Part C: Summary of our financial approach
Where the money comes from
The Council uses a number of mechanisms to fund operational expenditure. These include the following:
- General rates – mainly used to fund broad public good services such as playgrounds
- Targeted rates – where an activity benefits an easily identifiable group of ratepayers such as the commercial sector, for example business improvement districts
- Fees and user charges – where an identifiable benefit exists for users of certain Council services such as swimming pools
- Borrowings – in general, the Council does not fund operating expenditure by borrowing. The exception is to fund the impacts on ratepayers’ intergenerational equity or to fund expenditure over the period during which benefits are received, such as weathertightness payments
- Grants and government subsidies – including income to maintain our transport networks from the New Zealand Transport Agency (NZTA)
- Other sources of funding – including income from interest and dividends from investments held by the Council, lease income and proceeds from asset sales, and prior year surpluses
Capital expenditure is funded from new or extended borrowings, rating for depreciation, development contributions, capital funding from third parties like NZTA, the sale of surplus assets, and restricted funds. Capital expenditure funding is further outlined below:
- Renewal – If the capital expenditure relates to the replacement (renewal) of an existing asset, that expenditure will be initially funded by borrowings. These borrowings will be repaid by rating for depreciation over the life of the asset. Any surplus rate funded depreciation, after paying for the replacement of Council assets, will be used to repay borrowings.
- Upgrade – If the capital expenditure relates to the construction or purchase of a new asset or to the upgrade or increase in service potential of an existing asset, that expenditure will usually be funded from new or extended borrowings. Borrowing is the most cost-effective and equitable way to do this as it spreads the cost of the asset over all the generations who will benefit from it, making it affordable to ratepayers today.
- Growth – Development contributions are used as the main funding tool for capital expenditure to meet demand for core infrastructure. Funds collected under the Development Contributions Policy will result in a corresponding decrease in the amount to be funded from new borrowings.