Draft revenue and financing policy · Overview TheLocalGovernmentAct2002(LGA)requiresthecounciltoadoptaRevenueandFinancingPolicy,outlining thecouncil’sapproachtofundingitsoperatingandcapitalexpenses

Statement of proposal and

Draft Revenue & Financing Policy

Contents

4STATEMENT OF PROPOSAL

10DRAFT REVENUEAND FINANCINGPOLICY

CONTENTS

1

Draftrevenu

ean

dfina

ncingpo

licy

2

Statement of proposal

1. Purpose

The purpose of this document is to inform the public and seek comments on the council’s draft Revenue andFinancing Policy.

2. Background

The Revenue and Financing Policy is required as part of the Long Term Plan. It has been prepared in accordancewith sections 101, 102 and 103 of the Local Government Act 2002 (LGA) and sets out how the council intendsto fund its operating and capital expenditure.

The council is permitted to use the funding mechanisms set out in section 103(2) of the LGA. This section allowsthe following funding mechanisms to be used when funding operating and capital expenditure:

General ratesTargeted ratesLump sum contributionsFees and chargesInterest and dividends from investmentsBorrowingProceeds from asset salesDevelopment or financial contributionsGrants and subsidiesAny other source (including reserves).

In setting the Revenue and Financing Policy, the council is mindful of trying to achieve the right balance interms of who benefits from services or make the situation worse, and who pays for services - against affordabilityand wider social benefits.

The council is required to consult on this draft policy in accordance with section 82 of the LGA.

3. Proposal

The council proposes to adopt a Revenue and Financing Policy to be included in its Long Term Plan 2018–2028.This draft policy is based on the Revenue and Financing Policy adopted in the 2015-2025 Long Term Plan, andhas been subjected to a thorough review. The proposed changes and assessment of options are detailed below.

How the council funds activities

Proposed changes to how the council funds activities:

1. Consents advice and information - add residual fees/subsidy for advice as per charging policy

2. Natural hazard management - remove residual fees/subsidy as none are collected

3. Biosecurity – remove residual targeted rate, as Whangārei Heads pest management rate is proposed tobe removed.

The first two changes reflect minor changes to fee collection, so make no substantial difference to the council’sfunding approach. The removal of the Whangārei Heads pest management rate reflects the council’s proposednew approach to paying for pest management across Northland via a targeted region-wide pest managementrate.

The reasonably practicable options for the proposed changes to how the council funds activities are:

make the proposed changes to funding sources for activities; orretain the funding sources for activities in the current policy.

Draftrevenu

ean

dfina

ncingpo

licy

4

This consideration is split into two:

minor fee collection (consents advice and information, and natural hazard management) andmaterial change (biosecurity).

Minor fee collection

The advantage of making the proposed changes is that the fees and charges reliance will reflect the proposedcharging policy 2018/19.

The disadvantage of making the proposed changes (and hence the advantage of retaining the funding sources)and charges is negligible, as the impact of these fees on the council’s revenue is very small.

The disadvantage of retaining the funding sources is that fees and charges reliance will not accurately reflectwhat is collected.

Material change

The advantage of making the proposed changes to biosecurity is that a consistent approach to funding pestmanagement areas can be implemented across Northland, and Whangārei Heads ratepayers will benefit byno longer being required to pay the targeted rate.

The disadvantages of making the proposed changes are that: Whangārei Heads ratepayers may be concernedthat pest management activity in the area is of a lower priority than it was when a specific targeted rate was inplace; and ratepayers across Northland will bear the cost of pest management in Whangārei Heads.

The advantage of retaining the current funding sources for Whangārei Heads is that no other ratepayers willbear the cost of pest management in this area.

The disadvantage of retaining the current funding sources is that Whangārei Heads will not be treated fairlywith other planned pest control areas, as ratepayers in this area will incur a specific targeted rate while otherareas receiving pest control will not.

Preferred option

The council considers that the proposed changes better reflect the council’s proposed direction for the next10 years. Its preferred option is to make the proposed changes.

The way the council groups its activities

Proposed changes to the way the council groups its activities:

1. Governance and Engagement:

The Māori relationships, governance, and communication and engagement activities that were previouslyincluded in the 'Community Representation and Engagement' activity are separated out into their ownsub-activities.The economic development activity that was previously in its own activity group is included in the governanceand engagement group of activities.

