2019/20 Annual Plan Consultation Document - Tauranga City Council

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2019/20 Annual Plan Consultation Document - Tauranga City Council
2019/20
Annual Plan
Consultation
Document

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT   1
Greetings
Welcome to the second year of Council’s Long Term Plan 2018-2028:
the draft Annual Plan 2019/20.

Tauranga continues to grow quickly as the attraction of     draft Annual Plan was completed. Accordingly, budget
our city becomes more widely known and people move          adjustments have reduced the proposed average
here from other regions.                                    residential rates increase to 3.9%, which is almost half
                                                            the original increase proposed in the LTP of 7.5%.
Generally speaking, well-managed growth is good.
It creates jobs, increases economic activity and can        This 3.9% figure is equivalent to CPI inflation of 1.9%
improve efficiency. However, it also increases the cost     plus 2% (and is after we have taken into account the
of providing roads, water, parks, libraries and most of     growth in the estimated number of rateable properties
the other services and infrastructure that a modern city    in the city of 1,505 since last year). An additional rates
requires to run efficiently.                                increase (of about 0.4% for the average residential
                                                            property) is also proposed for funding the kerbside glass
To help meet such challenges, Council’s most recent         collection, which reflects the costs of the service running
10 year Long Term Plan (LTP) proposed an overall rates      for the full 12 months from 2019/20.
increase of 7.5% for the 2019/20 year. This was needed
to ensure that long-term revenue met projected costs        The budget adjustments have been made in areas that
including the costs of increasing debt levels.              do not affect our service delivery levels or our ability to
                                                            deliver our capital programme that supports growth.
When the LTP was adopted, Council signalled a desire
to review this proposed rates increase before this year’s

However, we recognise that reducing this year’s rates       We are looking at options to mitigate our debt levels
increase has budget implications beyond this year.          to remain within the agreed limit. For instance, we
                                                            are planning to review our operational and capital
To ensure accurate budget information, Council              programme during the next LTP process.
reviewed the costs of delivering key capital projects
identified in future years of the LTP. Pricing increases    Central Government and high-growth councils
and more detailed design for some projects mean             (including Tauranga, but also Auckland, Hamilton and
that the estimated cost of the capital programme has        Queenstown) are also looking at different options for
increased by more than $100m over the next nine years.      funding and financing.
This increase in costs, coupled with the reduction in
                                                            Because of the complexity of the issues involved,
proposed revenue, means that we would exceed our
                                                            unfortunately none of these options will be in place to
ability to keep our borrowing within limits agreed in
                                                            have an effect within 2019/20.
our Financial Strategy by 2022/23 if we were to deliver
everything proposed in the LTP.

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                       2
Summary of operational budget adjustments

                                   Rates
                               (reduction)
    Change                                         Comment
                                / increase
                                  ($’000s)
                                                    Includes (a) timing changes for projects including new administration
    Budget adjustments,                             building, library and land purchases for parks, (b) reduction in budgets
    savings and cost                (2,560)         for corporate activities (c) corporate savings across training, travel,
    freezes                                         legal and general expenses, and (d) no inflation adjustment of various
                                                    administrative and operating expense codes.

    Net interest                    (1,600)         Interest rate changes to align to revised economic forecasts.

    Depreciation                    (1,000)         Reduce rate funding to stormwater depreciation reserve1

    Rate funding of                                 Reduce the amount of rate funding to be introduced to marine facilities
                                     (620)
    activities                                      ($350k), The Historic Village ($270k) - phasing this in over four years.

                                                    Continue funding of Tourism Bay of Plenty destination management
    Tourism BOP                      (620)
                                                    through Airport activity.

    Staff positions                  (400)          Reducing new staff positions and reprioritising existing vacant positions.

                                                    Reprioritisation (across Urban Form and Transport Initiative,
    Areas of increases
                                    1,540           intensification, growth, resilience, and city centre response), insurance,
    and reprioritisation
                                                    risk reserve and new investigations

    Total                          (5,260)
1
  The stormwater depreciation reserve has interest rate funding of $0.6m in 2019/20 on a balance of $16m. The annual interest receipt
increases steadily through the next few decades as the reserve grows significantly from annual funded depreciation and compounding
interest ($1.8m of interest is budgeted to be paid to the reserve in 2028). A reduction of $1m in the amount of depreciation expense that
is rates funded would prevent the stormwater reserve from becoming too large. This amount of non-funding would still allow Council to
meet all its renewal and debt repayment requirements over the life of the assets covered by the reserve.

