Financial summary for 2020/21

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Consultation has concluded

Graphic illustration depicting Archives, Mana whenua partnerships, Call Centre, key buildings, central government and Arapaki Service Centre

Whakarāpopoto huamoni 2020/21

This section is the summary of our budget for the 2020/21 Annual Plan. It has information our Operating Expenditure, Capital Expenditure and Revenue, as well as outlining our borrowing position.

You can find more details about Rates and also changes to Fees and User Charges on separate pages.

The 2020-21 Annual Plan covers the third year of our Long-term Plan (LTP) which was set in 2018. The LTP is due to be updated next year.

Before the Covid-19 pandemic there was extra pressure on the Council's finances including:

  • recovering from the impact of earthquakes on Council property for example - the Central Library.
  • improving aging infrastructure e.g. waste water systems; and
  • continuing to invest in the development of the City.

The proposed Annual Plan budget outlined a balance between rates affordability, continuing existing services and investing in the city.

Since the consultation started several cost pressures have arisen that have been incorporated into the final Annual Plan. To ensure these did not impact on the level of rates funding needed, the Council has agreed to find further cost savings, accept some additional financial risk and borrow further in 2020/21. More information on these can be found in the More Financial Details tab below.

The budget of the final Annual Plan includes the following impacts:

  • The economic shut-down substantially reduced income from fees and user charges, grants, Central Government subsidies, and other sources such as interest and dividends from investments and alongside rates, this income pays for our operating expenditure.
  • In addition - apart form marinas and landfill - we are also not increasing any fees this year as well as maintaining our levels of service to the community (e.g.roads, footpaths, and libraries to festivals, museums, sports fields, animal control) as much as we can.
  • We are forecasting an income loss of about $38m this year. We have not added this loss to rates, as that would have meant an additional 12% increase. That is not sensible at this time.
  • The lower revenue means we are proposing to increase the amount we borrow this year to cover our losses, and pay the extra borrowing off over 10 years.
  • We are forecasting debt to cover 10.7 percent ($62m) of operational expenditure (our day-to-day spend). This is up from 2.4 percent ($13.5m) in 2019/20.

The articles below have now been updated to provide more information on our final 2020-21 Annual Plan budget.

See the feedback from those who have taken part in the Annual Plan consultation by viewing our interactive dashboard of participation here

Whakarāpopoto huamoni 2020/21

This section is the summary of our budget for the 2020/21 Annual Plan. It has information our Operating Expenditure, Capital Expenditure and Revenue, as well as outlining our borrowing position.

You can find more details about Rates and also changes to Fees and User Charges on separate pages.

The 2020-21 Annual Plan covers the third year of our Long-term Plan (LTP) which was set in 2018. The LTP is due to be updated next year.

Before the Covid-19 pandemic there was extra pressure on the Council's finances including:

  • recovering from the impact of earthquakes on Council property for example - the Central Library.
  • improving aging infrastructure e.g. waste water systems; and
  • continuing to invest in the development of the City.

The proposed Annual Plan budget outlined a balance between rates affordability, continuing existing services and investing in the city.

Since the consultation started several cost pressures have arisen that have been incorporated into the final Annual Plan. To ensure these did not impact on the level of rates funding needed, the Council has agreed to find further cost savings, accept some additional financial risk and borrow further in 2020/21. More information on these can be found in the More Financial Details tab below.

The budget of the final Annual Plan includes the following impacts:

  • The economic shut-down substantially reduced income from fees and user charges, grants, Central Government subsidies, and other sources such as interest and dividends from investments and alongside rates, this income pays for our operating expenditure.
  • In addition - apart form marinas and landfill - we are also not increasing any fees this year as well as maintaining our levels of service to the community (e.g.roads, footpaths, and libraries to festivals, museums, sports fields, animal control) as much as we can.
  • We are forecasting an income loss of about $38m this year. We have not added this loss to rates, as that would have meant an additional 12% increase. That is not sensible at this time.
  • The lower revenue means we are proposing to increase the amount we borrow this year to cover our losses, and pay the extra borrowing off over 10 years.
  • We are forecasting debt to cover 10.7 percent ($62m) of operational expenditure (our day-to-day spend). This is up from 2.4 percent ($13.5m) in 2019/20.

