Draft Long Term Plan 2012-2022 - Hurunui District Council

www.hurunui.govt.nzFinancial PositionFinancial Position as at 2012Our financial position at the start of the LTP period is set out inthe 2011/2012 Annual Plan shown below:• The total rates were set at $12.8 million; of which $5.3million are in District Wide rates and $7.5 million are intargeted rates.• Total income from non-rate sources was $16.9 million,which includes $9.6 million in gross revenue derived fromthe Hanmer Springs Thermal Pools and Spa.• Total Operating Expenditure is forecast at $23.5 millionand Capital expenditure for the 2011/2012 year isexpected to be $9.2 million (which includes a level ofCapital that has been carried over from the 2010/2011year).• External Debt was expected to be $13.5 million at theend of June 2012; however, the forecast has been reducedto $12.5 million due to deferring some projects as part ofthe LTP budget preparation.• Internal Debt is expected to total $16.6 million as at 30June 2012.• Total Assets as at 30 June 2011 was $335 million, of which$253 million related to our infrastructure.The Relevance of the Current Financial Situationto the Financial Strategy• The current financial situation is relevant to thefinancial strategy as it provides the starting point for thedevelopment of the budgets for the LTP.• There have been relatively low levels of rate increases forthe past three years.• We took on debt for the first time in September 2010,principally to provide funding for the $7.5 millionexpansion of the Hanmer Springs Thermal Pools and Spa,but there was already a need to obtain external debt tofund the following keys projects over the preceding years:• Town Centre Development in Hanmer Springs ($1.9million) and Amberley ($560,000)• Water Upgrades in Amberley ($714,000), Cheviot($658,000) and Hanmer Springs ($788,000).• Sewer Upgrades for Amberley ($2 million) andHanmer Springs ($1.8 million)• Capital Expenditure to address the Drainage issues inthe Amberley Ward ($890,000).• New Medical Centre in Hanmer Springs ($450,000)and Rotherham ($1 million)• As a result, there have been a number of large projects thathave been funded through the internal financing policy andthe requirement for those communities to start to repaythe debt through rates to replenish our cash reserves.Until then, we will continue to hold debt for the periodof the LTP.• The financial performance of the Hanmer Springs ThermalPools and Spa remains critical to our ability to keep ratesat an affordable level. The surpluses derived from theHSTP&S is actively used to fund various costs relating toreserves throughout the district. If we did not have thesurpluses to offset these costs, then they would need to berated for. In addition, and under the terms of the InternalFinancing Policy, we receive interest from the HSTP&Sfor funds lent to it for the recent expansion works. Thisinterest received is used to offset the costs of our externaldebt and to offset the District Wide Rates. The Council isforecasting to spend more on reserve based costs than itis forecast to earn from the surpluses derived from theHanmer Springs Thermal Pools & Spa for the first threeyears of the Long Term Plan. To fund this the Council willutilise existing reserves.Forecast Financial Position as at 2022At the end of the LTP period, our position is forecast as follows:• Total rates revenue of $19.9 million; of which $8.0 millionare in District Wide rates and $11.9 million are in targetedrates.• Total income from non-rate sources is expected tobe $22.3 million, which includes $13.8 million in grossrevenue derived from the HSTP&S.• Total Operating Expenditure is forecast at $39.6 millionand Capital Expenditure for the 2021/2022 year isexpected to be $7.7 million.• External Debt was expected to reduce to $12 million atthe end of June 2022.• Internal Debt will reduce to $15 million by the end ofJune 2022.• Total Assets as at 30 June 2022 is forecast to be $493million, of which an estimated $393 million relates toinfrastructure.Key Movements Over the Ten Year PeriodRates – Over the ten year period, we are forecasting toreceive a total of $167 million in Rates. This is broken down to$69million in District Wide Rates and $98 million in TargetedRates. To achieve the total increase of 55% since the 2011/2012,we intend to take incremental steps over the ten year period,however with a relatively large increase of 5.83% required forthe 2012/2013 year.Non-Rate Income – Excluding gains in asset valuation and vestedassets, we are forecasting that a total of $191 million will bereceived from other forms of income. Roading Subsidies makeup $38 million over the period, Development Contributions areforecast at $4.3 million and the gross revenues from the HSTP&Sare forecast at $115 million. In addition, we are expected toreceive $3.4 million from Forestry Sales, which is used directlyto reduce debt.Operating Deficits - Due to Council spending more on reservebased costs than it is forecast to earn from the surpluses fromthe Hanmer Springs Thermal Pools & Spa, for the first three24