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.
Long Term Plan/Annual Plan Subcommittee
03 February 2022
File:
(22/109)
Report no: LTPAP2022/1/33
Draft Annual Plan
2022-2023
Purpose
of Report
1. The
purpose of this report is to further progress the development of the Draft
Annual Plan 2022-2023 and engagement material ahead of the upcoming light
community engagement.
|
Recommendations
That the Subcommittee
recommends that Council:
1) notes that public engagement is planned for the period 12 April
– 3 May 2022;
2) notes that Council has previously agreed to a light engagement for
the Draft Annual Plan 2022-2023 as there have been no significant changes
from the Long Term Plan 2021-2031;
3) notes that the final engagement material together with the
supporting underlying information of the Draft Annual Plan 2022-2023 will be
presented to the LTP Subcommittee on 4 April 2022 for adoption;
4) endorses the initial draft version of the engagement material
subject to any feedback, refer Appendix 2;
5) endorses the proposed budget updates in table 2 for budget
carryovers identified;
6) notes the revised financial projections, including projected debt
and balanced budget results as detailed in Section E;
7) endorses the proposed rates revenue increase for inclusion in the
draft Annual Plan 2022-2023 of 5.9% (before the impact of growth);
8) notes that the indicative impact on the average residential
property valued at $630,000 will be a rates increase of $132 per annum or
$2.54 per week which includes rubbish and recycling;
9) endorses the initial draft Annual Plan 2022-2023 subject to any
feedback, refer Appendix 1; and
10) considers any further direction and guidance to be provided to
officers ahead of finalising the draft Annual Plan 2022-2023 and draft
engagement material.
|
Executive summary
2. The
Long Term Plan 2021-2031(LTP) was adopted by Council on 30 June 2021. This lays
out Council’s strategic intent and direction for the 10 years from
2021-2031. The LTP set Council’s strategic direction of getting the
basics right to address the challenges that are being faced by the city and
achieve the vision for Lower Hutt of a city where everyone thrives.
3. There
was extensive consultation around the LTP, which included early consultation on
the direction and focus of the LTP, followed by a consultation period where
material was available through a range of media channels, community meetings
and in person hearings with Council.
4. Extensive
consultation is not required for the draft Annual Plan 2022-2023 (DAP) as it
aligns with the direction set in the LTP. Council has previously agreed to a
light-touch engagement. This will consist of an online survey with accompanying
social media collateral, accompanied by a short, printed document to all
households in Lower Hutt.
5. The light touch
engagement period is planned to take place from 12 April to 3 May 2022.
6. At
the subcommittee meeting on 16 December 2021 Council progressed a range of
budget decisions to be updated in the DAP. This included the decision to keep
rates increases at the level set in the LTP.
7. Affordability of rates is a key consideration of
Council. The proposed rates revenue increase in 2022/23 equates to the
following indicative impact of the average residential and commercial central
ratepayer:
|
Property Category
Capital value (CV)
|
2021/22 Rates
|
2022/23 Rates
|
$ Change Annual
|
$ Change Weekly
|
|
Average
Residential, CV $630k
|
$2,951
|
$3,083
|
$132
|
$2.54
|
|
Average
Commercial Central, CV $1.8M
|
$15,119
|
$16,353
|
$1,234
|
$23.73
|
8. The financial
impact of these decisions are as follows:
· the LTP projected to achieve a balanced budget in 2028/29; we remain
within this projected timeframe in the DAP.
· The 2022/23 to 2025/26 capex has increased to $729M in the DAP
compared to the LTP capex of $644M. This is largely due to increased costs of
the Barber Grove sewer and Seaview storage tank, the bringing forward of the
Petone collecting sewer and the addition of the valley floor growth projects.
· Net debt is projected to peak in the DAP at $618M in 2028/29
compared to a projected peak in the LTP of $573M, largely due to the increased
capital programme.
9. 2022 has seen a
shift in how we approach COVID-19 as a country. We’re now living and
working with COVID-19 across New Zealand. We are considering how contractor and
material supply impacts due to COVID-19 will affect the work we have planned
for the year ahead. Officers considering contingency plans and are reviewing
our capital programme in light of these considerations ahead of the annual plan
being finalised in June 2022.