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                                    3
Four key priorities
In the meantime, we consider the capital programme proposed for 2019/20 to be achievable within our financial limits.
The projects proposed to start in 2019/20 are related to the four key priority areas identified in our LTP.

These priorities are:

             1
                                   Land supply and urban form
                                   Making new land available for housing and enabling more
                                   housing on existing land.

             2
                                   Connectivity
                                   How we keep our city connected and moving, ensuring
                                   efficient travel through roads, cycle ways, footpaths and
                                   parking improvements.

             3
                                   Resilience to environmental changes
                                   and natural disasters
                                   Recognising the risks to our properties and infrastructure from
                                   changes in groundwater levels, flooding frequency and sea
                                   level rise.

             4                     Increased environmental standards
                                   Aiming for improved water quality in our streams, rivers and oceans.

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                     4
Key issue
The key issue in this draft Annual Plan is therefore not     However, because we would then have less revenue
about this year, but about how we position ourselves for     we will have to reconsider our future debt and revenue
future years.                                                levels to avoid breaching limits that were set in the LTP
                                                             Financial Strategy. Council will have to consider options
Our best-available information has highlighted potential     that might include:
financial issues in a few years’ time. The question is
to what extent we should start to address this now in        • Higher rates increases in future years (our current LTP
the form of increasing rates revenue, acknowledging            budgets for an 8.2% rates increase in 2020-21).
that more substantive funding options will need to be        • Reducing our capital expenditure on projects
considered in future years.                                    proposed in the LTP.
We seek your feedback on this issue.                         • Other funding and financing models being developed
                                                               with Central Government to deliver new city
The approach we have taken in this draft Annual Plan is
                                                               infrastructure while keeping Council’s rates and debt
to lower the average rates increase to 3.9% instead of
                                                               levels sustainable.
the 7.5% increase proposed in the LTP.

Alternative approaches
One alternative approach for 2019/20 would be to retain      Other options for an average rates increase between
the higher average rates increase of 7.5% as set out in      3.9% and 7.5% could also be considered. Each would
the LTP, with the additional rates used to repay debt.       enable some additional revenue to be applied to debt
                                                             reduction in 2019/20.
Under this approach, Council will still have to consider
the mid-term options listed above but would do so with
a stronger revenue base. This improves our important
                                                             Note: an average rates increase of 7.5% as proposed in the LTP
debt-to-revenue ratio in two ways: by reducing debt and      based on the budget adjusted expenditure levels of the Annual
at the same time increasing revenue.                         Plan allows for an additional repayment of debt of $5.6m (or 1%
                                                             of net debt).
However, it does mean a higher average rates increase
this year.

The average rates increase of 3.9% proposed in the draft
Annual Plan means an average residential rates increase
of $102; under the alternative approach of retaining the
7.5% increase in the LTP this increase is $185. Similarly,
the median commercial rate under the draft Annual Plan
decreases by $20 compared with the $118 increase
proposed under the LTP.

We seek your feedback on this                       We are also seeking your feedback on
issue and the approach we should                    some proposed changes to user fees and
take in the 2019/20 Annual Plan.                    charges, and to the draft Development
                                                    Contributions Policy 2019/20.

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                        5
Key dates
Public consultation:                   23 March until 23 April 2019

Submission hearings:                   7-9 May 2019
                                                                             LET US
                                                                                                  KNOW
                                                                          what yo
Council deliberations:                 21-23 May 2019

                                                                                  u
Adoption of final Annual Plan:         18 June 2019

                                                                           think
                Online:
                use the online submission form available at
                www.tauranga.govt.nz/annualplan2019

                In person:
                drop off your submission form at Council
                offices on Willow Street or at your local library

                Email:
                scan your completed submission form and                   If you wish to speak in support
                email it to submissions@tauranga.govt.nz                  of your submission please let us
                                                                          know on your submission form if
                                                                          day or evening suits you best
               Post:
               place your completed form in an envelope and
               send it to this address (no stamp required):

               Freepost Authority Number 370
               Annual Plan 2019/20
               Tauranga City Council
               Private Bag 12022
               Tauranga 3143

Looking ahead – Long Term Plan 2021-2031
Over the next 18 months, we will be working with community organisations, clubs and other local organisations to
understand what projects they want to deliver for the community and how we may be able to assist. This will inform our
own planning as we build towards the 2021-2031 LTP.