2. The sub-activities included in regulatory services were previously grouped under 'Resource and CatchmentManagement'.

3. The activities included in the Environmental Services group were previously grouped under 'Resourceand Catchment Management' and 'Hazard Management'.

4. Customer services and community resilience:

The customer services activity is separated out as a sub-activity, it was previously included within ‘SupportServices’.

Statem

entof

prop

osal

5

The civil defence and emergency management and oil pollution response sub-activities included in this groupof activities were previously included within the 'Hazard Management' group of activities.Funding for community projects and volunteer emergency services was preciously included in the ‘CommunityRepresentation and Engagement’ activity.The harbour safety and navigation, and transport sub-activities included in this group of activities werepreviously included within the 'Transport' group of activities.

5. Corporate excellence:

The customer services, Māori engagement, and communications activities are no longer included in thisactivity.The remaining activities encompassed by corporate excellence were previously grouped together as 'SupportServices'.

These changes will not in any way change the way we fund these activities.

The reasonably practicable options for the proposed changes to the activity groupings are:

• make the proposed changes to activity groupings; or

• retain the activity groupings in the current policy (which is due to expire).

The advantage of making the proposed changes is that it will better reflect where the council’s activities fitwithin the council's overall services and structure. The changes to where existing activities are allocated will notchange the way council funds these activities. Rather, it changes only where and how we report on theseactivities.

There are no real disadvantages to making the proposed changes, or advantages to retaining the currentactivity groupings.

The disadvantage of retaining the current groupings is that it reflects an out-of-date picture in terms of wherethese activities fit.

Preferred option

The council considers the proposed changes better reflect contributions the activities make to council objectivesand service levels. Its preferred option is to make the proposed changes.

Wording and structure of the policy document

Proposed changes to the wording and structure of the policy document

The document has undergone a thorough review, resulting in more readable and considerably shorter draftRevenue and Financing Policy, which is closely aligned with the council’s other policies and strategies.

A summary of the changes is:

1. Content that is not required by sections 101,102 or 103 of the LGA is removed

2. Wording and order of sections is revised to improve readability

3. Table one: List of activities and funding mechanism used, and table two: Funding sources and factorsconsidered, are merged and simplified.

4. The council’s consideration of each activity to be funded (section 101(3)(a) of the LGA) is condensed andpresented in the first column of the table. This includes updated consideration of the activities against thecurrent context and revised community outcomes The previous ‘support services’ activities are explicitly included.

Draftrevenu

ean

dfina

ncingpo

licy

6

5. The council’s consideration of the overall impact of any allocation of liability for revenue needs on thecommunity (section 101(3)(b) of the LGA) is now included. This is because external borrowing to pay for thecapital infrastructure of our river management schemes is planned for the term of the Long Term Plan.

These changes will not alter any substantive matters. This reviewed policy continues to include the contentrequired by sections 101, 102 and 103 of the LGA.

The reasonably practicable options for the proposed changes to the layout and wording of the policyare:

make the proposed changes to the layout and wording; orretain the structure and wording in the current policy (which is due to expire).

The advantage of making the proposed changes is that the document is shorter and easier to read, and formspart of a cohesive package of council strategies and policies. This makes it more accessible to the public andmore easily comprehended by interested parties.

The disadvantage of making the proposed change is that some relevant detail and context is removed orcondensed. However, the removed content is not required by the LGA to be in the policy. The condensedcontent continues to meet the council’s LGA obligations.

The advantage of retaining the structure and wording is that it provides extensive context and detail, whichsome readers may prefer.

The disadvantage of retaining the structure and wording is that it is a difficult and long read, which maydiscourage people from reading it.

Preferred option

The council considers the proposed changes make the policy more accessible and more easily understood,which contributes to its transparency and openness aims and obligations. Its preferred option is to make theproposed changes.

Reasons for proposal

As the current Revenue and Financing Policy was included in the 2015-2025 Long Term Plan, it will expire on30 June 2018. In order to comply with clause 10, Schedule 10 of the LGA, it is necessary to adopt a new Revenueand Finance Policy before adoption of the Long Term Plan. The council is required to consult on the policy bysection 102 of the LGA.

