Part E: Supporting and financial information
Long-term Plan 2018–28 disclosure statement
for the period commencing 1 July 2018
Purpose of this statement
This statement is to disclose the council's financial performance in relation to various benchmarks to enable the assessment of whether the council is prudently managing its revenues, expenses, assets, liabilities, and general financial dealings.
The council is required to include this statement in its long-term plan in accordance with the Local Government (Financial Reporting and Prudence) Regulations 2014 (the regulations). Refer to the regulations for more information, including definitions of some of the terms used in this statement.
These measures allow for comparison of financial performance with other Councils. However, readers are urged to read the commentary and explanations provided to give context to the information, as it is not always possible to compare Wellington City Council’s results with other Councils due to their size, location and provision of services.
The Council considers there are three key financial areas that demonstrate whether a Council is being managed in a prudent manner:
- the level of rate increases
- level of borrowings
- the balancing of the budget
Rates affordability benchmarkTop
The council meets the rates affordability benchmark if—
- its planned rates income equals or is less than each quantified limit on rates; and
- its planned rates increases equal or are less than each quantified limit on rates increases.
Rates (income) affordabilityTop
The following graph compares the council's actual rates increases with a quantified dollar limit on rates increases included in the financial strategy included in the council's long-term plan. The quantified limit for the first three years of the Long-term Plan is $350,000,000 and is $495,000,000 for the years 1–10 of the Long-term plan.
Rates (increases) affordabilityTop
The following graph compares the council's planned rates increases with a quantified limit on rates increases included in the financial strategy in the council’s Long-term Plan. The quantified limit for the annual rates increase is the difference between the rates limit for the year and the previous year’s rates income expressed as a percentage. Growth in the rating base reduces the impact of the overall rates increase on existing ratepayers. We have assumed an average growth in the ratepayer base of 0.9 percent per year over the 10 years of the plan. After accounting for growth and excluding the impact of the proposed tourism targeted rate (which, if introduced, will be rated on the tourism sector), the annual rates increase limit is the equivalent of an average rates increase of 3.5 percent over the first 3 years of this plan and an average of 4.0 percent over 10 years.
Debt affordability benchmarkTop
Net borrowing as a percentage of income
The following graph compares the council's planned borrowing with a quantified limit on borrowing stated in the financial strategy included in the council’s Long-term Plan. The quantified limit is net borrowings, comprised of borrowings less cash and cash equivalents, being less than or equal to 175% of income. For this measure income is defined as total revenue less vested assets and development contribution income.
The council meets the debt affordability benchmark if its planned borrowing is within each quantified limit on borrowings.
Balanced budget benchmarkTop
The following graph displays the council's revenue (excluding development contributions, financial contributions, vested assets, gains on derivative financial instruments, and revaluations of property, plant, or equipment) as a proportion of operating expenses (excluding losses on derivative financial instruments and revaluations of property, plant, or equipment).
The council meets this benchmark if its planned revenue equals or is greater than its planned operating expenses. In 2020/21 the planned revenue falls below the planned operating expenditure (99%).
This has occurred because some of the planned operating expenditure is initially debt funded and then is rate funded to repay the debt for the purposes of inter-generational equity. The difference in timing between funding and expenditure has caused the balanced budget % to go below 100% in 2020/21.
Essential services benchmarkTop
The following graph displays the council's planned capital expenditure on network services as a proportion of expected depreciation on network services. Essential services comprise expenditure on the three waters and transport.
The council meets the essential services benchmark if its planned capital expenditure on network services equals or is greater than expected depreciation on network services. In years 9 and 10 of the plan the level of capital expenditure on network services falls below depreciation. This is driven by capital expenditure to improve levels of service occurring in the later years; the depreciation impact from this capital expenditure lags behind the investment. The depreciation is only for the existing assets in commission and is not related to the capital expenditure of assets yet to be commissioned.
Debt servicing benchmarkTop
The following graph displays the council's planned borrowing costs as a proportion of planned revenue (excluding development contributions, financial contributions, vested assets, gains on derivative financial instruments, and revaluations of property, plant, or equipment).
Because Statistics New Zealand projects the council's population will grow more slowly than the national population growth rate, it meets the debt servicing benchmark if its borrowing costs equal or are less than 10% of its revenue.