Report 18.24 Council report to approve RFP 8 March.pdf

Report
2018.24
Date
7 March 2018
File
LGAP-7-771
Committee
Council
Author
Mark Ford – Manager, Finance
Approval of the proposed revenue and financing policy
and  adoption  of  accompanying  statement  of  proposal
for consultation purposes
1.
Purpose
To seek approval of the proposed revenue and financing policy and adoption of
the accompanying statement of proposal for consultation purposes.
2.
Background
A full review of the current Revenue and Financing Policy (R&FP) has been an
objective of GWRC for some time. In the 2015 Long-Term Plan, GWRC said
it  would  review  the  policy  at  some  stage  in  the  next  three  years,  to  reflect
concerns  expressed  by  members  of  the  community  over  the  equity  of  the
allocation  model  and  upcoming  changes  to  the  operating  model  for  public
transport. GWRC has now undertaken a review of the funding for all activities.
A  working  group  of  Councillors,  supported  by  officers,  began  the  policy
review  last  year  and  discussed  and  refined  the  principles  and  a  number  of
models  in  a  series  of  workshops.    Detailed  modelling  and  impact  assessment
was conducted and peer reviewed.
Under the Local Government Act 2002 (LGA), a local authority must, in order
to  provide  predictability  and  certainty  about  sources  and  levels  of  funding,
adopt a R&FP.
Section 103 of the Act sets out the required content of the policy.  The policy
must state policies in relation to the funding of operating expenses and capital
expenditure  from  a  number  of  possible  funding  sources,  including:  general
rates; targeted rates; fees and charges; grants and subsidies.
The  R&FP  must  be  adopted  prior  to  the  adoption  of  a  long  term  plan.    Any
changes to the proposed R&FP, as a result of consultation, must be considered,
agreed and adopted before the long term plan.
REPORT 18
PAGE 1 OF 6

3.
Comment
Revenue and Financing Policy
The  proposed  R&FP  has  been  revised  to  make  it  easier  to  navigate  and
understand.  In  addition,  two  significant  policy  changes  are  proposed.  In
considering  how  to  fund  flood  protection  and  public  transport,  GWRC
considered the factors in section 101(3)(a) and has chosen to advance proposals
that  particularly  give  weight  to  achieving  funding  decisions  that  are  equitable
across the region and reflect where the benefits fall.

Flood Protection

GWRC invests  a large amount in  flood protection  throughout  the  region. Our
programme includes stop-banks on our main rivers, and barrage gates at Lake
Wairarapa.  It  is  estimated  that  flood  protection  work  will  cost  over  $200
million  over  the  next  ten  years.  Some  areas  of  our  region  require  more
significant  flood  protection  work  than  others.  The  vast  majority  of  our  flood
protection  work  takes  place  in  three  areas  –  the  Hutt  Valley,  Wairarapa  and
Kāpiti.

The  current  funding  policy  for  flood  protection  uses  a  mix  of  user  charges,
general  and targeted rates. The current policy means ratepayers outside of the
major  flood  catchments  contribute  a  large  portion  of  the  funding  for  flood
protection.

This graph shows the share of GWRC expenditure for flood protection in each
district, compared to the share of funding each district provides. Figure 1 uses
2018/19 figures, excluding GST.
Figure 1   GWRC flood protection – total expenditure compared to funding, by district

REPORT 18
PAGE 2 OF 6

For the purpose of public consultation, a preferred option has been identified to
change  the  funding  policy.  Retaining  the  status  quo  is  also  an  option.  Both
options are being presented to the public for feedback.

The preferred option for consultation proposes moving to a model where 70%
of  the  cost  of  the  work  will  be  funded  by  a  targeted  rate  in  each  of  six
catchments:
Wellington
Porirua

Kāpiti Coast
Lower Hutt
Upper Hutt

Wairarapa

Catchments are based on the boundaries of the city or district. In the
Wairarapa, the Masterton, Carterton and South Wairarapa districts are
combined for the purpose of this rate.

The remaining 30% of the funding requirement will be funded through a
targeted rate, applying to across the region.

GWRC  would  continue  the  rate  funding  for  river  management  and  drainage
schemes,  so  that  there  will  be  two  flood  protection  rates  for  most  properties,
and three rates for those in approved schemes in the Wairarapa.

This package of targeted rates reflects the different levels of benefit applying to
communities from flood protection work.

Public transport
Historically, Public Transport was funded from fare revenue (approximately 45
to  50%)  and  a  subsidy  from  NZTA  (approximately  around  25%),  with  the
remaining costs (approximately 25%) funded through rates.

Report  18.71  (considered  separately)  proposes  amendments  to  make  it
consistent  with  the  new  Public  Transport  operating  model,  when  all  fare
revenue will come direct to GWRC and to reflect the introduction of a package
of student and off-peak discounts.

In line with a stronger understanding of the benefits of public transport, GWRC
has developed a new rating approach. The proposal is to:
  Allocate rates for public transport as one network.
  Apply a weighting, called a rating differential, to recognise the different
levels  of  benefit  that  different  categories  of  ratepayers  get  from  the
network.

As  a  result,  most  residential  ratepayers  will  pay  the  same  rate  for  public
transport  on  an  equalised  capital  value  basis.  Residential  ratepayers  in  the
Wairarapa will pay half the rate paid by ratepayers in other areas of the region.
Wellington  CBD  businesses  have  the  highest  rating  differential,  and  rural
properties have the lowest, taking account of the levels of benefit that different
rating groups receive from public transport.