10. This report seeks direction
from Council to further progress the development of the Draft Annual Plan
2022-2023 and engagement material ahead of the upcoming light engagement.
Section
A - High Level Timeline
11. Table 1 sets out the timeline
for the Annual Plan 2022-2023 process as agreed to by Council.
Table 1: High level plan
|
Activity
|
Date
|
Status
|
|
Officers progress initial
planning and preparation
|
August/September
2021
|
Complete
|
|
Council endorsement of
high-level plan and key assumptions.
|
1
November 2021
|
Complete
|
|
Council meeting –
Review of cost pressures, work programme changes and reprioritisation,
funding options.
|
16
December 2021
|
Complete
|
|
Initial DAP and draft engagement
material reviewed by Council
|
28
February 2022
|
Today
|
|
Council adopt DAP and
engagement material for public engagement
|
4
April 2022
|
|
|
Public engagement -
“light” engagement
|
12
April 3 May 2022
|
|
Community feedback received
and considered
|
May
2022
|
|
Council meets to make final
decisions
|
7
June 2022
|
|
Council adopts the AP and
sets the rates
|
30
June 2022
|
Section
B - High level engagement approach
12. Extensive consultation is not
required, as this DAP aligns with the direction set in the LTP. Council has
previously agreed to a light-touch engagement. This will consist of an online
survey with social media support, accompanied by a short, printed document to
all households in Lower Hutt.
13. While formal engagement is
not required, it is still important for Council to communicate with residents
about the progress being made on the LTP and the work planned for the year
ahead.
14. A short survey will be the
main form of collecting feedback from residents on the DAP, hosted on our
engagement website (Bang the Table). Officers are progressing a digital-first
engagement approach, allowing us to engage with a broad range of stakeholders
in an effective and efficient way. A digital-first approach is also prudent
given the potential impact of COVID‑19 and will allow us to continue with
engagement regardless of the COVID‑19 situation at the
time.
15. Officers recognise that a
digital first approach must also be digitally inclusive. This means
supplementing digital efforts with traditional engagement methods. For this
reason, we propose to print and distribute a short engagement document to
households which will direct readers to the online survey, or to their nearest
Council facility where they can access the survey with the support of Council
staff if needed.
16. Alongside the online survey
and printed document, we will again be hosting an online rates calculator where
residents can enter their address to find specific information about their how
the proposed rates changes affect their property. Links to this calculator will
be included in the survey, and the printed document will also direct readers to
where they can find this tool online.
Section
C - Draft engagement material
17. As above, the main components
of light-touch engagement include an online survey, and a short, printed
document distributed to letterboxes in Lower Hutt.
18. The online survey will be
hosted on Bang the Table (our digital engagement platform) and will include
links to relevant material including the DAP. Online content will largely
be a digitally friendly version of information contained within the Draft
Annual Plan and engagement documents.
19. The printed document will
provide a high-level overview of the DAP, major projects being progressed in
the year ahead, as well as information on how the plan is being funded i.e. the
rating impact.
20. An initial draft of the
Annual Plan along with the engagement material and survey questions are
attached in Appendix 1 and 2 to this report.
21. In addition to the online
survey and printed document, officers are progressing an online rates
calculator like what was utilised during the LTP consultation in
2021. The online rates calculator allows residents to enter their
address to find specific information about their how the proposed rates changes
affect their property.
Section
D - Budget decisions
22. The Council has previously
progressed a range of budget decisions for the DAP which are summarised in
Appendix 3 including proposed targeted rates and charges for kerbside rubbish
and recycling (see Appendix 3). The work to date on the post implementation
operational appraisal of kerbside rubbish and recycling has not identified any
further changes or additions for decisions by the LTP/AP Subcommittee. The
appraisal report, once finalised, will be submitted to the Corporate Leadership
Team and to members via the Climate Change and Sustainability Committee.
