Changes to the budget since the consultation
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.
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.
Finally, the additional cost pressures will result in $2.9m of additional borrowing to the consultation document forecast increased borrowings of $172m.
Consultation has concluded