Financial summary for 2020/21

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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 on how Covid-19 has impacted 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 balances rates affordability, continuing existing services and investing in the city:

  • The economic shut-down has 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.
  • We are forecasting an income loss of about $38m in 2020/21. If this was added to rates then they would need to increase by a further 12%. That is not sensible at this time.
  • In addition - apart form marinas and landfill - we are also not increasing any fees next 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.
  • Less revenue means we are proposing to increase the amount we borrow this year to cover our losses. and pay it off over 10 years.
  • We are now 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.

We are also taking action to support Wellington's social and economic recovery:

  • We don't know how long it will take Wellington to recover from the pandemic. This makes longer-term planning of our finances extremely difficult so we expect some change to the final Annual Plan in June as the Covid-19 restrictions ease.

The tabs below provide more information on our proposed 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 on how Covid-19 has impacted 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 balances rates affordability, continuing existing services and investing in the city:

  • The economic shut-down has 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.
  • We are forecasting an income loss of about $38m in 2020/21. If this was added to rates then they would need to increase by a further 12%. That is not sensible at this time.
  • In addition - apart form marinas and landfill - we are also not increasing any fees next 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.
  • Less revenue means we are proposing to increase the amount we borrow this year to cover our losses. and pay it off over 10 years.
  • We are now 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.

We are also taking action to support Wellington's social and economic recovery:

  • We don't know how long it will take Wellington to recover from the pandemic. This makes longer-term planning of our finances extremely difficult so we expect some change to the final Annual Plan in June as the Covid-19 restrictions ease.

The tabs below provide more information on our proposed 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


  • Moni whiwhi - Revenue

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    2 months ago

    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 consent, parking and landfill fees.

    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...

    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 consent, parking and landfill fees.

    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. While there is still uncertainty in when fee-paying Council services will be fully functioning, we estimate this revenue will be $38m below policy expectations. The general assumption is fees and charges 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 our proposal to cancel 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 draft 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 are proposing – as a one off – to debt fund this loss of revenue instead of increasing rates. Total recurring non-rates operating revenue is forecast at $148m.

    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 $148m; 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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    2 months ago

    Prior to 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 $53 million. If we didn’t look to manage the funding impact of these cost increases it would have been equivalent to a 16% rates rise.

    Therefore, before the pandemic we had already reduced the...

    Prior to 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 $53 million. If we didn’t look to manage the funding impact of these cost increases it would have been equivalent to a 16% rates rise.

    Therefore, before the pandemic we had already reduced the impact on rates by setting an organisational savings target of $3.2m 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 $2.4m provision in our 2020/21 draft 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% pay cut for six months and a salary freeze for a year. The Mayor and Councillors remuneration is set by legislation and as such they are prevented from taking a pay cut. However, all of the Elected Members have chosen to make donations to Wellington community organisations equivalent to 10% of their salary until the end of June 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 $3.2m 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 draft budget

    The cost of delivering and running Council services in 2020/21 is forecast be $577m or $7.30 per resident per day. As mentioned this is a $53m 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.

    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 $576m; Social and Recreation and Transport follow at 23 percent and 17 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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    2 months ago

    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 $295m 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...

    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 $295m 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. Specific project implications will be reviewed prior to finalisation of the Annual Plan in June. 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 draft budget

    Total proposed capital expenditure for 2020/21 is $295m. 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.

    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 $295 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 Hall and St James Theatre seismic strengthening, and the new Convention & Exhibition Centre.

  • Te whakamārama i tō mātou tūnga mino moni - Explaining our borrowing position

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    2 months ago

    Why do we borrow funds?

    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...

    Why do we borrow funds?

    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.

    Increased borrowing due to Covid-19

    Due to the abnormal situation created by Covid-19 we are 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.

    For 2020/21 total borrowings are forecast to increase by $172m. Of this increase, $119m is due to borrowing for capital expenditure (capital programme budget minus depreciation and repayments) and $53m due to deferred rates impacts. Borrowing is forecast to be $871m at the end of the year, this equates to 162 percent of our operating income compared to the Council imposed cap of 175%. 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 $233,000. By the end of the 2020/21 year, the average borrowing per resident is forecast to be $4,024.

    This graphs models the forecast year on year increase in Council borrowings in 2019/20 and 2020/21. The bottom stack represents the business as usual borrowing including forecast capital expenditure and repayments. The stacks above it represent the additional borrowings required to fund the financial impacts of COVID-19.In 2020/21 we will receive revenue from the payment of rates deferred in 2019/20. This has been deducted from the 2020/21 stack.