Whakapaunga moni tōpū - Capital expenditure
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.
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.
Consultation has concluded