates are included in the ‘Rates Funding Impact Statement’ section of LTP or Annual Plan each year.

71.  Extract of rates resolution from 30 June 2020:

“Rates Instalments

 

1.     The targeted rates and the general rate for the financial year ending 30 June 2021, as set out above, are payable in six equal instalments by the following due dates:

 

Instalment Number

Due Date

One

20 August 2020

Two

21 October 2020

Three

21 December 2020

Four

22 February 2021

Five

20 April 2021

Six

21 June 2021

 

Comparison to other councils 

72.  Appendix 9 provides detail information about other councils instalment details and dates. HCC is the only Council out of the selection that has six instalments. The majority of Councils have four instalments. Tauranga has only two instalments.

Table 10: Number of rates instalments

Number of instalments

Comparison to other Councils

Two

Tauranga City Council

Four

Porirua City Council, Christchurch City Council, New Plymouth District Council, Hamilton City Council, Dunedin City Council

Five

Upper Hutt City Council

Six

Hutt City Council

 

What change is proposed

73.  There is an opportunity to reduce the number of instalments. Officer advice is to reduce the number of instalments to four per annum from the current six and to align with other Councils. Table 11 shows the advantages and disadvantages of this change.

Table 11: Advantages/disadvantages of change to four instalments

Advantages

Disadvantages

Savings in printing and postage costs of about $44k.

Ratepayers may have difficulty understanding and adjusting to the change. There could be a large number of queries from ratepayers as a result of the change. A proactive communication plan would be needed

Lower environmental impact as a result of less printed material.

Each instalment invoice would be a higher amount although the total annual rates amount would not change. Ratepayers may perceive a rates increase as a result.

 

There are cashflow timing changes which has consequential financial impacts. Modelling has indicated this is very minor.

 

Implementation approach and support to ratepayers

74.  A strong communication plan for ratepayers would be the key implementation task. The communication plan needs to let ratepayers know the key reason for the change and the impact on them. There would be training for the call centre, front of house staff and rates staff to explain the change and resolve ratepayer queries. 

75.  We would continue to offer direct debit on any day of the week with optional frequencies of weekly, fortnightly, monthly or on the due date. Ratepayers would be able to set their rates payments on the basis that best suits their individual circumstances and budget. The only change would be that an invoice would be sent out less frequently. We currently have 17,409 accounts on direct debits which is 42% of our ratepayers. Further analysis of ratepayer payment methods are attached as Appendix 10.

76.  We would propose to change any ratepayers on a ‘due date’ direct debit, i.e. direct debit is set to be deducted on the due date of the instalment, to a bi-monthly direct debit. This will mean that the direct debit will still operate in the same way it currently does and there would be no impact for these ratepayers. Newly signed up direct debits will have the option of a quarterly direct debit deduction.

77.  Currently 8,758 or 21% of ratepayers receive their rates instalments via email, 27,811 or 67% are posted out and the remainder are for larger organisations which are held by the rates team who liaise directly with these organisations.  Further operational savings can be achieved if ratepayers agree to receive their rates invoices via email rather through post. We proactively promote email use through our customer services team, rates officers and communication channels. 

Section M - Next steps

78.  Officers will report back to the subcommittee on the 27 October with further analysis and advice and seek direction to support the policy development. Included here will be information on the proposed rating growth assumptions to be included in the plan.

Climate Change Impact and Considerations

34.  The matters addressed in this report have been considered in accordance with the process set out in Council’s Climate Change Considerations Guide.  There are no climate change impacts or considerations arising from this report.

Legal Considerations

79.  The most relevant legislation includes the Local Government Act 2002, Local Government (Rating) Act 2002 and the Rating Valuations Act 1998. 

Financial Considerations

80.  External specialist advice is being provided in support of the proposed changes to the policy included in this report. This is being funded from within existing budgets.

Appendices

No.

Title

Page

1

Appendix 1 - Compare local authorities key rating policy elements (rating basis, UAGC, rating differentials)

116

2

Appendix 2 - Impact of UAGC of $300 and $100 on allocation of general rates

118

3

Appendix 3 - UAGC - Indicative impact of property valuation changes on general rates allocations

119

4

Appendix 4 - HCC Rating Differentials Annual Plan 2020/21

120

5

Appendix 5 - Map showing District Plan categories with comparison to properties rates as rural category

121

6

Appendix 6 - Comparison of local authorities rural policy

122

7

Appendix 7 - Rural rates - Indicative rating impact of options

123

8

Appendix 8 - Rating impact for options on general rates differentials methodology

126

9

Appendix 9 - Comparison of local authorities - number of rates instalments

130

10

Appendix 10 - Ratepayer payment method analysis

131

    

 

 

 

 

 

Author: Daniel Koenders

Manager Financial Strategy & Planning

 