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                  6
New infrastructure requirements
and the effect on Council’s debt and
financial options

Tauranga’s population growth has been above the             With higher debt comes risk, as it affects our ability to
national average for more than 20 years. This has           respond to unforeseen events.
required greenfield development for housing while also
                                                            In order for Council to remain within our set financial
encouraging residential intensification.
                                                            limits, we must maintain the right balance between our
Council must provide infrastructure including roads,        income (mainly from rates and charges) and our debt.
stormwater, water and wastewater networks for
                                                            The LTP identified the need to increase rates income to
these areas, as well as parks and other amenities
                                                            cover the operational costs of new infrastructure and the
for communities to enjoy. Council delivers the
                                                            increasing costs of our debt. At the time of adopting the
infrastructure at the start of developments, and it takes
                                                            LTP, we expressed a desire to review the future increase
time to recover these costs from rates and charges. We
                                                            in costs to ratepayers. However, we are also aware that
have therefore taken on debt which is increasing over
                                                            we will need to increase our income as our debt grows to
the period of this LTP.
                                                            deliver new infrastructure.

Our main options are to reduce debt or increase revenue     A second option is increasing rates to help directly
or some combination of both.                                manage our debt. This would reduce the increase
                                                            in our future debt levels and help keep us within our
The proposal for a lower rates increase than proposed
                                                            set financial limits, while still delivering the full capital
in the LTP will mean less revenue for Council. When
                                                            programme identified in the LTP. Such management
combined with the higher costs of delivering our capital
                                                            of our debt levels could also provide more capacity to
programme, this will require a future reduction or
                                                            borrow to meet any unforeseen events in future.
slow-down in our works programme and/or a need for
increased revenue.                                          A third and longer-term option is to look at alternative
                                                            revenue sources to cover our costs, rather than rely on
In discussions with central government agencies, we and
                                                            general rates. Options include targeted fees or rates
other high-growth councils are looking at ways to move
                                                            and specific project funding. These options will be
the increasing debt burden and its ongoing costs away
                                                            considered in the development of our next LTP.
from Council. The costs of new infrastructure would still
need to be paid by developers and new home owners,          More information on the financials can be found in the
but the debt and the payments could be moved to             Annual Plan supporting documentation at
parties other than Council. The Productivity Commission     www.tauranga.govt.nz/annualplan2019
is also conducting an inquiry into Local Government
funding and financing which will look at this issue. They
are due to report by November 2019.

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                         7
Financials
Draft Annual Plan key indicators versus LTP budgets for 2019/20

                                                                              LTP budget                   Annual Plan proposal
                                                                               2019/2020                       2019/2020
                                                                                 ($m)                              ($m)

    Operational Summary
    Rates *                                                                          183                                 178

    Other operating revenue                                                          70                                  69

    Subsidies and grants received for capital                                        36                                  37

    Total operating revenue including grants                                         290                                 284

    Operating expenditure                                                            258                                 255

    Surplus / (deficit)                                                              31                                  28

    Rates increase average after growth **                                          7.5%                                3.9%

    Debt Summary
    Net debt at 30 June 2020 ***                                                     529                                 527

    Debt / revenue ratio ****                                                      179%                                188%

    New capital investment *****                                                     248                                 238

    Development contributions                                                        31                                  31

*        includes water rates of $23m
**       increase is for the average residential ratepayer
***      approximately 63% of debt is funded through rates. The remaining is funded by development contributions or user fees
****     includes capital funding for NZTA standard projects
*****    includes vested assets, land sales. Total figure is reduced by a capital delivery adjustment that acknowledges that not all
         capital work budgeted is able to be delivered in a year due to matters outside our control.

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                                    8
Capital expenditure
The capital expenditure budget for 2019/20 allows us to deliver new assets like infrastructure (for example, roads, water
and wastewater pipes and treatment plants, and parks), and renew or improve our existing assets.