The articles below have now been updated to provide more information on our final 2020-21 Annual Plan budget.

See the feedback from those who have taken part in the Annual Plan consultation by viewing our interactive dashboard of participation here

Consultation has concluded
  • Changes to the budget since the consultation

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    A number of cost pressures have arisen since consultation started that have been incorporated into this final Annual Plan. An equivalent value of further cost savings, acceptance of some additional risk and further borrowing have also been agreed in order to ensure that these additional pressures have not impacted the overall required level of rates funding for 2020/21.

    Additional costs pressure

    Additional cost pressures of $10.3m were identified since consultation. Most significantly these include increased levels of depreciation given increased three waters infrastructure valuations ($2.15m); and provisioning for additional forecast cash losses for CCOs as a consequence of pandemic related decreased trading and grant losses ($2.6m).

    Additional Capital spending

    In addition, since consultation three additional capital expenditure requirements have been identified that will increase the capital programme by $4.6m to $299.1m. These are: Central Library remediation options $2m; Karori Event Centre fitout $1.2m; and Roading projects (bringing forward lifelines road improvements) $1.4m.

    Increased Council cost savings

    As a consequence, the level of cost savings in this Annual Plan has increased to $7.4m from the $3.2m included in the Consultation Document. Additional savings will be made through a range of efficiency measures including around Council travel, remuneration, contracts, ICT and asset capitalisation.

    Increased risk

    To manage cost pressures the Council has also taken on some additional risk in its level of insurance coverage. Council has secured $421m of insurance cover of a possible $623m target cover (approximately 67%). In simplified terms this is approximately equivalent to having cover for a 1 in 700 year event, against the strategy target of a 1 in 1,000 year event. The gap between the insurance cover and Council’s share of the loss in a significant seismic event would be covered by borrowing.

    Increased borrowing

    Finally, the additional cost pressures will result in $2.9m of additional borrowing to the consultation document forecast increased borrowings of $172m.

  • Moni whiwhi - Revenue

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    Where the funding comes from

    The Council uses a several mechanisms to fund our operational and capital expenditure. Rates are expected to fund 58 percent of our operational expenditure. We also collect revenue from fees and user charges, grants and government subsidies and other sources such as interest and dividends from investments. Capital expenditure is funded through borrowings, grants and government subsidies, and development contributions for projects that aim to meet the demands from growth.

    Prior to the COVID-19 pandemic, Council was considering several increases to fees and charges to maintain the balance between how much is funded by users of some services and how much is funded by rates, as outlined in our Revenue and Financing Policy. We were expecting a total $11m in increased revenue from fee increases, the most significant increases being in building consents, parking and landfill fees. As a result of COVID-19 the majority of these planned increases were cancelled.

    COVID-19: The impact and response

    The loss of non-rates operating revenue is the most significant financial impact facing Council as a result of COVID-19. Forecasts indicate that non-rates revenue will be down by $20m in 2019/20 because of lost revenue from the closure or reduction of Council services during different COVID-19 alert levels. This will result in an operating deficit for the 2019/20 year, which Council will need to borrow to fund.

    We are also budgeting for significantly lower revenue from fees and charges in 2020/21, we estimate this revenue will be $38m below policy expectations. The general assumption is fees, charges and dividends revenue will be approximately 60 percent of predicted levels in July 2020, increasing to 100 percent by the end of October 2020. For some of our services we have modified this assumption based on more concrete evidential estimates.

    Part of the loss of revenue results from cancelling the originally planned fee and user charges increases. This will ease the impact on the community as we recover from the COVID-19 pandemic. We are also not expecting to receive a dividend from our shareholding in Wellington Airport in 2020/21.

    Alongside the fees and user charges revenue, there is a risk to Council’s lease and property revenue as a result of tenant hardship. A combination of short-term rent abatement and deferred payment of rents is proposed as part of the Council’s Pandemic Response Plan.

    The budget

    Under the Council’s current funding policies, an additional rates increase of 12% percent would be needed to offset the $38m shortfall in non-rates revenue. This is clearly intolerable at this time. Therefore we will debt fund this loss of revenue instead of increasing rates. Total recurring non-rates operating revenue is forecast at $153m.

