Our budget approach
In responding to our changing operating environment, we have to get the right balance between looking after what we already have and providing infrastructure, services and functions for the future in a way that is sustainable and affordable.
Over the next 10 years we intend to deliver many of our existing services at the same or similar level to what we currently provide – with increases in some areas. This requires a change in how we manage our finances to ensure our budget and levels of service are sustainable. Our budget figures are based on our preferred option for each consultation topic.
The main activities we propose to spend more money on include:
- Increasing the extent and frequency of bus services across the region in response to population growth, including through the implementation of the Western Bay of Plenty Public Transport Blueprint as a result of consultation in Tauranga and the western Bay
- Increased resourcing in data services and science associated with national monitoring standards and fresh water monitoring requirements
- Increased resources in Emergency Management and Biosecurity to deliver more comprehensive programmes.
We are also committed to the necessary but costly repairs of our flood protection and control schemes following the April 2017 flood events in the eastern Bay, as well as maintaining our existing infrastructure. We are also committed to our accommodation upgrade project in year one of the Long Term Plan 2018-2028.
We have reviewed our services and functions to ensure we are efficient and effective. We are planning to reduce our contracting costs in some activities by approximately $1.5 million per year compared to what we included in the 2017/18 Annual Plan (excluding inflation and capital spend). We also propose to reprioritise our planning programme for the National Policy Statement on Freshwater Management and to maintain our current overall levels of resourcing in Corporate Services.
While we are improving our efficiency in these areas, we will still provide the same levels of service to the community. We have reviewed how we use the funds available to provide the best value to the community and have carried out a detailed review of the funding mix focused on affordability, fairness and equity. This has led to us putting a stronger focus on the money we collect from fees and charges and from targeted rates, where it is easy to identify who is benefiting from the services we provide. Further information is contained in the Revenue and Financing Policy and its supporting document, Funding Needs Analysis.
Heading into the next 10 years, we will use the most cost and administratively efficient form of funding. We propose to use borrowing to fund our capital works programme. Using borrowing to pay for assets allows us to spread the cost out over time so that future generations will pay for the benefit they will receive, as well as freeing up money to be invested for future benefits.
We propose to borrow where the cost is less than the additional return generated by investing our cash in a higher yield. Growth continues to be different across the region. Balancing the requirements for strong urban growth and affordability for areas of low growth is an ongoing consideration. Growth projections are stated in our significant forecasting assumptions.
Our financial strategy outlines how we plan to manage our finances over the next 10 years and pay for all the work we are doing. It looks at where we think we will need to spend money. Our biggest challenge is managing the balance between keeping things affordable and giving our communities what they want and need.
General rates are used to fund work that benefits the whole region, and investment income and dividends will be used to reduce the overall amount of general rates we need to collect. This means relatively small increases in general rates can lead to high percentage changes.
To deliver the services required, we propose a general rates increase of 12 percent (an average $32 per household) in 2018/19. Targeted rates are used to fund work that has a local benefit and ensures the people who benefit pay for that service.
The average increase to targeted rates, which affects the total rates you pay, depends on the area in which you live and the services you receive. The graph to the right shows forecast total rates, total real rates increases and the quantified limit on rates.
Our rates are based on land value, land area and location. On the next page we have provided a graph to show how rates will change from what you are paying now to what you will pay in 2018/19, depending on where you live. We have also provided a graph that shows rates for different property sizes with examples for small, median and large properties for each territorial authority.
Forecast rates and rates increases
Forecast total rates by territorial authority - annual average median properties 1000m2
Forecast total rates by territorial authority for 2018/19 - rates for different property sizes
We propose an unbalanced budget (forecast operating deficit) for the first four years of the Long Term Plan 2018-2028. This means in each of these four years, the money we expect to spend on operating expenditure is more than we expect to receive. The primary reasons for the unbalanced budget are due to our funding contributions to third party infrastructure projects through the Regional and Investment Funds, the Rotorua Lakes Protection and Restoration Action Programme reserves and the Environmental Enhancement Fund reserves. We propose to deliver a balanced budget from year five onwards.
We propose to borrow $157 million over the next 10 years to fund capital spend. In addition, we’ve taken an integrated approach to treasury management to ensure the most efficient use of our balance sheet. We plan to use up to $50 million of borrowing to help optimise the interest costs incurred by Quayside Holdings Limited (Quayside). We have set prudent limits to how much we can borrow and we will be well within our debt to revenue ratio limit of 250 percent. This additional capacity gives us flexibility to respond to unforeseen circumstances.
Forecast borrowing and debt limit
We have a 100 percent shareholding in Quayside, which in turn holds a majority shareholding in the Port of Tauranga Limited (POTL). Retaining a majority shareholding in the POTL continues to be strategically important for the Council and the Bay of Plenty. Quayside holds the POTL investment as well managing other commercial investments to optimise growth and returns in the long run for the good of the Bay of Plenty. We receive a dividend from Quayside each year. We use these to reduce the amount we need to collect through general rates. Quayside has forecast a higher dividend for each of the next 10 years, which will comprise just over 20 percent of our forecasted operating revenue and help reduce our rates.
