Key Issue 01
What's the situation?
Council owns and looks after lots of infrastructure, and a lot of it is invisible. It’s underground, like our pipes, or it’s something you don’t really think about, like being able to flush your toilet and turn on your tap.
Our infrastructure is ageing, and we need make sure we’re able to replace it either as it’s coming due for replacement (before it’s broken), or once it has broken. However, our asset base (all the infrastructure we look after) is too large and too expensive to fully fund from rates – but rates are the main funding source local councils have.
To address this issue, Council has looked at our capital works programme. The capital works programme is our annual plan to 1) build new stuff and 2) upgrade/replace/maintain existing stuff.
As with everything Council does, this is a balancing act between keeping things affordable for the community but ensuring we are also responsibly managing our infrastructure in a way that is sustainable. Managing our infrastructure means two things: replacing things we already own when necessary (i.e. it’s broken or about to break), and making sure the rate at which we’re building new stuff is fiscally sustainable/responsible.
OPTION1
Status quo. Continue with the capital works programme as we have planned.
How your general rates would change
The impact on your general rates under this option will be approximately as follows.
*These figures are based on low, medium, and upper valued properties in the district based on capital value and are approximate, average per annum amounts. The figures shown above are the estimations of the cost to each ratepayer of the proposed option for this activity/key issue.**The Capital Works Programme proposed under Option 1 and Option 2 are both smaller than last year’s. Consequently, the rating impact ($) will be smaller than the 2023/24 rating impact of the Capital Works Programme.
Levels of Service
Option 1 for this issue is for Council to continue with the status quo – that is, continue with our capital works programme as we have it planned.
That currently includes:
- New builds, including things like piping and waste water treatment plants to allow for growth (new houses) int he district.
- Renewals that address the aging infrastructure we talked aboutearlier.
- Under Option 1, Council would plan for our capital expenditurebudget to be around what we projected in the 2021-31 LTP forthe 2024-25 year: approximately $14.47 million.
Advantages
- We can address more of our old infrastructure and replace/upgrade it before it breaks.
- Council continues new developments, which furthers the growth prospects and aspirations of the district.
Disadvantages or risks
- Council’s capital works programme would remain significantly higher than what has been able to be delivered in recent years. The programme would be unrealistic to deliver without an increase in operational resource and associated expense in the early years of the LTP.
Debt
OPTION 2 - Council's preferred option
Pull back on our capital works programme.
How your general rates would change
The impact on your general rates under this option will be approximately as follows.
Levels of Service
Option 2 is Council’s preferred option. We would pull our capital works programme back to our historic levels of delivery for the first years of this LTP, to alleviate costs in the short-term while better preparing for the years ahead. Instead of Option 1, where our capital expenditure budget would be approximately $14.47 million for the 2024-25 financial year, Option 2 proposes a budget of $12 million instead.
What does that mean? Good question!
To come to this option, Council looked back at our annual plans and how much we planned to deliver in capital works, versus how much we delivered in reality at the end of that year.
This revealed that we have delivered less than our planned programme for several years. This can happen for multiple reasons – resources/materials were too expensive, we lacked staff, and (most notably) COVID-19 majorly affected everyone’s ability to get mahi done.
We took the average of how much we deliver usually over a three year period and used it as a guide for our capital works programme for the first years of this LTP, which saw it reduce significantly. This ‘pull back’ helps Council to bring down the cost burden in the short-term, while also allowing us to consider ways to tackle costs going forward.
This means less money spent but also means pushing out some work which would be nice to have done now. This means some assets which ideally would be replaced now won’t be replaced and there is a risk they could fail and services are disrupted while services are restored. Also some improvement projects that the community are asking for will not be delivered unless external funding and resource is provided to deliver those projects.
Some of the key effects of this option will be timing of when works happen. For example, growth projects such as the Hukutaia Growth Infrastructure will be deferred to later years of the LTP where ordinarily Council would have been planning for them now. Other deferred projects include things like water reticulation renewals, where ideally we’d like to replace things (like pipes) before they break, instead we have moved toward a more reactive approach to those projects.
Advantages
- This approach contributes to keeping the general and targeted rate increases down.
Disadvantages or risks
- Our plan for new stuff will be small, limiting the District’s capacity for growth (such as new houses and new businesses). This means the growth we anticipate from population demands, discussed earlier in this document, may be temporarily waylaid by the lack of or delay in supporting infrastructure.
- Although we’ll still be replacing/maintaining the infrastructure we already have, this be more limited than we had planned and maintenance and service disruption may increase.
- Some improvement projects that the community are asking for will not be delivered unless external funding and resource is provided to deliver those projects.
Debt
There is no impact on debt for Option 2.