REPORT 18
PAGE 3 OF 6

Transition policy

GWRC proposes transitioning changes to the new rates allocations in the R&F
over three years, so the policy is completely implemented from 1 July 2021.
4.
Consultation process
The  changes  in  the  proposed  R&FP  relate  to  the  funding  of  two  of  GWRC
largest  areas  of  work,  and  they  are  considered  significant  due  to  the  level  of
public interest we expect.
Changes to the R&FP will be consulted on concurrently with the Consultation
Document (CD): ‘Investing in  Our Extraordinary Region’  (see  Report 18.23).
The consultation document includes a summary of the proposed changes to the
policy and a reference to the consultation process.
The allocation of rates within the region is significant and impacts some of the
key  aspects  of  the  consultation  document  and  financial  strategy  including
affordability  and  fairness.  It  should  be  noted  that  the  information  on  the
allocation  of  rates  in  the  CD  has  been  prepared  on  the  basis  of  the  proposed
changes to the policy. The inclusion of R& FP changes in the CD is consistent
with requirements of section 93C(2)(d) of the LGA.
Section 83A of the LGA allows for combined or concurrent consultation where
a local authority is required to use or adopt the special consultative procedure
(SCP). We are required to use the SCP to consult on the CD.
It is recommended that the SCP and the process outlined in section 83 also be
used  for  the  RF&P.  This  requires  the  preparation  of  a  Statement  of  Proposal
(SOP).    This  approach  is  appropriate  given  the  significance  of  the  proposed
changes,  the  potential  impacts  on  parts  of  the  community  and  the  level  of
public  interest.    This  is  consistent  with  our  Significance  and  Engagement
Policy.  Use of SCP will also ensure compliance with sections 82 & 82A of the
Act.
The  proposed  R&FP  is  attached  in  Attachment  1  and  the  Statement  of
Proposal is attached in Attachment 2.
Submissions  responding  to  the  statement  of  proposal  on  the  proposed  R&FP
will be considered at the hearings being held for the 10 Year Plan and has been
incorporated into the Hearing Committee's terms of reference (Report 18.23).
5.
Engagement
The  proposed  changes  to  the  R&FP  are  significant  and  likely  to  be  of
considerable interest to the community. As such a comprehensive engagement
approach  will  be  utilised  in  conjunction  with  the  engagement  on  the  10  Year
Plan.
A number of key messages have been developed and will be used throughout
the engagement process.
REPORT 18
PAGE 4 OF 6

A Summary of Information (Attachment 3) has been prepared as the basis for
public consultation, in accordance with sections 83 and 83AA of the Act. A set
of Q & As to support public consultation are being prepared and will be made
available on the GWRC website.
Consultation  and  engagement  will  follow  the  approach  for  the  10  Year  Plan
outlined in Report 18.23.
6.
Consideration of climate change
The matter requiring decision in this report has been considered by officers in
accordance  with  the  process  set  out  in  the  GWRC  Climate  Change
Consideration  Guide.  There  are  not  direct  climate  changes  impacts  of  the
proposed  policies  as  they  relate  to  funding  mechanisms,  rather  than  activities
themselves.
7.
The decision-making process and significance
Officers  recognise  that  the  matters  referenced  in  this  report  may  have  a  high
degree of importance to affected or interested parties.
The  matter  requiring  decision  in  this  report  has  been  considered  by  officers
against the requirements of Part 6 of the Local Government Act 2002 (the Act).
Part 6 sets out the obligations of local authorities in relation to the making of
decisions.
7.1
Significance of the decision
The subject matter of this report is part of a decision-making process that will
lead to the Council making a decision of high significance within the meaning
of  the  Local  Government  Act  2002,  being  the  adoption  of  the  R&FP.    The
immediate  decision  required  by  this  report  has  a  low  to  medium  level  of
significance.
8.
Recommendations
That the Council:
1.  Receives the report.
2.  Notes the content of the report.
3.  Agrees  that  the  special  consultative  procedure  be  used  to  consult  on  the
proposed  changes  to  the  Revenue  and  Financing  Policy,  and  that  this
approach meets the requirements of sections 78, 82 and 82A of the Local
Government Act 2002.
4.  Agrees  that  the  consultations  on  the  10  Year  Plan  and  the  proposed
Revenue and Financing Policy shall be concurrent.
5.  Approves  the  proposed  Revenue  and  Financing  Policy,  as  set  out  in
Attachment 1, for the purposes of consultation.
6.  Adopts  the  statement  of  proposal  and  summary  of  information  for  the
proposed Revenue and Financing Policy, as set out in Attachments 2 and
3.
REPORT 18
PAGE 5 OF 6

7.  Endorses the engagement approach outlined in section 5 of this report.
8.  Authorises  the  Council  Chair  to  make  editorial  changes  to  the  proposed
Revenue  and  Financing  policy  and  accompanying  documents  to  correct
errors and improve public understanding.


Mark Ford
Luke Troy
Dave Humm
Manager, Strategic Finance
General Manager, Strategy
General Manager, Corporate
Services/Chief Financial
Officer

Attachment 1: Proposed revenue and financing policy
Attachment 2: Statement of proposal - proposed revenue and financing policy
Attachment 3: Summary of information – proposed revenue and financing policy

REPORT 18
PAGE 6 OF 6