We have two main reserves. These are the Infrastructure Fund, which is fully allocated to fund infrastructure projects, and the Regional Fund, which is available as an alternative funding source. We propose using $45 million from the Regional Fund reserve to establish a new investment reserve, the Toi Moana Fund, to optimise our returns over the long run. The Toi Moana Fund is a new reserve which Council plans to establish with the primary objective of providing optimised long term investment. Council proposes to put $45 million into the Toi Moana Fund from the Regional Fund. We receive interest revenue on reserve funds as well as our cash investments. We use investment returns to reduce the amount we need to collect through general rates.
Our full proposed financial strategy, which describes our financial plans in more detail, is available here or at any of our offices across the region. We welcome your feedback on our proposed financial strategy.
Where we spend your money
Over the next 10 years, we plan to spend $1.4 billion to continue to provide the same extensive range of services. We also plan to invest $178 million on capital projects. Some of our larger projects are shown in the chart below. Our work is divided into different activities - which are then grouped to enable us to report on that work - both as an organisation and financially. For this Long Term Plan, the Council has the following nine Groups of Activities. The graphs on the following pages show where we expect our expenditure to occur.
Key capital projects
What services do we provide?
Integrated Catchment Management
This group of activities integrates services in four catchment areas across the Bay of Plenty – Tauranga Harbour, Rotorua Lakes, Eastern catchments (including Rangitāiki), and Kaituna-Pongakawa catchments. We work with landowners on protecting priority biodiversity sites, improving swimmability at our most popular swimming spots and improving aquatic ecosystem health in other priority water bodies.
Teams also work alongside volunteer groups to protect our rivers, harbours and open coastlines. We support environmental care groups region-wide, often delivered using the guidance and oversight of local government and iwi representatives on our co-governance committees, to ensure that cultural values and tikanga are respected. Managing contaminant run-off is addressed primarily through landowner agreements, tangata whenua and industry partnerships, collaboration projects with district and city councils and assisting community groups and volunteer activity.
Flood Protection and Control
We are responsible for managing five major and 37 minor rivers and drainage schemes in the region. Our responsibilities include maintaining flood protection stop banks, pump stations, floodgates and erosion control structures, and managing and improving flood ways. We carry out regular maintenance of these structures, stream clearing and lake level monitoring and management for Lakes Rotorua, Okareka and Rotoiti. We also provide flood management during major events plus provide information and advice on flood related issues to help avoid or better manage the risks of flood hazards in the Bay of Plenty.
Resource Regulation and Monitoring
This group of activities provides a range of services direct to the community, including:
- Biosecurity - provides regional leadership in pest plant and pest animal management.
- Rotorua Air Quality - focuses on improving the quality of the Rotorua urban airshed.
- Resource Consents - processes and makes decisions on resource consent applications under the Resource Management Act 1991 and/or rules in our Regional Plans.
- Regulatory Compliance - ensures development activities involving water, geothermal, air, land and coastal resources do not negatively impact on the natural environment or put people’s health at risk.
- Maritime - ensures navigation safety and maritime oil spill response is provided 24/7 across the region.
We work collaboratively with a variety of stakeholders to support the development of the Bay of Plenty. Our efforts centre around three key activities:
- Regional infrastructure - supporting infrastructure projects (delivered by third parties). Funding assistance is provided through direct funding or through the contestable Regional Infrastructure Fund.
- Regional economic development – providing leadership, facilitation and support across the region for economic development through delivery of the Bay of Connections Economic Development Strategy with partner organisations.
- Regional parks - we own and manage two key pieces of land (Pāpāmoa Hills Regional Park and Onekawa Te Māwhai) for cultural heritage protection, natural environment protection and enhancement and the long-term enjoyment and benefit of the region’s residents.
Regional Planning and Engagement
This group provides a range of services to our organisation and the community, including:
- Regional planning
- Māori Policy advice, support and leadership on Māori relationship management
- Developing and implementing a geothermal planning framework under the Resource Management Act 1991.
- Community engagement support and advice on council activities, and externally through specific programmes to build awareness, involvement, engagement and education to help achieve the sustainable development of the region.
- Ensuring we provide good governance and accountability and conduct our business in an open, transparent and democratically accountable manner.
We provide public passenger transport across the region and mobility for people with limited transport options. We also support national and local road safety programmes and provide transport planning to meet our obligations under the Land Transport Management Act 2003. We aim to support an effective and efficient transport network and establish a more collaborative approach to providing public transport.
The Emergency Management Group provides Civil Defence Emergency Management (CDEM) services to our organisation, as well as regional emergency management leadership. This includes providing co-ordination and support to the Bay of Plenty CDEM Group and a support coordination service for the Lifelines Group.
Our Technical Services Group provides technical advice, information and services to the council and direct to the community. These services include Geospatial, Engineering, Science and Data Services.
Our Corporate Services Group provides support services to all our activities. These services include Communications, People and Capability, Internal Services, Corporate Property, Information and Communication Technology, and Finance and Corporate Planning.
Forecast operational expenditure
Forecast capital expenditure
Funding our work
We have a number of sources of money that pay for what we do.
Alongside the money collected through rates, we receive funds from fees charged directly to the customer (such as bus fares and charges for resource consent applications) and from central government in certain areas (such as transport) and income from our investments (similar to interest on a savings account).
The combination we propose to use to fund our work over the next 10 years is shown here.
Forecast operating revenue