Where the funding comes from

The Council uses a several mechanisms to fund our operational and capital expenditure. Rates are expected to fund 58 percent of our operational expenditure. We also collect revenue from fees and user charges, grants and government subsidies and other sources such as interest and dividends from investments. Capital expenditure is funded through borrowings, grants and government subsidies, and development contributions for projects that aim to meet the demands from growth.

Prior to the COVID-19 pandemic, Council was considering several increases to fees and charges to maintain the balance between how much is funded by users of some services and how much is funded by rates, as outlined in our Revenue and Financing Policy. We were expecting a total $11m in increased revenue from fee increases, the most significant increases being in building consents, parking and landfill fees. As a result of COVID-19 the majority of these planned increases were cancelled.

COVID-19: The impact and response

The loss of non-rates operating revenue is the most significant financial impact facing Council as a result of COVID-19. Forecasts indicate that non-rates revenue will be down by $20m in 2019/20 because of lost revenue from the closure or reduction of Council services during different COVID-19 alert levels. This will result in an operating deficit for the 2019/20 year, which Council will need to borrow to fund.

We are also budgeting for significantly lower revenue from fees and charges in 2020/21, we estimate this revenue will be $38m below policy expectations. The general assumption is fees, charges and dividends revenue will be approximately 60 percent of predicted levels in July 2020, increasing to 100 percent by the end of October 2020. For some of our services we have modified this assumption based on more concrete evidential estimates.

Part of the loss of revenue results from cancelling the originally planned fee and user charges increases. This will ease the impact on the community as we recover from the COVID-19 pandemic. We are also not expecting to receive a dividend from our shareholding in Wellington Airport in 2020/21.

Alongside the fees and user charges revenue, there is a risk to Council’s lease and property revenue as a result of tenant hardship. A combination of short-term rent abatement and deferred payment of rents is proposed as part of the Council’s Pandemic Response Plan.

The budget

Under the Council’s current funding policies, an additional rates increase of 12% percent would be needed to offset the $38m shortfall in non-rates revenue. This is clearly intolerable at this time. Therefore we will debt fund this loss of revenue instead of increasing rates. Total recurring non-rates operating revenue is forecast at $153m.

The graphic illustrates the non-rates revenue to fund operating expenditure. The biggest area of non-rates revenue is Parking fees and enforcement at 20 percent of the total non-rates revenue of $153m; Housing rents, Other revenue, and Landfill fees follow at 19%, 17%, and 14% respectively; Property lease income, Building and Resource consent fees, Pools, rec centres and sports-fields and Roading subsidies follow each under 10 percent of total non-rates revenue.