Long Term Plan 2021-31 Consultation
Councils do lots of planning. A Long Term Plan (LTP) pulls together a plan for all of our activities, major projects, our expected income and costs, and what our rates will need to be for the next ten years. We review our LTP every three years. When developing our plan, we are required to come up with a proposal. This proposal is the basis of our consultation. Sometimes there are a range of options. When this happens, we need to get the views of our community on the options, including our proposed option before, we finalise the plan.
This consultation outlines a number of key projects that we plan to work on that focus on what we have heard matters to our community. Have we got it right? Have your say!
It’s been a tough few years since the preparation of our last Long Term Plan, with a number of challenges at a local, national and international level. Due to this, everyone’s priorities may be quite different to what they were three years ago. We welcome this opportunity to come to you, our community, to plan for the next 10 years.
It’s no secret that our city, like many others across the country, is struggling with issues. That’s because, historically, we have not invested enough to look after our key assets – under the ground, on the ground, and in our community. Keeping our rates low has been the priority. In fact, Napier’s average rates rises have been the lowest in the country for close to two decades. But, it has come at a cost and it has started to affect our city’s liveability.
For too long, Napier has taken a short term and conservative view. At the same time we have been a little too ambitious about what can realistically be achieved – setting ourselves a huge programme of projects. In addition, our costs are rising due to factors outside our control. These include increases in Government set levies, policies and regulations, rising insurance costs to meet, as well as a number of catch-up costs including shortfalls from COVID-19. It’s time to face our future. And our future is now.
It is tricky but we have a plan. Our goal is now to focus on the essentials and to invest for the longer term so that our situation will improve over time. We have a lot to do – replacing ageing assets, fixing infrastructure, and keeping up with an everchanging environment.
Our people matter too. We have a responsibility to support our community to thrive – economically, socially, culturally and environmentally. We’re dedicated to building a city where everyone matters and everyone can contribute. There are some real issues to address, however working together with the whole of our community – we can get there.
To achieve the outcomes we all want for our city, it is vital we continue to partner with others to succeed. We are linked in with a range of agencies, organisations and individuals across our community, regionally and nationally.
So, how do we afford it? An easy option would be to pass on all of these costs directly to the ratepayer, which would be a significant increase to rates. That doesn’t sit well with us, we’re committed to keeping our rates as affordable as we can. To achieve the right balance, we’ve had to make some tough calls on what can be done within the next 10 years. We’ve taken a hard look at our spending and our plan is to keep our costs down. We’ve had to move some projects out a few years to save money, and we’re also looking to borrow $337 million during the next 10 years to catch up on renewals and replacement of our key assets.
There are consequences to this approach. We’re borrowing more than we have before and our budget will not break even until 2031.
The start of 2021 has been uncertain and we understand this will continue over the coming months and possibly years. Our plan is based on what we know now, while acknowledging we are in for change, particularly when it comes to how our water services could be provided in the future.
Our team is committed to making things right for Napier. To do this, we’re taking bold but necessary steps. Our focus for the next 10 years is to work on what matters. We want to know what matters to you. Join in on one of our engagement events – we would love to hear your thoughts. Please spend a few moments to make a submission - your feedback matters to us. We’re keen to get on with “doing the mahi”.
Climate change has rapidly become a significant issue, but the world’s response has been slow. In Napier, we have had first-hand experience of it with the recent rainfall event and subsequent flooding. In the next 10 years and beyond we know that climate change threats are on the rise with more frequent and intense rainfall events, rising sea levels and hotter temperatures. Our plan looks at how climate change will impact our services and what our role is to both reduce greenhouse gases (a leading cause of climate change) and to adapt to its effects.
Are our pumps up to it? We’re factoring in increased rainfall into the upgrades of not only our stormwater pumps, but also our pipes and our buildings and facilities.
Are we green enough? We’re switching to electric vehicles, recycling more, and any new buildings and facilities will be designed with sustainability in mind.
In the city we have switched to LEDs for our streetlights, we have a plan to reduce waste, we’re promoting active transport by building more pathways with more to come.
We’re looking at what we plant where (to reduce water demand) and actively looking at coastal erosion.
Is our community ready? Working with communities to build resilience and planning ahead is important if we are to adapt to climate change impacts. We play a major part in responding to and recovering from civil defence emergencies.
Our District Plan helps guide how land can be used, and it is currently being reviewed. Climate change is a factor that we’re considering within the review.