    The graphic illustrates the non-rates revenue to fund operating expenditure. The biggest area of non-rates revenue is Parking fees and enforcement at 20 percent of the total non-rates revenue of $153m; Housing rents, Other revenue, and Landfill fees follow at 19%, 17%, and 14% respectively; Property lease income, Building and Resource consent fees, Pools, rec centres and sports-fields and Roading subsidies follow each under 10 percent of total non-rates revenue.

  • Whakapaunga moni whakahaere - Operating Expenditure

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    Even without the COVID-19 pandemic the Council was facing significant cost increases in 2020/21 to deliver existing services and to respond to earthquake and resilience issues. These included setting up temporary library services after the closure of the Central Library. Higher asset values also meant that we needed to put aside more money to ensure crucial city infrastructure was maintained and replaced. The extra costs totalled $54 million. If we didn’t look to manage the funding impact of these cost increases it would have been equivalent to a 17 percent rates rise.

    Therefore, alongside managing the impacts of COVID-19, we had reduced the impact on rates by setting an organisational savings target of $7.4m and accepted a range of other budget risks. We also reviewed costs where the benefits will occur over several years and considered whether these be debt funded to take the pressure off 2020/21 rates. There is more detail on this in the Borrowing Position section.

    COVID-19: The impact and response

    Since the COVID-19 lockdown, we have had some minor cost reductions. These include energy costs and some of the operating expenses in our closed facilities, but generally Council still needs to pay the majority of the costs that maintain services in the city.

    The crisis also has implications for each of our Council Controlled Organisations (CCOs). The primary and almost immediate impact was the collapse of third party external revenues. As many of our CCOs rely on Council funding to support the services they provide, including the Zoo, Wellington Museums, and Wellington Venues, we expect Council costs to increase to ensure they can thrive after COVID-19. We have made an extra $5.0m provision in our 2020/21 budget for this.

    The Council is trying to balance making cost savings with protecting the jobs of our staff and maintaining service levels. The Executive Team have taken a 10 percent pay cut for six months and a salary freeze for a year. All of the Elected Members chose to make donations to Wellington community organisations equivalent to 10 percent of their salary until the end of June 2020 to show their personal support for the city. This is in addition to extra Council funding for community initiatives of $1m in 2019/20 and $500k in 2020/21.

    In addition to the $7.4m savings target and budget risks already assumed, the CEO is undertaking a thorough review of Council costs to ensure all savings have been identified.

    The budget

    The cost of delivering and running Council services in 2020/21 is forecast to be $594m or $7.52 per resident per day. As mentioned this is a $54m increase on last year, which primarily relates to increased depreciation due to new assets and a property revaluation, and inflation on contracts and personnel costs. We will be trying to reduce costs further to avoid additional rates pressure while we recover from COVID-19, but our plan also assumes we will not be reducing service levels. This presents a significant challenge as our budget already contains some risks and uncertainty around additional costs the Council might incur as part of our COVID-19 Pandemic Response Plan.

    $594m - Operating spending for 2020/21

    The graphic illustrates the proportion of planned operational expenditure in each of our seven strategic activity areas. Our Priority areas ensure we allocate spending based on what is important. The biggest area of organisational expenditure is Environment & Infrastructure at 35 percent of the total gross operating expenditure of $594 million; Social and Recreation and Transport follow at 23 percent and 16 percent respectively; Economic development, Urban development, Council organisational projects, Arts and Culture, and Governance follow, each with under 10 percent of total operational expenditure

  • Whakapaunga moni tōpū - Capital expenditure

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    What is capital expenditure?

    Capital expenditure is used to renew or upgrade existing assets or to build new assets to provide a higher level of service or account for growth. Our assets include buildings, roads and footpaths, water, stormwater and wastewater pipes, libraries, swimming pools, and sportsfields.

    We have a significant capital expenditure programme in place, with $259m originally planned for 2019/20 and $299m for 2020/21. The 2020/21 programme includes significant investment in our water, stormwater, wastewater and transport networks, as well as multi-year projects to earthquake strengthen the Town Hall and St James Theatre, and the city’s new Convention and Exhibition Centre. Prior to COVID-19, Council was forecasting that approximately $42m of 2019/20 planned capex would not be delivered and the budget deferred to future years.