Other provisions in the policy

During the process of review of the draft Revenue and Financing Policy, the council has considered whetherthe remaining provisions in the policy should in any way be altered. It has concluded that, other than thechanges discussed above, the policy works well and meets the requirements of sections 101, 102 and 103 ofthe LGA. It therefore proposes retaining all other aspects of the policy.

The council will consult on any future review and proposed changes to the policy.

4. Submission process

Full copies of the draft Revenue and Financing Policy and information about how to make a submission areavailable from the council website at www.nrc.govt.nz/ltp2108

The draft Revenue and Financing Policy also forms part of the supporting information to the council consultationon the Long Term Plan 2018–2028. Information on the Long Term Plan consultation and submission processcan also be found on the Northland Regional Council website.

Please refer to ‘Financial Policies’ in the Supporting Information pack for the draft Revenue and Financing Policy.

Statem

entof

prop

osal

7

http://www.nrc.govt.nz/have-your-say.

Draftrevenu

ean

dfina

ncingpo

licy

8

Draft revenue and financing policy

Overview

The Local Government Act 2002 (LGA) requires the council to adopt a Revenue and Financing Policy, outliningthe council’s approach to funding its operating and capital expenses – in other words, how the council paysfor what it does.

The council must manage its finances prudently and in a manner that promotes the current and future interestsof the community. Generally, the council must make sure it has a “balanced budget”, ensuring that operatingrevenue covers operating expenses.

The council can fund its activities from a range of sources outlined in section 103 of the Local Government Act.The council usually funds its activities from the following:

1. Targeted region-wide rates2. Specific targeted rates3. Income from investments4. Fees and subsidies5. GrantsThe council also uses borrowing to fund its some of its activities.

Sources of funding for operating expenses

Targeted region-wide rates

The council typically funds activities that provide a community benefit or public good from targeted region-widerates, because the benefit is wider than just specific users. It is usually impossible or impractical to identifycustomers or users, or to fully recover costs from those who benefit, or those who make the situation worse.

The council has elected to use six targeted region wide-rates as it considers these to be a more equitableapproach than setting a general rate and uniform annual general charge. The level of targeted region-widerates is based on the funding required to provide agreed council activities after identifying the other incomesources.

Specific targeted rates

The council uses specific targeted rates where it provides services to a specific area or group within the regionalcommunity, but there is no mechanism to directly charge them. The activities funded may have a widercommunity benefit or public good, but a group derives a direct or greater benefit from the provision of theactivity. Where it is appropriate, only this group be targeted to pay for some or all of the service.

The council may also set a specific targeted rate for transparency and accountability reasons.

Income from investments

The council uses its investment returns (dividends, interest and rent) to reduce targeted region-wide rates. Forthe purposes of this policy we group investment returns with targeted region-wide rates, and refer to this groupas 'rates/general funds'.

Some investment revenue will be diverted to the Investment and Growth Reserve to fund economic developmentactivity.

Fees and charges

User charges are direct charges to identified individuals and/or groups:

who use certain council services, orwhose actions or inactions cause the council to provide the service.D

raftrevenu

ean

dfina

ncingpo

licy

10

In these instances, a benefit exists to clearly identifiable people and/or groups, so they are required to pay forall or part of the cost of using that service.

Fees and charges are set based on recovering either the full cost of the service, the marginal cost added byusers, or a rate that the market will reasonably pay. Fees and charges are set in accordance with the council’sCharging Policy.

Licence fees may be set by the council or by regulation, and may not always cover the full costs of the service.Enforcement fees are charged to achieve compliance and do not necessarily meet the full costs of theenforcement activity.

Borrowing

The council may use internal or external borrowing as per its Liability Management Policy to bring forward oraccelerate operating expenditure. The cost and repayment of borrowing is to be funded from the same fundingsources available to fund the specified activity.

Reserves and special funds

Reserve funds may be used to fund expenditure for specific purposes. In some circumstances, the reservesare a legal requirement. The council may establish additional reserves as and when required. Any fundingsurplus or deficit resulting from activities funded by way of targeted rates is set aside in a specified reserve tobe used or repaid in subsequent financial years. Subject to meeting any specified conditions associated withthese reserves, the council may expend money of an operating or capital nature from these reserves.

