Supporting information

Financial strategy

The strategy continues the focus Council set in previous Long-term Plans on prudently managing our investments and borrowings, keeping rates affordable and sustainable and looking after the assets we have while maintaining levels of service.

Draft Financial Strategy 2021-31 (PDF, 710KB)

KEEPING RATES AFFORDABLE AND SUSTAINABLE

It is always a balancing act between meeting the wants and needs of our communities whilst keeping rates affordable and sustainable. This strategy has been prepared with this at the forefront of our thinking.

RATES

To help achieve what we think is a good balance we have set the following limits on rates:

Total rates revenue must not exceed 80% of operating revenues
Rate increases may not exceed the forecast Local Government Cost Index (LGCI) +2.5%

Prospective average rates increase graph.

Council will slightly breach the rates limit in years 1 & 2 of this LTP, partially as a result of the 0% rates increase in 2020/21 and partial as a result of the large capital programme in years 1 & 2 of this plan.

In our last Long-term Plan, we had set the limit on rates increases at LGCI +1.5%. We increased this by 1% to LGCI +2.5% as we are proposing a significant capital infrastructure programme.

The financial strategy outlines the Council’s financial vision for the next 10 years and the impacts on rates, debt, levels of service and investments. It will guide the Council’s future funding decisions and, along with the Infrastructure Strategy, informs the capital and operational spending for the Long-term Plan 2021-31. It identifies the challenges that we want to respond to with our financial goals.

Council has recently been upgraded to an AA+ credit rating from Standard & Poors (S&P). This is reflective of Council’s strong financial management and budgetary performance. Council’s strategy is to retain its AA+ rating by ensuring that it operates in a financially prudent manner and stays within the limits imposed within this financial strategy.

LOOKING AFTER THE ASSETS WE HAVE WHILE MAINTAINING LEVELS OF SERVICE

A key strand of Councils financial strategy for many years has been to look after the assets that we have whilst maintaining levels of service. Council will maintain its existing levels of service. Council will achieve this by continuing its investment in condition assessment programmes for its assets and also by continuing its investment in robust asset management systems that capture the full the information about the assets to enable Council to plan asset renewal programmes and provide for the funding of those renewals as outlined in the asset management plans. Due to the ongoing condition assessment programmes over the last three years we now better understand the condition of our assets which has resulted in a more accurate and increased renewals programme. The focus on increasing the knowledge of the condition of Council’s assets will continue in this strategy along with an increased delivery programme.

PRUDENT MANAGEMENT OF OUR INVESTMENTS AND BORROWINGS

This strategy maintains Councils current prudent and conservative approach to the management of its investments and borrowings to ensure that todays and future generations of ratepayers share both the benefits and the costs of Council services.

As a result of strong growth in the district and an increasing regulatory framework, particularly around water and wastewater Council has had to investment more in core infrastructure in order to keep pace with this growth and provide for future anticipated growth.

The impact of this can be seen in a significantly increased capital programme (including renewals) to service both this growth but also the increased regulatory framework for water and wastewater services.

To fund this Council will need to borrow more and this is reflected in a growing debt balance in this strategy. Accordingly, Council has revised its debt to revenue limit from 200% of operating revenues to 225% of operating revenue to accommodate this need. Council still considers debt to be the most appropriate funding tool for long life intergenerational assets. Council is confident that it continues to take a prudent and sustainable approach to its finances in a way that promotes the current and future interests of the community. One of the ways that Council manages this is to ensure that it maintains its AA+ credit rating from Standard and Poors.

Gross debt, investments and net debt graph.

