1% - Waikato District Council

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42NAVIGATING THE FUTURE | WAIKATO DISTRICT COUNCILThe Asset Renewal Reserve Balances graph shows the abilityof the council to fund asset renewal programmes.Asset renewal reserve balances2520151010 Year growth expenditure and developmentcontribution income2018161412108650Millions420Millions-5WaterWastewaterStormwaterRoadingTotal replacement fundsOther2012/132013/142014/152015/162016/172017/182018/192019/202020/212021/22While water and wastewater Capital Replacement Reserves dogo into deficit during part of the period this plan covers, duringthe whole 10 years the deficit is eliminated and we can startto build up reserves to fund replacement of ageing assets after2022. This means rates increases will be smoothed out, whichwe consider is a prudent approach to addressing the deficit.Revenue for new assetsNew assets are necessary to meet the needs of growth andimprove services. During the next 10 years the cost of thesewill be $172 million.2012/132013/142014/152015/162016/17Capital expenditureDevelopment contribution income2017/182018/192019/202020/212021/22Some of our growth projects have to be built beforedevelopment occurs, so we borrow the funds needed, and thenrepay that from development and financial contributions oncethe growth has taken place.Rates affordabilityOnce growth, new services and maintaining our existingservices has been taken into account, we need to considerthe impact on rates.What is affordable for each household is different and so wehave to consider averages to determine whether rates areaffordable. (There is a rates rebate scheme, rates remissionand postponement policies to help those who can’t affordtheir rates).These projects will be funded from development contributionsfor the growth-related projects, and new debt, reserves andrates for improved services.
43financial pathwayThere is also a challenge in that council inflation, measuredby the Local Government Cost Index, tends to be higher thanthe Consumer Price Index (CPI) that measures householdinflation. The graph below shows that during 1999 to 2009local government inflation increased more than the CPI.LGCI and CPI 1999 to 2009Index Jun 06 = 10001,2001,1501,1001,0501,000950900850800750700Overall LGCICPI19992000200120022003200420052006200720082009This trend is expected to continue. So we can maintain whatwe have now, and improve other services, rates will have toincrease more than incomes will during the next 10 years,making rates less affordable.We’ve set a limit on overall rates increases at the localgovernment inflation rate plus 1 per cent. (See thegraph below).Limits on proposed rates increases3,6003,2002,8002,4002,0001,6001,200800400Based on this plan, in 2012 the average rates per dwelling (totalrates amount divided by the total number of dwellings) will be$2,764. During the next 10 years, both rates and the numberof dwellings in the district will increase. By 2022, we estimatethe average rate per dwelling will be $3,148. This is belowthe Department of Internal Affairs national average estimateof $3,412. Therefore, the council has set a limit on rates atno more than $2,764 per dwelling plus the local governmentinflation rate plus 1 per cent (cumulative). Please note theamounts shown include Goods and Service tax.Affordable debtWhen new assets are needed to improve services or toprovide for growth, the council borrows the money needed.This keeps rates down and spreads the cost of paying for thenew assets to include future ratepayers who will also get thebenefit of the assets.The council’s Treasury Risk Management Policy (see page 115 inVolume Two) has the detail of how the council sets its externaldebt limits. This takes into account the technical measureslenders require so they are satisfied we can service the debt.In summary, the measures set the external debt limit for 2012at $144 million ($6,183 per dwelling).Our planned debt is well below the limit at $3,253 (by 2022)per dwelling. The council expects to have external borrowingsof $25 million by the end of June 2012. So that we can fundgrowth and new services, the council’s planning to borrowanother $66 million by 2022 (see below for our debt profile).Limits on proposed debt7,5007,0006,5006,0005,5005,0004,5004,0003,5003,0002,5002,0001,5001,00050002012/132013/142014/152015/162016/172017/182018/192019/202020/212021/2202012/132013/142014/152015/162016/17Proposed avg. rates per dwellingLGCI plus <strong>1%</strong> (cummulative)2017/182018/192019/202020/212021/22Proposed avg. debt per dwellingDebt limitsStaying below our debt limit means we have the capacity tofund the expected growth, predicted in Future Proof, between2022 and 2061. It reflects a fair contribution from futureratepayers for the assets we have built and are building duringthis plan and provides a buffer for managing risk if we have amajor natural disaster.
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