 

 

Author: Helen Stringer

Financial Transaction Services Manager

 

 

 

 

 

 

Reviewed By: Jenny Livschitz

Chief Financial Officer

 

 

 

Reviewed By: Anna Welanyk

Director Transformation and Resources

 

 

 

Approved By: Jo Miller

Chief Executive

 


Attachment 1

Appendix 1 - Compare local authorities key rating policy elements (rating basis, UAGC, rating differentials)

 

Summary comparison of key aspects of local authorities rating policy

Territorial Local Authority

Rating basis

UAGC

Targeted rates

General Rate Differential

Hutt City Council

Capital Value

No

Water and Wastewater
Recycling
Area based

Residential 1.0

Rural 0.75
Utility 2.80
Business Central 2.95, Business Suburban 2.61, Business Accommodation 2.69,  Business Queensgate 3.17

Wellington City Council

Capital Value

No

Water and Sewerage

Stormwater
Area based

Base (inc. Residential)  1.0

Commercial  3.25

Porirua City Council

Capital Value

Yes $420 per SUIP

Water and Sewerage

Recycling
Area based

Residential and other  1.0

Motels  1.62
Business  3.41

Plaza  2.80
Others

Upper Hutt City Council

Capital Value

No

Water and Wastewater
Stormwater
Area based

Standard  1.0
Rural  0.73
Business, Utilities  2.9

Christchurch City Council

Capital Value

Yes $132 per SUIP

Water and Sewerage
Waste Minimisation
Others

Standard  1.0
Business  1.697
Remote rural  0.75

Palmerston North District Council

Land Value

$500 per rating unit

Water and Wastewater
Kerbside Recycling
Others

Misc  1.00

Non-residential  2.65

Single unit residential  0.78, Scaling multi-unit residential  1.15 – 1.76

Tauranga City Council

Capital Value

$296 per SUIP

Water and Wastewater
Glass collection
Area based and others

Residential  1
Commercial  1.2

New Plymouth District Council

Capital Value

$438.94 per SUIP

Water and Sewerage
Refuse Collection
Area based and others

Residential  1.00
Commercial and Industrial  4.17
Small holdings, farmland  0.82

Hamilton (2019/20)

Capital Value

$348 per rating unit

Water and Wastewater

Refuse and others

Residential  1.00 , Commercial  2.5690
BID Commercial  2.4405 Other

Dunedin

Capital Value

No

Water and Drainage

Kerbside Recycling
Area based and others

Residential  1.00
Commercial  2.46
Others

 

*UAGC = Uniform Annual General Charge


Attachment 2

Appendix 2 - Impact of UAGC of $300 and $100 on allocation of general rates

 

Detail workings to show impact of implementing $100 and $300 UAGC for general rates

 

Property Category

1 July 2020 Total Current Rates

1 July 2020 Total Targeted Current Rates

Current General rate in the $ (no UAGC)

Total General rate including $100 UAGC

Total General rate including $300 UAGC

Change 20/21 general rates based on UAGC $100

Change 20/21 general rates based on UAGC $300

Low value Haywards

$2,053

$1,048

$1,005

$1,061

$1,164

$56

$159

High value Woburn

$3,405

$1,048

$2,357

$2,355

$2,327

-$3

-$30

Averages

Residential

$2,599

$1,048

$1,551

$1,583

$1,634

$32

$83

Business Central

$13,628

$1,268

$12,360

$11,922

$10,930

-$438

-$1,430

Business Suburban

$11,812

$1,268

$10,544

$10,185

$9,368

-$359

-$1,176

Business Accommodation

$24,711

$3,863

$20,848

$20,043

$18,232

-$805

-$2,616

Rural (no services)

$1,608

$0

$1,608

$1,638

$1,683

$29

$74

Business Queensgate

$1,906,376

$21,363

$1,885,013

$1,820,625

$1,674,478

-$64,388

-$210,535

Utilities

$18,294

$0

$18,294

$17,601

$16,037

-$693

-$2,258

 


Attachment 3

Appendix 3 - UAGC - Indicative impact of property valuation changes on general rates allocations

 

Indicative impact of property valuation changes on general rates allocations – with comparison of no UAGC $600 and $150 UAGC


Attachment 4

Appendix 4 - HCC Rating Differentials Annual Plan 2020/21

 

Hutt City Council Rating Differentials – Annual Plan 2020/21

 

Category

 

Definition

Residential

1.00

All rating units in the city which are:

·      used primarily for residential purposes, excluding properties categorised as rural;

·      used or set aside for reserve or recreational purposes (other than East Harbour Regional Park)

Business Accommodation

2.687

All rating units in any part of the city which are used primarily for commercial accommodation.