Infrastructure strategy

Council owns much of the essential infrastructure that we use every day, managing $1.2 billion of infrastructure and other assets. This includes streets, pipes for water, stormwater and wastewater, community facilities like libraries and pools, and much more. Our Infrastructure Strategy sets out how we intend to manage and maintain these over the next 30 years. Our key goals are to:

Have infrastructure that is in good condition and meets the levels of service required by the community.
Be supplying enough safe drinking water to residents connected to Council’s reticulated drinking water supplies.
Have a healthy environment.
Understand the condition of all assets so renewals are able to be accurately forecasted to maintain assets at the required level of service.
Recognise and respond to the potential increase/decrease in demand on infrastructure from population growth/decline in the district and parts of the district.
Recognise the changing demographics (in particular an aging population) across the district and respond to the required changes in the provision of services following fair and equitable decision-making processes for all communities.
Understand the implications of our high non-resident population and peak holiday population and recognise that this makes us different to other districts and how this impact on the provision of services.
Have infrastructure that is financially sustainable.

The decisions we make to help us achieve these goals will be influenced by a number of things including population and demographic change; the need to protect the health of our communities and our environment; the need to maintain or renew infrastructure and its resilience; and ensuring we are providing for the Māori world view.

Our Infrastructure Strategy indicates that we will need to spend approximately $191 million renewing the district’s infrastructure over the next 10 years. We have made provision for this within our Financial Strategy and Long-term plan. Our Financial Strategy provides capacity for council to invest in upgrading and funding new assets.

There is a fine line between balancing wants and needs with affordability and sustainability, as well as working within our Financial Strategy. As a result, our Infrastructure Strategy prioritises capital spend on infrastructure upgrades for drinking water and wastewater to meet legislation and consent requirements, along with place-making projects that drive a prosperous community.

Draft Infrastructure Strategy 2021-51 (PDF, 2MB)

Our capital expenditure by activity over the next 10 years.

Changes to policies / fees and charges

FEES AND CHARGES 2021/22

Taupō District Council is required to prepare fees and charges for activities. Usually Council adopts fees and charges annually. This time, Council is preparing to adopt the fees and charges for the three-year period 2021 to 2024. This will mean that for the following three years, we will only consult on the fees and charges that require an annual consultation, or where changes in circumstances require a change to fees or charges.

Proposed changes

Most fees and charges have been increased by inflation (2%) as directed by Council’s Financial Strategy. There are some exceptions to this, such as fees which are set by legislation.

We recommend you view the full fees and charges schedule, which you can find below.

DEVELOPMENT CONTRIBUTIONS POLICY

Taupō District Council has a development contribution policy that aims to recover the cost of infrastructure projects required to service growth, from the new growth community when they develop and buy their sections, rather than the existing community.

Charges are based on the identification of projects that increase capacity to support growth and to support the creation of reserves in new growth areas. Costs associated with renewal components, increased service levels, and for capacity to service growth that has already occurred are excluded. The costs associated with increasing capacity to support community growth are then charged to the development of new sections and passed on to the new community.

Charges have increased substantially in the 2021 Development Contributions Policy. These are driven by a number of large projects that are required to support growth and a revised charging approach to drive better reserve development.

The policy out for consultation sets out the new charges, the areas where they apply, and growth projects driving the costs.

RATES REMISSIONS AND POSTPONEMENT POLICIES

Council is required to have rates remissions and postponement policies. Each policy outlines the objectives, conditions, and criteria specific to that policy including the information that must be provided when an application is made. Council currently has nine rates remission and postponement policies:

Rates Remission for Lake Taupō Lakebed, Crown owned Hydro Lakes lakebeds (with easements to carry out the electricity generation business)
Rates Remission for Community, Sporting and Other Organisations
Rates Postponement for Extreme Financial Hardship
Remission of Rates Penalty
Rates Remission and Postponement on Māori Freehold Land
Remission of General Rates for Council Owned Utilities
Water Rates Remission Attributable to Water Leaks
Natural Disasters Rates Remission
Waitahanui – fixed charge targeted water rate remission policy.

REVENUE AND FINANCING POLICY

This policy sets out who pays for the activities that Council undertakes on behalf of the community and how these activities will be funded. Our funding policies are determined having consideration of who benefits, intergenerational equity, who contributes to the need for the activity, distinct funding and the overall impact of the method of funding. The Revenue and Financing Policy should be read in conjunction with the s101(3) considerations report available below.