    COVID-19: The impact and response

    All of the physical works on Council’s capital expenditure projects were put on hold as a result of COVID-19 alert Level 4. While work on many projects restarted under Level 3, we expect a further $23m of planned 2019/20 capital expenditure to be deferred. There is also continued uncertainty on capital project delivery throughout 2020/21 because of the economic impacts of the pandemic. It is unlikely that we will be able to complete the $65m of carry forward in expenditure on top of the significant capex programme already planned. We are assuming that a similar capex underspend ($65m) will be deferred from 2020/21 into future years. This reduces the borrowing required for capex in 2019/20 and partly offsets the temporary increase in debt funding required to support the rates deferral proposal in Council’s Pandemic Response Plan.

    At this stage Council is not proposing to stop any capex projects currently planned for 2020/21. However, we may need to reconsider our work programme depending on the response to our submission to Central Government’s request for identification of ‘shovel ready projects’. Most of the projects in our 2020/21 draft budget are already in progress and stopping them will incur costs rather than save money. We also think it is important that we continue to invest in Wellington to ensure jobs are retained and the city is fit for the future.

    It’s also important to note that we borrow to fund capital expenditure, so stopping capex projects will have little impact on 2020/21 rates. However, the Council will be reviewing and reprioritising projects as part of the 2021-31 Long-term Plan.

    The budget

    Total capital expenditure for 2020/21 is $299m. This is a small increase from what was included in the 10-Year Plan. The variances primarily relate to the refinement of costs and timings on major building and water projects. For a more detailed explanation of the planned work programme please see the Key projects sections in Section 3: Strategy areas projects and programmes.

    $299m - Capital spending for 2020/21

    The graphic illustrates the proportion of planned capital expenditure in each of our seven activity areas. Our Priority areas ensure we allocate spending based on what is important. The biggest area of capital expenditure is Transport at 24 percent of the total capex of $299 million; Environment & Infrastructure, Arts and Culture, Urban Development, and Social and Recreation follow at 22%, 18%, 16% and 11% respectively; Council organisational projects, Economic development and Governance follow each with under 10 percent of total capital expenditure. Cultural Wellbeing and Urban Development are higher than usual this year, because of construction costs for the Town Hal and St James Theatre seismic strengthening, and the new Convention & Exhibition Centre.

  • Explaining our borrowing position

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    Explaining our borrowing position

    We borrow to fund upgrades to our assets or to invest in new infrastructure. We do this as it allows us to spread the cost of funding this expenditure over the multiple generations that will benefit from the investment.

    Our policies also allow us to use debt to fund operating expenditure where the benefits are received over several years. This avoids ratepayers having to fund the whole cost in one year. We were due to start paying for costs for Let’s Get Wellington Moving, temporary library services and additional water resilience in 2020/21, but have deferred this to keep the rates increase as low as possible – but it does mean the rates increase will be higher next year once we start rate funding these costs.

    Due to the abnormal situation created by COVID-19 we are also planning a variation from our Revenue and Finance Policy and the balanced budget requirement this year. This means we are proposing to fund the gap caused by lower fee and user charges and dividend income through borrowing. This is prudent so long as the revenue recovers in future years. But it does have to be paid for eventually, so we are planning to spread this cost over the following 10 years.

    $860m
    Total borrowings are forecast to be $860 million at the end of 2020/21, this equates to 158 percent of operating income.
    $3,970 per resident
    The forecast average borrowings per resident at the end of 2020/21 are $3,970.


    For 2020/21 total borrowings are forecast to increase by $195m. Of this increase, $111m is due to borrowing for capital expenditure (capital programme budget minus depreciation and repayments), $42m due to debt funding of operating expenditure and $42m of revenue losses and cash flow assistance to CCOs caused by the COVID-19 pandemic. Borrowing is forecast to be $860m at the end of the year, this equates to 158 percent of our operating income compared to the Council imposed cap of 175 percent. This compares to $849.4m forecast for June 2021 in our 2018-2028 Long-term Plan.

    In Wellington the average household earns $143,577 a year. Our debt is the equivalent of our average household having a mortgage of about $227,000. By the end of the 2020/21 year, the average borrowing per resident is forecast to be $3,970.