23. There are some further budget
matters where decisions/direction is sought in the preparation of the DAP in
relation to carryovers from 2021/22 to 2022/23 which have been identified and
the transport storm damage budget. Council is requested to consider each of
these budget matters in table 2 and provide direction to officers.
Table 2: Budget matters
requiring review and decisions
|
|
Brief Description
|
Financial impact over the ten years of the LTP and
officer recommendation
|
Further information in Appendix 4
|
|
1.
|
Wainuiomata
Hill Road Safety Seal
Programmed physical work for
2021/22 are proposed to be deferred due to COVID related shipping delays of
the high friction surfacing (HFS). Once the HFS arrives, it will be too
late in the season (weather-wise) to undertake the work.
|
$1M capital and $0.5M Waka
Kotahi subsidy revenue moved from 2021/22 to 2022/23.
Officers recommend the
approval of the proposed changes.
|
Attachment A
|
|
2.
|
Development
Stimulus Package
Redistribution
of the remaining balance to reflect the years that the fees and rates will be
remitted, based on current information on developments.
|
A carryover
of $2.9M is sought to redistribute the remaining balance to more accurately
reflect the years that the fees and rates will be remitted, based on current
information.
A reduction
of $0.9M in the overall balance for remissions is achieved as a number of
developments have not proceeded and as a consequence of Consentium being
established by central Govt to undertake Kainga Ora’s building
consents.
Officers recommend the approval
of the proposed change.
|
Attachment B
|
|
3.
|
Extension
of Wise Street Wainuiomata
The next
stage of work has been delayed due to a Greater Wellington consent that was
not planned and is now required for an open drain. There has also been delays
in works due to COVID lockdown in 2021.
|
A total
budget of $2.27M was available in 2021/22 for the work which is partly
completed ($0.92M). A carryover of $1.35M into 2022/23 is sought.
Officers recommend the
approval of the proposed changes.
|
Attachment C
|
|
4.
|
Micro-mobility
Council
officers have been working to get a transport system-wide view across all
projects and programmes and ensure the timing of works lines up with other
complimentary infrastructure. As a result it is proposed that the majority of
the 2021/22 costs of this micro-mobility programme will fall in the 2022/23
year, subject to resourcing.
|
A carryover
of $2.5M capital and $1.3M Waka Kotahi subsidy revenue is sought.
Officers recommend the
approval of the proposed changes.
|
Attachment D
|
|
5.
|
Transport
– Storm Damage
With climate
change at the forefront, we are experiencing more frequent storm surges in
the Eastern Bays, Seaview and Petone beach areas, heavy rainfall and extreme
wind events. Due to climate change these types of events are predicted to
become more common. Our current combined storm damage and slip repair
budget of $240,000 per annum is insufficient to enable Council to respond to
these events resulting in a budgeted over spend in the 2021/22 year.
|
The existing operational budget for storm damage is $140k per
annum and $100k per annum for slip repairs. We are seeking an increase in
council funding in the 2021/22 to $760k per annum for storm damage and an
increase of $100,000 per annum for slip repairs making the total funding sought
$1.1M for 2021/22.
For future
years we are seeking an increase in the storm damage budget of $270K being
the total storm damage and slip repairs budget to $510K for outer years.
Officers are
in negotiation with Waka Kotahi in relation to part funding these additional
costs. Subsidy funding of 51% has been assumed in line with the usual
subsidy received from Waka Kotahi.
|
Attachment E
|
Section
E - Summary financial information
24. Based on financial modelling
completed of the impacts of the DAP budget review process, the following
information provides a summary of the impacts of the changes.
25. Information has been
presented below in line with key metrics in council’s financial strategy
covering the projected balanced budget position, projected debt and the
projected capital programme compared to the LTP forecasts.
26. The modelling includes the
changes recommended by officers in table 2.
27. Our financial strategy
focuses on strong fiscal management while addressing growing demands for
increased capital expenditure in core infrastructure assets. In our 10-Year
Plan, we set the direction of returning to a balanced budget by 2028/29. This
draft Annual Plan reinforces this direction with the timeframe of 2028/29
maintained despite a range of cost challenges.