Proceeds from asset sales

Proceeds from asset sales will usually be used to provide funding for the acquisition of assets of a similar nature.The council may also elect to use the proceeds of asset sales to fund operating expenditure. The retention ofstrategic and investment assets and the application of investment returns (operating) to promote economicwell-being, provides inter-generational equity. Unless the council resolves otherwise, proceeds from the saleof investment assets will be set aside for further reinvestment.

Financial contributions

Financial contributions will be applied in accordance with the Financial Contributions Policy.

Grants and subsidies

Central government and other third-party agencies provide various grants and subsidies for specified activitiesand projects.

Other funding sources: Use of surpluses from previous financial periods

Where the council has recorded an actual surplus in one financial period, it may pass this benefit on to ratepayersin a subsequent financial period. The council will not normally carry forward surpluses in relation to the sale ofassets or revenue received for capital purposes.

Sources of funding for capital expenditure

Capital expenditure is generally funded from the same sources available to fund operational expenditure. Whiledebt or internal borrowing may sometimes be used to provide the immediate funding needed to acquire anasset, repayment of the debt will be made from the same sources as operating expenditure.

Capital expenditure is funded from depreciation, general funds, targeted rates and borrowing as outlinedbelow:

Replacement of an asset: funded out of rates charged to recover depreciation. If funds are insufficient, thenreserves or borrowing may be used to provide funding.New asset or the upgrade or increase in service potential of an existing asset: internal or external borrowings.

Draftrevenu

ean

dfina

ncingpo

licy

11

The funding of capital expenditure from the sale of surplus assets, restricted or special funds is decided on acase-by-case basis.

If an approved capital expenditure project is not completed by the end of the financial period, the unspentfunds may be carried forward to the next financial period. The council may impose a targeted rate to fundcapital expenditure or repay the borrowings on an asset at a faster rate than over the full life of the asset.

Draftrevenu

ean

dfina

ncingpo

licy

12

Revenue and financing sources and mechanisms for the council’s activities

The following table shows a summary of the funding sources for each activity, and the council's considerationof the factors under Section 101(3) of the Local Government Act 2002 when determining the appropriatefunding sources for each activity. The factors considered for each activity were:

The community outcomes to which it primarily contributesThe distribution of benefits between:

the community as a wholeany identifiable parts of the community, andindividuals.

The period the benefits are expected to occurHow much the actions or inaction of individuals or a group contribute to the need for the activityThe costs and benefits, including consequences for transparency and accountability, of funding the activitydistinctly from other activities.

We have also considered the overall impact on the community of any allocation of liability for revenue needs.Over the course of this Long Term Plan, the council will borrow funds to pay for the capital infrastructure ofour river management schemes. The maximum period of these loans is 30 years, and actual loan periods aredetermined after considering the extent of the capital works and the period of benefit, affordability andcommitment of future generations.

Specific targeted rates will be collected from 2018/19 to ensure the council has sufficient funds to repay theseloans as they fall due. The council will invest rates collected in managed funds until the loans are due to berepaid. By collecting rates immediately the council will receive investment returns which will offset the borrowingcosts. This approach ensures the financial cost of borrowing, and hence the impact on the community (via thetargeted rates they are required to pay each year) is reasonable.

Explanation of notations made in the table

Rates/general funds: includes targeted region-wide rates and general funding (including income frominvestments).

Full: All, or almost all, of the cost of the activity is funded from that source.

If the comment is made regarding rates/general funds, it does not preclude making minor charges forthe service but indicates that the charges are a negligible part of the total funding.

Majority: Most of the service is funded from this source.

When used in reference to fees and charges, it reflects the view that the services should be recoveredfrom users but that legislation imposes some constraints which may mean that full recovery is notpossible.

Residual: A portion of funds comes from this source.

When used in reference to fees and charges, it reflects that in some circumstances there are constraintson council charges, or that the alternative revenue source may include enforcement revenue which isimposed to achieve compliance and may not always cover the costs of enforcement.

