Annual Plan 2020/2021

We will be holding a public consultation on the Annual Plan for 2020/2021 from 10 March to 14 April, asking for feedback on a proposal to increase rates more than was forecast in the Long Term Plan for this financial year.

Rates increase being proposed in upcoming Annual Plan consultation

This proposed rating increase is not enough to cover the total increase in operating costs, so will require additional funding by borrowing, which is achievable with a short-term loan to reduce the rates increase and spread it out over subsequent years, to lessen the burden on ratepayers.

“The facts are that the cost of maintaining our current services has escalated at a much faster rate than that estimated and developed  two years ago in our 2018-2028 Long Term Plan (LTP),” says our Mayor Sandra Goudie. “The increases  largely stem from our solid waste (rubbish and recycling) and core infrastructure activities,” Mayor Sandra says.

Solid waste costs have increased sharply over the past 18 months, with a large portion of the increase related to the change in recycling markets (China no longer accepting some types of plastic) and the increased costs of maintaining closed landfills (of which we have 11 in our district), both of these nationwide issues have been covered extensively by the national media.

“Contractor rates in the civil construction industry are also driving costs up, as we compete for tenders against thriving building industries, in places like Auckland and Tauranga,” says Mayor Sandra.

“Over the past few years we’ve increased the delivery of the capital works programme. This is a good outcome and delivers on our commitment to our ratepayers, residents and visitors but it comes with associated increased operational costs. On top of that, we’ve had additional pressures of joint funding government initiatives that increase our commitments, such as the Tourism Infrastructure Fund (TIF) to manage visitor demand. This has seen increased operational costs ripple through,” she says.

Public feedback on proposed rates increases

Because the proposed rates increase of 9.98 per cent is significantly more than the 3.70 per cent increase forecast for the year in the last (2018-2028) LTP, we’re seeking public feedback through our upcoming Annual Plan consultation from 10 March to 14 April.

We will publish a consultation document at the opening of the consultation that will detail exactly what is proposed.

If we increase rates by just under 10 per cent, we can manage the remaining deficit through a short-term loan, which will then be addressed through future rates increases, or changes in expenditure through the LTP process.

“We are concerned at the impact this rates increase may have on some ratepayers and we’re committed to looking at options to reduce overall expenditure as we develop our next LTP over the next 12 months,” says Mayor Sandra.

The exact impact of a rates increase on any property will vary a bit depending on what type of property it is and where it’s located. When the consultation opens, the consultation document will give the options for funding, rating examples for different types and values of properties.

“You can help us when consultation opens, by letting us know which services you value the most and which ones are no longer relevant or could be reduced. Please take this time to give us your feedback when our consultation opens in March,” Mayor Sandra says.

We have already started developing the 2021-2031 LTP and we’ll be consulting on that in early 2021.

More information on LTPs is on our website at tcdc.govt.nz/longtermplans

User fees and charges are proposed to increase in the areas where there’s been increased expenditure. Our consultation document will have a full list of the fees and charges we’re proposing to increase, as well as a summary of capital expenditure projects planned for 2020/21.

Factors that are driving up our costs

  • The average rates increase for the past decade has been 1.6 per cent. The annual average increase in costs over the last decade in the local government sector has been 2.3 per cent.
  • This gap year-on-year for the last decade combined with delivery of a larger capital expenditure programme means operating costs have risen more sharply than in the past.
YearRates Increase
2009/10 4.20%
2010/11 3.10%
2011/12 -0.90%
2012/13 -5.40%
2013/14 1.30%
2014/15 2.20%
2015/16 2.88%
2016/17 1.40%
2017/18 3.90%
2018/19 3.32%
2019/20 4.94%

Our capital works programme for the last three years has been ambitious, to build, replace or upgrade core infrastructure. Whereas in the past we sometimes only completed half of the capital works programme, over the last two years we have completed between 80-90 per cent of what was planned.  This improved delivery has flow-on effects which are:

  • Much of this capital expenditure is loan-funded, which results in increased finance costs to service the interest.
  • New or upgraded assets incur higher funded depreciation, and in many cases higher operating costs, adding to the total debt burden.
  • Costs are increasing not only due to inflation, but also because of higher standards set by the central government, for example, in drinking water treatment regulations, where by the end of next year we will have spent $15 million on upgrading five drinking water treatment plants to meet new government standards. The next LTP will include the programme for the remaining five plants, which could cost a similar amount.
  • We’re trying to meet demand from ratepayers and residents (for example – for more extensive coastal management measures to manage impacts of climate change).
  • In the last two years we’ve had significant costs to repair damage from storm events.
  • Then there’s competition to get suitable contractors to come and do infrastructure work, when there are similar jobs available to them in places like Auckland, Hamilton and Tauranga. Work tenders coming back to us for jobs are much higher priced than what was budgeted for 18 months ago.
  • We’ve also moved forward some spending to take advantage of co-funding from the central government’s Tourism Infrastructure Fund, to build or improve facilities such as toilets and car parks in visitor hotspots like Hahei.

Why raise rates, why not just cut spending?

The Annual Plan process is not able to lower expenditure significantly to avoid an increase in rates as contractual changes would be required, and the timeframes do not allow for these to occur before the end of June, when the Annual Plan for 1 July 2020 to 30 June 2021 must be adopted.

Many of our Council’s core services have mandatory standards that must be met, for example environmental standards for wastewater discharges; drinking water standards for water treatment plants; minimum timeframes for processing consents. Councils minimise costs on these services by running capital upgrades in the most efficient manner possible and having long term contracts in place for the operations, (which are regularly reviewed).

Some other services which are not mandatory to provide or have no minimum standards set by an independent body (such as parks and reserves, information centres and libraries) are often delivered by contracted providers and we run most of these contracts for at least three years and link them to the LTP cycle. Changing services that impact on Council staff numbers and/or their contractual arrangements requires time and often transition arrangements are needed. These types of changes also require public consultation and cannot usually be accommodated within a single financial year. They are best considered as part of an LTP process.

Remember: The LTP sets our Council’s financial priorities for a period of 10 years, with detailed budgets for the first three years, and is updated every three years. In the years between an LTP, an Annual Plan is developed that revises budgets for that year based on any new circumstances.

Reasons for significant increases in some fees and charges

User fees and charges are also set to increase in the areas where there has been increased expenditure, for example rubbish and recycling costs have increased by 41 per cent and the associated fees and charges are increasing on average by 31 per cent to offset most of this additional expenditure.  The reasons behind the increases include:

  • Since the Chinese government banned the import of many recycling materials in 2019 (which had been part of a National Sword initiative), councils like ours are having to find other sources for disposal. 
  • There are increasing costs to landfill due to the extra volumes coming in.
  • We’re now having to budget for any remediation work that might be required in the future to manage the 11 closed landfill sites we have in our district (Auckland has 89 of the 112 landfills nationwide at risk from just half a metre of sea level rise). The spotlight has been on old, closed landfills around the country and the risks they pose to the environment after floodwaters exposed one on the banks of the West Coast's Fox River and spread rubbish along the coastline in 2019.

Meanwhile, the proportion of costs that can be recovered by fees and charges is bound by our Council’s Revenue and Financing Policy. This policy is scheduled to be reviewed as part of our next LTP. Proposals to change this policy require public consultation so if our Council considers that a higher or lower proportion of the costs for some services should be met by the users then we’ll be seeking comment from ratepayers and users next year when we ask for feedback submissions on the LTP.