Inflation
28. Inflation rates used in the
plan are the Local Government Cost Index (LGCI) prepared by BERL for local
government. These rates are prepared annually and most recently received in
October 2021. The adjustors used are based on data to June 2021.
Recent CPI information indicates that higher than planned for inflation
continues to be a risk.
29. For Council this is in part
managed through having contracts in place for services. This helps provide a
level of certainty in the near to medium-term. As part of the Draft Annual Plan
budgeting process officers worked to ensure that they could continue to work
within budgets set in the LTP and found costs savings or re-prioritised within
the base budget where possible to balance rising costs.
30. Specific risk factors
identified through the budgeting process have been brought to council for
decision, for example the reserves maintenance and road maintenance contracts.
31. The wider economic
environment continues to carry a number of uncertainties due to impacts
COVID-19 is having. Officers will continue to monitor and provide advice on
specific risks as they arise.
COVID-19
32. 2022 has seen a shift in how
we approach COVID-19 as a country. We’re now living and working with
COVID-19 across New Zealand.
33. Council is currently working
on different contingency plans to allow us to continue to make progress on our
key projects and provide services despite the challenges posed by the ongoing
pandemic.
34. We are considering how
contractor and material supply impacts due to COVID-19 will affect the work we
have planned for the year ahead. Officers are reviewing our capital programme
in light of these considerations ahead of the annual plan being finalised in
June 2022.
Capital investment
35. Graph 1 shows the updated
capital programme (after inclusion of the carryovers in table 2 and the
previous budget decisions detailed in Appendix 3).
36. The 2022/23 to 2025/26 capex
has increased to $729M in the DAP compared to the LTP capex of $644M. This is
largely due to increased costs of the Barber Grove sewer and Seaview storage
tank, the bringing forward of the Petone collecting sewer and the addition of
the valley floor growth projects.
37. The achievability of this
capex programme appears to be high risk, due to a range of factors including
uncertainties due to COVID-19 impacts and organisational capacity to deliver. We continue to work closely with suppliers and contractors on
projects that are underway or planned. In light of current challenges the
Corporate Leadership Team is regularly reviewing our capex programme and any
changes to timeframe, cost etc will be reported to members.
38. Detailed capital project
lists are included in each activity section in the Draft Annual Plan attached
in Appendix 1.
Graph
1: Capital investment plan, comparison of DAP with LTP
Borrowing
39. The change in the capital
programme results in a corresponding adjustment in the level of borrowings
we’ll require. Borrowing levels are maintained within the limits set in
our financial strategy. Net debt is projected to peak in the DAP at $618M in
2028/29 compared to a projected peak in the LTP of $573M.
Graph 2: Projected
net debt, comparison of DAP and LTP
Balanced
budget
40. The balanced budget position
in 2022/23 is projected to be a $26.2M deficit compared to a deficit of $24.6M
in our 10-year plan. In the 10-Year Plan 2021-2031 we are projected to achieve
a balanced budget in 2028/29; we remain within this projected timeframe in this
draft Annual Plan.
Graph 3: Projected balanced
budget target, comparison of DAP and LTP
The
Hutt City Council balanced budget target is defined as the Local Government
(Financial Reporting and Prudence) Regulations 2014 definition, modified to
exclude from the definition of revenue Waka Kotahi NZ Transport Agency’s
Capital improvement subsidies, Infrastructure Acceleration Fund grants and
central government COVID-19 Response and Recovery co-funding for Naenae Pool
and Eastern Bays Shared Path.
Projected rating impact
41. Council agreed to include a
rates revenue increase in the draft Annual Plan 2022/23 which aligns with the
Long-Term Plan 2021-2031, being an overall rates revenue increase of 5.9%
together with a growth-related rates revenue component of 1.1%.
42. The rates projections in
table 3 is indicative modelling based on a 5.9% overall rates revenue increase
plus 1.1% for growth in the 2022/23 year.
43. Affordability of rates is a
key consideration of Council. The proposed rates rise equates to an average
increase of $2.54 per week per household or an average increase of $132 per
annum. Investment in our Three Waters infrastructure makes up about half ($65)
of the average $132 per annum rise. The remaining $67 covers cost increases for
all the other services provided (including transport, parks, community
facilities, rubbish, recycling etc.).
