CONFIDENTIAL
Annual Plan 2020/21 Update
Council Workshop, 23 April 2020
Agenda
CONFIDENTIAL
Background/Context
Proposed Savings
Proposed Funding
Other Issues
Consultation
Next Steps
Background / Context
CONFIDENTIAL
Average rates increase as per planned
expenditure in year three of the 2018-28 LTP
was 6.3%
Council decisions in 2018/19 pushed this rate
up to 10.1%
Additional significant cost pressures added to
the projected 2020/21 rates increase by a
further approx. 8%
An Activity Review was undertaken during late
2019 to find cost savings and efficiency
improvements.
A prospective rates increase of 9.8% was
endorsed in Dec 2019.
Drivers of the prospective 9.8% ($13m) rates increase
CONFIDENTIAL
Public transport costs
5.8%
Reduction in reserves usage
2.7%
Accommodation
2.0%
Debt servicing costs
0.8%
Wages movements
0.8%
Natural resources plan
0.4%
Riverlink
0.4%
LGWM
0.4%
BAU savings
(3.6%)
Proposed Savings/Funding - Summary
CONFIDENTIAL
Option One
Option Two
%
Value
%
Value
($'000)
($'000)
Starting level
9
.80 1
3,367
9
.80 1
3,367
-
EV/BNR/RS1
- 1
.40 - 1
,910
- 1
.40 - 1
,910
Wages & Salaries
- 0
.80 - 1
,091
- 0
.80 - 1
,091
Capital Programme
- 0
.20 - 273
- 0
.20 - 273
PT reductions in service
- 0
.35 - 477
- 0
.35 - 477
Reduce customer engagement - 0
.15 - 205
- 0
.15 - 205
Other savings
- 0
.25 - 341
- 0
.25 - 341
Fund LGWM over 20 years
- 0
.25 - 341
- 0
.25 - 341
6
.40
8
,730
6
.40
8
,730
Use of Reserves
- 1
.70 - 2
,319
- 1
.70 - 2
,319
Debt Increase
- 1
.70 - 2
,319
- 4
.70 - 6
,411
Proposed rates increase
3
.00
4
,092
0
0
Further savings of 3.4% matched with
additional funding of 3.4% to achieve a rates
increase of 3%
Proposed Savings - Detail
CONFIDENTIAL
EV/BNR/RS1
Delay the introduction of EV buses and
changes from the bus network review
until 1 July 2021
Delay changes to the Hutt train
timetable until 1 July 2021
Given the current status of these
projects this is likely to be a two to
three month delay
Proposed Savings - Detail
CONFIDENTIAL
Salaries & Wages
Hold all salaries and wages at current levels
for the full year.
Capital Programme
Delay capital expenditure for 12 months in
the following key areas:
• Bus real time systems upgrade
• Bus on-board announcements
• Some bus and station upgrades
• Some parks capital programmes
• Some flood protection works
Proposed Savings - Detail
CONFIDENTIAL
PT Service Reductions
These savings recognises that it will likely take
some time for patronage on public transport to
rebuild to the previous numbers and that it is
probable a reduced level of service will apply for
some time.
The exact level is difficult to calculate but needs
to take into account:
• Maintaining the viability of operators
• That social distancing will need to be
maintained on public transport for some time
Proposed Savings - Detail
CONFIDENTIAL
Customer Engagement
The current strategy is based on engaging with
communities to raise GW’s relevance and
reputation
This savings would limit the level of work in this
area and delay some activities for 12 months
delay
Fund LGWM over 20 years
LGWM is currently being funded over 10 years
(for the business cases), however, the life of the
project is likely to be significantly longer
Proposed Funding Options - Detail
CONFIDENTIAL
Use Of Reserves
Option one proposes that 50% of the shortfall to
reach a 3% rates increase is funded from reserves
Reserves are created from rates that were not
spent in the year they were collected
Using $2.3m of reserves is at the top end of
available reserves that are not tagged or linked to
a specific activity
As the reserves are not cash backed this would
result in an overall increase in debt adding 0.25%
to rates increase for the next 10 years.
Possible Funding Options - Details
CONFIDENTIAL
Debt Increase
Increase debt by $2.3m (option one) or $6.4m
(option two)
Both options are well within our capacity to
borrow but would increase debt servicing costs in
future years
Option one would result in future rates increases
of ~0.25% for the next ten years
Option two would result in future rates increases
of ~0.5% for the next ten years
Other Issues
CONFIDENTIAL
A key assumption in the Annual Plan is that any
shortfall in public transport will be covered by
NZTA – while this is likely in the short term the
length of this has yet to be confirmed
Other revenues are likely to fall but very difficult
to estimate by how much
Costs are also likely to be lower as full programme
delivery unlikely to be achieved
Working assumption at this time is that these will
largely offset and be monitored and managed
during the year
Bulk Water Levy
CONFIDENTIAL
The increase in the bulk water levy is current budgeted at
6.1% ($2.1m)
Current reserves
$15m
Bulk Water Supply contingency fund $38m
Use $1.05m of reserve to reduce to 3.05%
Consultation
CONFIDENTIAL
A rates increase of 3% would not
require consultation, but rather an
engagement progamme of work
At a rates increase of 0%, consultation
would be more of an issue but
probably not required
Options to reduce rates increase–consultation requirements
CONFIDENTIAL
LGA:
-
Section 95(2A): no consultation required where there is no significant or material
difference from the relevant year of the LTP.
-
Sections 78(1), 78(3) and 79(1): In their decision making process Council must
consider the views and preferences of persons likely to be affected by, or have an
interest in, the matter and should use their discretion to decide if the matter is
significant enough to those affected and interested persons to warrant a
consultation.
Consultation in the current environment would need to look different, but still ensure
that all of our community have fair access to participate in the process – notification
via website, Social Media channels, radio, posters, billboards, newspapers; no in-
person events, or hearings; submissions received via phone, text, online, or post.
A number of Councils* are choosing not to consult on their 2020/21 Annual Plan and
will focus their consultation on the 2021-31 LTP pre-engagement. This is being driven
by a lack of anything significant to consult on and a desire to support their
communities who will have different matters on their minds over the
coming weeks and months.
*Bay of Plenty Regional Council and Porirua City Council are two recent examples.
Proposed Savings/Funding - Summary
CONFIDENTIAL
Option One
Option Two
%
Value
%
Value
($'000)
($'000)
Starting level
9
.80 1
3,367
9
.80 1
3,367
-
EV/BNR/RS1
- 1
.40 - 1
,910
- 1
.40 - 1
,910
Wages & Salaries
- 0
.80 - 1
,091
- 0
.80 - 1
,091
Capital Programme
- 0
.20 - 273
- 0
.20 - 273
PT reductions in service
- 0
.35 - 477
- 0
.35 - 477
Reduce customer engagement - 0
.15 - 205
- 0
.15 - 205
Other savings
- 0
.25 - 341
- 0
.25 - 341
Fund LGWM over 20 years
- 0
.25 - 341
- 0
.25 - 341
6
.40
8
,730
6
.40
8
,730
Use of Reserves
- 1
.70 - 2
,319
- 1
.70 - 2
,319
Debt Increase
- 1
.70 - 2
,319
- 4
.70 - 6
,411
Proposed rates increase
3
.00
4
,092
0
0
Further savings of 3.4% matched with
additional funding of 3.4% to achieve a rates
increase of 3%
Next Steps
CONFIDENTIAL
Guidance from Council on level of rates
increase
Further understanding of the impacts
of COVID-19 on work programme
Prepare draft annual plan based on the
above and report back to Council on 11
June 2020