DRAFT LTP book.indb - Hurunui District Council

www.hurunui.govt.nzRisks and UncertaintiesThe useful lives are based on historical information. Some assetsmay last longer than the live stated above because of differingfactors and conversely, some assets may deteriorate at a fasterrate than the lives stated above.Rating of Uncertainty: Low5. Emissions Trading SchemeThe Emissions Trading Scheme (ETS) is in place; however, thereis still limited detail on how its implementation will affect costsmoving forward. The price change adjustors as provided byBERL have made some allowance for the effects of the ETSand the Council has applied those rates in accordance with itsassumption on inflation.The Council has registered its Forestry Assets under the ETSand it should qualify for carbon credits. These carbon creditswill have a value, however, as it is in its initial stage, there is nodetails to assess the effect of this value and as a result, it has notbeen accounted for in the preparation of the LTP.Rating of Uncertainty: High7. New Zealand Transport AgencySubsidy RatesTo fund roading operational and capital expenditure, the Councilreceives a percentage of the cost as a subsidy from the NewZealand Transport Agency (NZTA). The subsidy rate is basedon a calculation performed nationally which takes into accountthe land value of each District Council area. For the 2012/2013fi nancial year, the subsidy rates were as follows:• Operating Expenditure 50%• Capital Expenditure 50%• Minor Safety Improvements 60%• Level Crossing Warnings 100%• Special Purpose Roading 100%There has been no indication that any of these rates are expectedto change in the next three years, therefore the Council hasmade the assumption that subsidy rates are to remain constantover the life of the LTP.Risks and UncertaintiesThere is an inherent risk that the infl ation rates used in thepreparation of the LTP may not refl ect the actual costs. Shouldthe resulting costs from the implementation of the ETS begreater than the levels of infl ation that have been allowed for,then the Council will need to increase the funding from ratesand other income to allow for it.As the Council has not accounted for the value of the carboncredits in the preparation of the LTP, any potential value that isassigned to the credits, or any proceeds from the potential saleof any carbon credits will be credited to the Forestry Reserve,which can be utilised in a manner determined appropriate bythe Council.Rating of Uncertainty: Medium6. Changes to Council’s BusinessDictated by as yet Unknown/Unconfirmed Legislation orCentral Government Policy ChangeDue to the recent change of Government, the level of uncertaintyin this area is too high for any changes to be suffi cientlyquantifi able to be taken into account for the present plan. TheCouncil remains aware of the key issues on a qualitative level,and will take them into account as best they are able.Risks and UncertaintiesThe NZTA subsidy rates are based on a calculation whichtakes into account the land value of the Hurunui District as acomparison with other local authorities throughout the country.Should the land value of the Hurunui increase or decrease at arate different to the average over the country, the calculationmay result in the subsidy rate for the Hurunui increasing ordecreasing.Should the subsidy rates decrease from the levels assumed, it willresult in the amount of subsidy for roading works to decreaseand placing a greater burden for funding the operational andcapital expenditure of the roading network on the ratepayers.As an example, if all each category of subsidy reduced by 10%(resulting in the subsidy rates Operating & Capital Expenditureto 40%; Minor Safety Improvements to 50% and Level CrossingWarnings and Special purpose Roading to 90%), for the2012/2013 year, based on the budgeted level of expenditure, theroading rate would need to increase by $669,813 to $3,293,675,which will be a 19.54% increase in the District Wide Rates, asopposed to the 7.13% increase currently forecast.Rating of Uncertainty: High152