Table
3: Indicative rates impact for DAP by property category
|
Property Category
|
Capital Value
|
2021/22 Rates
|
2022/23 Rates
|
$ Change Annual
|
$ Change Weekly
|
Change Amount %
|
|
Average
Residential
|
$630,000
|
$2,951
|
$3,083
|
$132
|
$2.54
|
4.5%
|
|
Average Commercial Central
|
$1,782,000
|
$15,119
|
$16,353
|
$1,234
|
$23.73
|
8.2%
|
|
Average Commercial Suburban
|
$1,644,000
|
$13,135
|
$14,230
|
$1,095
|
$21.05
|
8.3%
|
|
Commercial Queensgate (LTP+$20M
estimate)
|
$315,000,000
|
$2,300,864
|
$2,660,276
|
$359,412
|
$6,911
|
15.6%
|
|
Average Rural (no water or wastewater)
|
$886,000
|
$1,954
|
$2,024
|
$70
|
$1.34
|
3.6%
|
|
Utilities
|
$3,000,000
|
$19,260
|
$20,856
|
$1,595
|
$30.68
|
8.3%
|
44. Rates
modelling has been updated for the latest rating database information up to the
end of January 2022 including projected growth until 30 June 2022.
45. Rating policy: the reduction
in the residential portion of the total general rate from 62% to 61% in 2022/23
as agreed as part of the LTP and the corresponding increases in the commercial
portions are included in the projected rates impacts.
46. The 2021/22
rates for Queensgate are calculated on the current CV of $295M. An assumed
estimated increase for Queensgate of $20M for 2022/23 has been applied in the
rating projections in table 3. However, at the time of writing this report
there is still a lengthy process to complete with Quotable Value to confirm
what the value increase (if any) will be for Queensgate. Officers will report
to the Annual Plan Working Group as information and advice becomes available
from Quotable Value.
Section
F - Next steps
47. Following the decisions made
by the subcommittee at this meeting, officers will be finalising the DAP and
the engagement material. The final versions of the DAP and the engagement
material will be presented to the subcommittee on 4 April 2022.
48. The content of the DAP and
engagement material will undergo final review and checking. There are likely to
be other updates and minor adjustments to information and budgets as this
review process is completed. Any significant matters identified will be
reported to the Annual Plan working group and direction sought as required.
Climate
Change Impact and Considerations
49. The matters addressed in this
report have been considered in accordance with the process set out in
Council’s Climate Change Considerations Guide.
50. The DAP directly responds to
the need to achieve emission reductions, by embedding emission reductions in a
range of initiatives. For example, Council’s investment in Naenae Pool
includes that the new building would not use natural gas for heating and instead
utilise alternative low-carbon energy sources. The DAP also includes a number
of projects to reduce emissions, including the decarbonisation of Council
facilities (including pools and the Dowse).
Consultation
51. Council has agreed to a light
touch engagement process as detailed in Sections B and C of this report.
Legal
Considerations
52. The most
relevant legislation includes the Local Government Act 2002, Local Government
(Rating) Act 2002 and the Rating Valuations Act 1998.
Financial
Considerations
53. No other financial
considerations other than those contained in this report.
Appendices
|
No.
|
Title
|
Page
|
|
1⇩
|
Appendix 1 - Initial Draft Annual Plan
|
19
|
|
2⇩
|
Appendix 2 - Draft Engagement Material
|
179
|
|
3⇩
|
Appendix 3 - Previous Draft Annual Plan 2022-2023
Budget Decisions
|
184
|
|
4⇩
|
Appendix 4 - Detailed project information to support
budget
decisions
|
188
|
Author: Daniel Koenders
Manager Financial Strategy & Planning
Author: Harman Singh
Advisor Strategic Planning and Business
Author: Amy Dowdle
Senior Communications Advisor
Reviewed By: Jenny Livschitz
Group Chief Financial Officer
Reviewed By: Jarred Griffiths
Acting Director Strategy and Planning
Approved By: Jo Miller
Chief Executive