How our capital budget is allocated for 2019/20

                                                         $0.9m People and engagement
                                                              $1.8m Corporate services
                    City centre public spaces $6.1m

    Parks, facilities and
      other community       $39.5m
                services                                                                    $64.8m Water supply

       Sustainability
         and waste $3.0m

       Wastewater $15.8m

                Stormwater $18.2m

                                                                    $33.8m Transportation

*Excludes vested assets and land sales

The total capital programme has reduced by $9m when             The most significant projects which have seen changes
compared to the LTP. This decrease is mostly a result           compared to year two of the LTP are the following:
of timing adjustments across a range of projects. There
have been minor cost adjustments in 2019/20, with the           • Delays to the delivery of the new central library and
more significant cost increases in growth projects in later       civic administration building
years of the LTP.                                               • Delay to the sale of the elder housing portfolio

                                                                You can find more detail about changes to our capital
                                                                expenditure programme, when compared with the LTP, at
                                                                www.tauranga.govt.nz/annualplan2019

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                       9
Operational spending
The operational budgets and level of service are consistent with year two of the LTP.

Budget adjustments were made to reflect lower funding of depreciation and lower interest costs than assumed in the
LTP, as well as reductions across a range of lower-priority budgets. None of the budget reductions has affected existing
levels of service.

You can find more detail on the changes to budgets and revised financial information at
www.tauranga.govt.nz/annualplan2019

2019/20 operational expenditure

                 Corporate services $41.7m                                 $40.0m Transportation

          People and
         engagement $14.0m

                                                                                           $33.8m Wastewater

   Regulatory and
                  $24.3m
      compliance

                                                                                            $24.2m Water supply

                                                                                        $21.3m Stormwater
Parks, facilities and other
                              $68.8m
     community services
                                                                               $8.2m Sustainability and waste

                                       Strategy and growth $18.7m           $6.3m Infrastructure delivery

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                   10
Impact on debt
We are continuing to see significant increases in the cost     These factors have increased the cost of our capital
of infrastructure and new projects.                            programme by over $100m over the remaining nine years
                                                               of the LTP.
Our debt level is increasing faster than we projected in
the LTP because we have revised upwards the cost of            As part of the next LTP, we will need to review and
delivering the capital programme. Since the adoption           potentially reduce the capital programme that is
of the LTP in June last year, the cost of the works            delivered directly by Council to ensure that we remain
programme has increased for reasons which include:             within financial limits. If no changes were made to the
                                                               capital programme as proposed in the 2018-2028 LTP,
• The capacity of the market to deliver the projects and,      we would breach financial limits on debt to revenue
  therefore, the competitiveness of the tender prices          ratio (a 250% limit) by 2023. Maintaining the average
  Council receives. This is occurring in many New              residential rates increase at 7.5% in the 2019/20 annual
  Zealand cities.                                              plan would defer this breach until 2025.
• Ensuring that the things we build are resilient to natural
  disasters, and this comes at a cost.

Setting rates
The Financial Strategy for the LTP 2018-2028 set the           To reduce debt, Council would likely have to spend less
average residential rates increase for the 2019/20 financial   on new infrastructure, both ‘hard’ infrastructure such as
year at 7.5% after growth. At the time of adopting the LTP,    roads and pipes, and ‘community’ infrastructure such as
Council signalled a desire to review future years of the       sports fields and community facilities. We will also need
plan and confirm the strategic direction for the city. This    to revisit our strategic priorities, as these will guide a
included reviewing the level of rates increases proposed.      review of operational expenditure in the medium term.

In the 2019/20 Annual Plan, we propose a lower average         You can find more details on our financials, including the
residential rates increase than in the LTP. The average        expenditure by activity as shown in the funding impact
residential rates increase proposed is CPI inflation plus      statements, in the supporting information section at
2% (being a total of 3.9%). An additional increase is          www.tauranga.govt.nz/annualplan2019
proposed for kerbside glass recycling. This reflects the
service being run for a full year during 2019/20, after

                                                                                    A quick
being available for only part of the current year, and the
additional cost.