What’s the cost? Responding to climate change does come at a cost. Sometimes it’s just a matter of taking a more sustainable option when buying. But sometimes it requires us to add extra services or assets to manage the impacts of climate change – such as dealing with coastal erosion or increasing the capacity of our stormwater network to cope with flooding. Further work is needed to quantify the costs but we have an Infrastructure Strategy that identifies some of the costs. See our Infrastructure Strategy.
The tourism industry plays a major part in our economy and continues to be heavily impacted by COVID-19 restrictions. We operate a number of tourism-based facilities and our income from these facilities took a hit last year, but we have almost returned to pre-Covid levels. We anticipate no income from our shareholding in the Hawke’s Bay Airport until 2025.
Last year, we met the challenges head-on and developed our recovery plan, including allocating $1.5 million to help our community bounce back. The effects continue to be felt in our city and our region, with high levels of uncertainty remaining. We have not allocated any further funding in our plan at this time but anticipate any significant future financial impacts would need to be funded by loans.
Along with a number of other councils, we are working with the Government on the reform programme for water services. Because the shape of the reform will not be known until later in the year, we are continuing with our plans to improve our water services. You can read more on this under our water and finance sections.
We have not kept up with replacing and upgrading all of our assets. Some are well past the end of their useful life and are getting beyond repair. At the same time, the money we’ve put away each year to save for replacing and renewing our assets has been too low. In the meantime, costs have increased and so have standards.
We can’t afford to do everything at once, so we are prioritising essential replacements and upgrades, concentrating on what is well-utilised, and what we can afford. We have a plan to make sure we collect more funds for asset renewals over the next 10 years so that we’re ahead of the game when it comes to doing future renewals - not waiting for things to be well past their use-by date before attending to them.
We provide 377 subsidised housing units across Napier. The subsidised rent we receive from tenants is used to pay the costs of providing this housing. Unfortunately, the rent we receive no longer covers the costs. From next year, the costs are projected to exceed the income we receive from rent by an average of around $2.5 million per annum ($24.5 million over the next 10 years).
We are reviewing the options for the future for our housing and will be consulting on these before making a decision in the next 12 months. In the meantime, we need to fund the shortfall.
We could do this through a rates increase or through a loan. We are consulting on these options, as you can see in the Housing section.
But either of these options mean we need to change our Revenue and Financing Policy. You can have your say on this change, go to Revenue and Financing Policy.
We have been ‘topping up’ the money we get from rates and other income with money from our reserves to cushion some of these extra costs. These reserves are now low. We need to fund our ongoing services and projects from all our income sources (including rates) and loans.
We will continue to receive income from the development of Parklands and are anticipating extra income from Kennedy Park Holiday Resort. This income means we can keep rates lower.
We’re proposing a rates increase of 8% for next year, with further rises each year over our 10 year plan. This 8% rise is on average $3.78 per week or $196.37 per year per rateable property.
We review our rates cap (limit) when we review our plan. We have increased our rates cap for the next 10 years to allow for the proposed increase.
We’re increasing our borrowing but we are staying within our debt limit of 230% of our income. We have reduced our costs after making changes to
gain efficiencies. For more details, see our Financial Strategy
A portion of our rates has been put aside to use for things we need to replace in the future. This savings money alone is not enough to fund the replacements that are now due and costs of replacements have also gone up. The gap we face can either be funded by rates or through loans. Funding the costs through rates would push the increase way beyond 8%. So, what we’re proposing to do is to fund the gap for the first five years through loans. Then, for the second five years we will continue to borrow but we will also start to set aside money again from rates for our reserves.
Last year we joined the Local Government Funding Agency (LGFA), a collective of councils that pool together to get good lending deals. Currently, interest rates on loans are very low. Being part of the LGFA, means we continue to get low interest rates even if there are increases in the open market. The LGFA set loan limits, our proposed borrowing is at least $100 million under the limit at any one time. It’s good practice to fund some things through loans so that the cost is spread across the generations of those who will benefit. Some things we build last for decades, so it’s only fair that people who will be using them in 30 years’ time help pay for them (intergenerational equity).
Napier War Memorial Centre
Napier War Memorial Centre
8 – 10 June 2021, Pettigrew Green Arena
Please note: Rates impacts shown in the consultation topics relate to the first year of each project unless stated otherwise. Multi-year projects will have ongoing impacts as further loans are drawn down and/or operating costs commence as the project progresses. The Finances section has a table showing the full rates impact over the next 10 years see. All figures in this document are inflated against Berl LGCI forecasts.
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