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A change to how we fund some tourist facilities

The current situation

In 2023, we carried out an independent review of our business and tourism facilities to see if any could operate without rates funding. The aim of this review was to improve our financial sustainability.

At the end of the review, Council supported the approach of transforming three facilities into Council-owned commercial businesses from 1 July 2024, with the objective of being financially self-sustainable. These are *Napier Conferences & Events, Ocean Spa and Kennedy Park Resort. You can read more about this review here.

Until these three facilities reach the point of being self-sufficient, they will continue to operate as loss-making businesses. Currently we fund this loss through rates. Continuing to fund the losses this way is not financially sustainable and will potentially result in bigger rates increases over time, as costs increase. Until they can financially break even, we want to support them in a way that doesn’t impact rates.

*For clarity, Napier Conferences & Events is an activity, based in the Napier War Memorial Centre building.

P.25 Tourist Option 1Currently, these facilities are partly supported by rates funding. Even after they move to commercial operations from 1 July 2024, it will take some time for them to become financially self-sufficient. To reduce pressure on ratepayers, we are proposing to loan-fund their operating shortfalls until they are financially self-sufficient. The loan funding would be for a maximum of three years.

This is our preferred option because it takes pressure off our ratepayers through not having to fund the losses with rates. This will impact future rates increases as we need to repay the loans. However, the impact on rates increases would not be as much as if the deficits weren’t loan funded.

P.25 Tourist Option 2Under this option, Napier Conferences & Events, Ocean Spa and Kennedy Park Resort would transition into commercial businesses, but we would continue to fund their deficits using rates. Funding the deficits this way would continue until they are financially self-sufficient.

Rates will potentially increase even more in future to continue funding the rising operating costs of these activities.

There could also be potential drops in levels of service because we might not be able to carry out maintenance and upgrades as often as needed.

Korero Mai Say It Tile

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