To achieve the lower rates increase, we approved certain                           remind
adjustments to our budget. We now expect to gather
                                                                            More ho
                                                                                          er
$178m in rates, which is $5m less than budgeted in the                               uses do
                                                                                              esn’t au
                                                                              mean m                    tomatic
LTP for 2019/20.                                                                        ore rate                   ally
                                                                           Council                s reven
                                                                                    . Instea              ue for
                                                                          have a             d it mea
Although these budget adjustments mean that rates will be                         larger n             ns that
                                                                                           u mber of            we
lower in 2019/20, they also mean that in later years we will               divide th                   houses
                                                                                     e total ra                   to
need to increase our revenue or reduce our debt or both.                                        te requir
                                                                                        betwee           e m e n t
                                                                                                 n.

            To view the supporting information mentioned in this document, go to www.tauranga.govt.nz/annualplan2019

            To view the LTP, go to www.tauranga.govt.nz and search for ‘Long Term Plan’.
            Unless noted otherwise, the information in the LTP remains correct.

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                       11
User fees and charges
We’re proposing to make some changes to user fees and charges.

Most of these changes are small increases in line with inflation. However, we are proposing larger increases in the
following areas:

• sustainability and waste

• planning

• building services

• water supply

• road reserve occupation

• parks and recreation

• parking

• marine facilities.

Details are available in a separate statement of proposal. This is available at www.tauranga.govt.nz/annualplan2019 and
in hard copy at Council’s service centre and libraries.

Use the Annual Plan submission form to send us your feedback.

Development Contributions Policy
We are also adopting a new Development Contributions Policy. The policy has not changed significantly compared to
the current policy (2018/19) other than the new fees and charges schedule.

A copy of the draft 2019/20 Development Contributions Policy and a statement of proposal which outlines all of the
changes is available at www.tauranga.govt.nz/annualplan2019 and in hard copy at Council’s service centre and libraries.

Use the Annual Plan submission form to send us your feedback.

TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                       12
We want to hear from you
Tauranga City Council Annual Plan Submission Form
                                                                                                                Have
                                                                                                              your sa
                                                                                                                     y
Send us your feedback on the draft Annual Plan 2019/20 proposals set out in the
Consultation Document and the statements of proposals on policies and user fees.

        Online:                                                            Post:
        use the online submission form available at                        place your completed form in an envelope and
        www.tauranga.govt.nz/annualplan2019                                send it to this address (no stamp required):

                                                                           Freepost Authority Number 370
        In person:                                                         Annual Plan 2019/20
        drop off your submission form at Council                           Tauranga City Council
        offices on Willow Street or at your local library                  Private Bag 12022
                                                                           Tauranga 3143
        Email:
        scan your completed submission form and
        email it to submissions@tauranga.govt.nz

                   Submissions close on Tuesday, 23 April 2019 at 5pm

Once the Annual Plan 2019/20 is adopted,                Written submissions may contain personal information within the meaning of the
                                                        Privacy Act 1993. By taking part in this public submission process, submitters
submitters will be sent a summary of key
                                                        agree to any personal information (including names and contact details) in their
decisions. Council will not be providing                submission being made available to the public as part of the consultation and
individual responses to submissions.                    decision-making process. All information collected will be held by Tauranga
                                                        City Council, Council Administration Building, 91 Willow Street, Tauranga.
                                                        Submitters have the right to access and correct personal information.

 First name

 Last name

 Name of organisation (if submitting on behalf of)

 Street                                                            Suburb

 City                                                                                               Postcode

 Phone (daytime)                                      Email

Do you wish to speak to Council in support of your submission?                   yes           no

If so, please indicate whether you would prefer:              daytime            evening
We will contact you to arrange a speaking time. Each speaker is allocated 10 minutes.

Topics
Please let us know which topic(s) you are submitting on:

    Council’s long-term financial position                    Draft User Fees and Charges

    Draft Development Contributions Policy                    Other feedback or suggestions
TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                                                  13
Provide your feedback below:

Submission guidelines:                                    Need more room?
• Should you wish to speak to Council at the hearings,    You can attach extra pages – just make sure they’re A4
  you must still provide a written submission outlining   and that you include your name and contact information.
  your main points.

• Please use a dark-coloured pen if you are handwriting
  your submission and write as legibly as possible.
TAURANGA CITY COUNCIL | ANNUAL PLAN 2019/20 | CONSULTATION DOCUMENT                                            14
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