LTP 2012-2022 - Introduction - Hurunui District Council

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www.hurunui.govt.nz to getting the best out of our contracts for service, having helpful friendly staff, being responsive to complaints and service requests by getting back to customers quickly, etc. Regarding actual levels of service, these are discussed under the ‘Key Factors for Our Financial Strategy’ part of this section. 4. Facilitate Appropriate Growth in the District We want our district to continue to grow and that not only will more people want to live in the Hurunui, but that those who are here already, will want to stay. Growth in our population helps spread rates across a wider number of ratepayers and helps to retain key services, such as medical services, schools and shops, etc. We are mindful that growth needs to be sympathetic toward the environment and the district’s rural values which is why we talk about “appropriate growth”. Accordingly, we need to ensure that our planning rules (as we review our District Plan) do meet the objectives of the District as a whole. 5. Maximise Thermal Pools Profit We are in the envious position of owning one of New Zealand’s key tourist facilities - the Hanmer Springs Thermal Pools and Spa (HSTP&S). The success of the HSTP&S has had a flow on effect to other businesses that service the tourist industry. The HSTP&S is sited on a reserve vested to the Hurunui District Council in accordance with the Reserves Act. Because of this, we are able to use the profits from the HSTP&S to fund other reserves that we administer. This includes the Hurunui Memorial Library (also known as the “District Library”), the public toilets and cemeteries throughout the district, as well as a wide range of recreational reserves. This is a particular point of difference from other Local Authorities in New Zealand who will generally have to fund these types of functions through rates. Key Factors for our Financial Strategy Within the context of our core principals, we have identified the following key factors that shape our Financial Strategy over the life of this LTP: • We want to ensure that our services remain affordable • We want to maintain or improve our current levels of service Our key funding mechanisms are: a. Rates, both District Wide and Targeted rates b. Surpluses derived from the Hanmer Springs Thermal Pools and Spa c. The use of the Internal Financing structure which provides internal loans for communities requiring funding and also an avenue for communities to build up funds to meet funding requirements in the future We Want to Ensure that Our Services Remain Affordable The concept of affordability is one of our core principles. Our modest overall rate increases in the past three years have been: • 2009/2010 - 4.20% • 2010/2011 - 3.04% • 2011/2012 - 3.60% We considered all of these increases to be affordable and deemed that, the community agreed going by their submissions when we consulted the public on these. However, there are various factors facing us that will require us to increase rates at levels well above what we anticipated when we prepared the last LTP (the 2009-2019). As outlined in the Mayor and CEO’s introduction we are experiencing the on-going financial impact of the Canterbury Earthquakes. In particular, there has been a significant increase in the cost of insurance for everyone. While the increase is large and affects the overall rates increases, we consider it necessary and responsible to insure our keys assets. Meeting drinking water compliance is a costly issue (see the Key Issues section). We consider the cost of complying with the standards to be unaffordable to communities on the individual water supplies affected. Because of that, we have developed a two stage approach where we will aim for Ecoli compliance immediately and start to build a fund to meet some of the cost of the full compliance in later years. The rationale of this approach is to ensure we are in a position to meet our obligations in an affordable manner. Whereas we are intending on maintaining our current levels of service for roading over the next three year period, our ability to do so in future years may be challenging. The ongoing impact of receiving less NZTA funding than we had earlier anticipated in our Asset Management Plans will eventually have a detrimental effect on our levels of service unless more rates are collected. The issue we will likely be facing in our next Long Term Plan, will be affordability versus levels of service. We Want to Maintain or Improve Our Current Levels of Service With the exception of roading as outlined above, we are committed to maintaining our levels of service. In some areas, we intend to increase the levels of service, through: • Complying with the increased Drinking Water Standards • Improving the treatment of sewage in Hanmer Springs • Employing an engineer dedicated to stormwater management throughout the District • Building new or upgraded facilities, such as: • upgrading the Hanmer Springs Domain 22
Hurunui Community Long Term Plan 2012 - 2022 • upgrading or building a new Medical Centre in Cheviot • Improving our customer service (within existing budgets) Each of these will be funded through rates or other mechanisms such as the use of the internal loans or development contributions, to ensure that the rates increases imposed are kept to an affordable level. The Use of Our Key Funding Arms We have three key arms to our funding structure to meet the operating and capital expenditure planned for the period of the LTP. 1. Rates Under the Local Government (Rating) Act 2002, we have the ability to set rates to fund the activities we undertake. The way we set our rates is set out in the Funding Impact Statement and Rates System section. This Financial Strategy also sets out requirements for us to place limits on rate increases and this is discussed further below. 2. Surpluses Derived From the Hanmer Springs Thermal Pools & Spa As outlined in the Core Principles above, we operate the HSTP&S complex on a reserve that has been vested to the Council under the Reserve Act. Over the past decade, the operation of the HSTP&S complex has been extremely successful and we constantly consider how to maximise the profits generated. December 2010 saw the completion of a $7.5 million expansion of the complex, which provided a wider range of facilities and has proved to be an outstanding success. We are aware that as a tourist destination, the HSTP&S need to be in top condition and refreshed if we are to maintain our place in the tourism market. Because of this, and the ability for the profits from the complex to fund it, further capital projects are planned for the ten year period of this LTP. The use of the HSTP&S surpluses is a key funding option available to meet the costs of our reserves throughout the district. The plan estimates that a total of $24 million will be used from the surpluses derived from the HSTP&S to offset these costs. For the first three years of the Long Term Plan, the council is forecasting to spend more on reserve based costs than it is earning from the surplus of the Hannmer Springs Thermal Pools & Spa, however, the Council is comfortable with utilising some of the existing reserve balance to fund this. 3. Internal Financing Structure We developed an internal financing structure to provide a consistent approach to funding capital expenditure across the organisation. Because we do not build up depreciation reserves, this system is important to enable communities to access funding to undertake capital expenditure projects rather than being required to fund such project through other sources, such as rates. Our Internal Financing Policy is fully discussed on page 262. The structure is based on individual activities essentially holding its own bank account. Income (rates, development contributions, etc.) are deposited into the account and expenditure, both operating and capital, is withdrawn from the account. Like other bank accounts, the account can be in funds or overdrawn. When the balance is in funds, we pay an amount of interest and if the balance is overdrawn, then that activity pay interest to us. The result is that communities are able to undertake capital expenditure projects by allowing the capital balance to go into overdraft. This allows those communities to spread the cost of required capital work over a period of time, rather than having to fund it entirely in the year that it is incurred, by setting rates to cover an amount of debt repayment every year. The internal financing structure also allows communities to start building up funds by budgeting to continue to set rates at a higher level than required to meet all operating costs, even if there is no debt. This will mean that the excess operating income will be held for that community to meet capital expenditure requirements in the future. The benefit to those communities in this position is that we pay interest to those communities, which further increases their account balances. The key benefit from the use of the internal financing structure and building up fund is that it avoids large increases in rates as it allowed the Council and the individual communities to smooth the rating effect of large capital projects. The anticipated level of internally financed debt at as 1 July 2012 is $16.6 million. The balances over the ten year period are further disclosed in the Reserve Funds section of the LTP . 23
Page 1 and 2: t Long Term Plan 2012-2022 Hurunui
Page 3 and 4: Hurunui Community Long Term Plan 20
Page 9 and 10: About the Plan Introduction The Loc
Page 11 and 12: How Your Rates are Spent The Counci
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LTP 2012-2022 - Introduction - Hurunui District Council

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