Business Central

2.946

All rating units which are located within the Central Area Parking District and which are used primarily or predominantly for commercial and/or industrial purposes, excluding properties categorised as:

·      Utility Networks; Business Accommodation; Business Queensgate.

Business Queensgate

3.165

All rating units within the boundary of Bloomfield Terrace, Knights Road, Bunny Street, Queens Drive and Waterloo Road, which are commonly known as Queensgate Mall.

Business Suburban

2.6141

All rating units in any part of the city which are used primarily or predominantly for commercial and/or industrial purposes, excluding properties categorised as:

·      Community Facilities; Business Central; Utility Networks; Business Accommodation; Business Queensgate.

Community Facilities 1

1.028

All land in the city which is:

·      non-rateable in terms of the Local Government (Rating) Act 2002, Schedule 1, Part 1;

·      50% non-rateable in terms of the Local Government (Rating) Act 2002, Schedule 1, Part 2

Community Facilities 2

.0497

All rating units in the city occupied by charitable trusts and not-for-profit organisations which either:

·      use the land for non-trading purposes for the benefit of the community;

·      would qualify as land which is 50% non-rateable in accordance with Part 2 of Schedule 1 of the Local Government (Rating) Act 2002 if the organisation did not have a liquor licence, but excluding any rating unit used for residential purposes.

Community Facilities 3

2.344

All rating units in the city occupied by not-for-profit community groups or organisations whose primary purpose is to address the needs of adult members for entertainment or social interaction, and which engage in recreational, sporting, welfare or community services as a secondary purpose.

Rural

0.747

All rating units in the city which are:

·      used primarily for residential purposes, having an area in excess of 3,000 m2, but not connected to either water or sewerage reticulation;

·      East Harbour Regional Park;

·      not otherwise categorised in the Definition of Rating Categories table.

Utility

2.803

All rating units which comprise all or part of a utility network.

 


Attachment 5

Appendix 5 - Map showing District Plan categories with comparison to properties rates as rural category

 


Attachment 6

Appendix 6 - Comparison of local authorities rural policy

 

Comparison of local authority – Rural     

Territorial Local Authority

 

Rural differential

Rural definition Funding Impact Statement

Notes

Hutt City Council

Capital Value

Rural 0.747

Residential and over 3,000m2 not connected for water or sewerage, East Harbour Regional Park, not otherwise categorised

 

Wellington City Council

Capital Value

No *

N/a

*Open Space Remission which remits 50% of the  General Rate on land classified as rural etc

Porirua City Council

Capital Value

Less  50ha 0.75
Over 50ha and other  0.7

Land area and classified as rural under the District Plan

Rating units used for business purposes are excluded

Upper Hutt City Council

Capital Value

Rural 0.73

Over 30ha and classified as rural under the District Plan

 

Christchurch City Council

Capital Value

Rural 0.75

Rural under District Plan and used for agricultural, horticultural etc

Business and residential excluded

Palmerston North District Council

Land Value

Over 5ha .20
Less 0.2ha .60

Between 0.2 & 5ha 0.45

Not otherwise classified and is not serviced

Reference to the District Plan in relation to other differential categories but not this one

Tauranga City Council

Capital Value

No

N/a

N/a

New Plymouth District Council

Capital Value

Small holdings 0.82
Farmland 0.82

Not otherwise classified and land area conditions of 1ha and 4ha

 

Hamilton City Council

Capital Value

Other 0.741

Not commercial where there is no wastewater and water by meter

No reference to “Rural” but in the table of sample properties, rural is Other diff category

Dunedin City Council

Capital Value

Lifestyle 0.95
Farmland 0.80

Based on QV Land Use Code

Lifestyle = 1, 20, 21, 22, 29
Farmland = agricultural, horticultural, pastoral

 


Attachment 7

Appendix 7 - Rural rates - Indicative rating impact of options

 

Rural rates detail

The detailed table below presents the rating impact on average rates for each residential suburb and each current property category (excluding community facilities). Options are:

2.   Change the definition in the RFP and FIS to align with the District Plan description of a rural residential property.

3.   Remove the separate rural rate differential in entirety. This would mean that those currently classified as rural would instead be classified as residential.

Option 2: Align definition of rural with district plan

Option 3: Merge rural into residential differential. No other changes

Residential Suburbs

Capital Value July 2020

2020-2021 Rates

Option 2 Rates

 Change Annual $

Change Weekly $

Change Amount %

Option 3 Rates

 Change Annual $

Change Weekly $

Change Amount %

ALICETOWN

$660,000

$2,686

$2,686

$0

$0.00

0%

$2,684

($2)

($0.04)

0%

AVALON

$605,000

$2,549

$2,549

$0

$0.00

0%

$2,547

($2)

($0.03)

0%

BELMONT

$710,000

$2,810

$2,810

$0

$0.00

0%

$2,808