Funding sources andmechanisms

Activity: sub-activityGroup of activities and analysis

Governance and Engagement Draftrevenu

ean

dfina

ncingpo

licy

13



Operating expenditure:Governance: CommunityRepresentation

The Local Government Act 2002 requires councils to workwith the community to make and implement keydecisions. Both the community and council benefit Rates/general funds - Full

Minor capital expendituremay be required:

immediately and in the long term from the community’scontribution towards the council’s decision-making.Community representation is a public good whichcontributes to safe and resilient communities. Rates/general funds - Full

Operating expenditure:Māori EngagementThe Local Government Act 2002 requires councils to workwith Māori to make and implement key decisions. MāoriEngagement is a public good, which contributes to Rates/general funds - Fullprosperous relationships with tangata whenua, andensures safe and resilient communities. Both thecommunity and council benefit immediately and in thelong term from improved decision making andrepresentation.

Operating expenditure:Communication andEngagement: Communication

The community desires knowledge of, and involvementin, council activity. The council needs community buy-inwith its activities. Communication is a public good which Rates/general funds - Fullcontributes to safe and resilient communities. Both thecouncil and community benefit in the immediate andlong term from better community understanding of, andengagement and involvement in, council activities.

Operating expenditure:Communication andEngagement: Online

The community desires knowledge of, and involvementin, council activity. The council needs community buy-inwith its activities. Online communication and engagement Rates/general funds - Fullis a public good which contributes to safe and resilientcommunities. Both the council and community benefitin the immediate and long term from better communityunderstanding of, and engagement and involvement in,council activities.

Operating expenditure:Communication andEngagement: EnvironmentalEducation

The community wants the environment to be maintainedor improved. Environmental education supports theenhancement of indigenous biodiversity and biosecurity,and continuous improvement in water quality and security

Rates/general funds -Majority

of supply. The community benefits from the opportunity Fee/subsidy - Residualto learn about and participate in the sustainable use, Minor capital expenditure

may be required:development and protection of the region’s resources.The benefits are ongoing, but there is immediate benefitto the recipients. While some individuals (children and Rates/general funds - Fullschools) may derive private benefit, the cost of providingthis activity by imposing user charges on the recipientswould potentially make the programme unaffordable forthe direct recipients.

Draftrevenu

ean

dfina

ncingpo

licy

14



Operating expenditure:Economic Development:Economic DevelopmentActivities

The community wants to improve regional wealth.Economic development activities support Northlandhaving a thriving regional economy, and have public andprivate benefit in both the immediate and long term. The

Rates/general funds(Investment and GrowthReserve) - Majorityregional community benefits from an improved economic

climate and the flow-on effect of increased economic Income from CommunityInvestment Fund -Residual

growth, which includes improved economic activity,employment and income opportunities. Individuals andbusinesses benefit directly from increased economic Capital expenditure may be

required:opportunities, and the tourism sector benefits from sectorsupport and promotion. Targeted rates may be set toprovide transparency and accountability regarding theprovision of specific activities.

Rates/general funds - Full

Operating expenditure:Economic Development:Projects

The community wants to improve regional wealth.Economic development projects support Northlandhaving a thriving regional economy, and have public and

Targeted rate - Majority

Rates/general funds(Investment and GrowthReserve) - Residualprivate benefit in both the immediate and long term. The

regional community benefits from an improved economic Capital expenditure may berequired:climate and the flow-on effect of increased economic

growth. Individuals and individual businesses benefitdirectly from increased economic opportunities flowingout of specific initiatives. Funding these projects fromtargeted rates ensures transparency and accountability.

Targeted rates - Full

Operating expenditure:Economic Development:Infrastructure

The community desires regional infrastructure. Theregional community benefits from improved infrastructureand economic activity, contributing to a thriving regional Targeted rates - Full

Capital expenditure:economy. Individuals and businesses will benefit fromdirect use of the infrastructure. The benefits accrue bothin the immediate and long term. Funding from targetedrates ensures transparency and accountability.

Targeted rates - Full

Capital expenditure includes any interest and capitalrepayments where debt is raised. This includes theMarsden Point Rail Link.

Regulatory Services

Operating expenditure:Planning and PolicyThe entire community desires a well-structured andeffective region, and benefits from integrated regionalpolicies and plans which provide for the sustainable Rates/general funds - Full


management of Northland’s resources. This activity is apublic good, which supports the enhancement ofindigenous biodiversity and biosecurity, and continuousimprovement in water quality and security of supply. Thebenefits accrue both in the immediate and long term.


Draftrevenu

ean

dfina

ncingpo

licy

15



Operating expenditure:Consents activity: Consentapplications

Applicants must seek consent under the ResourceManagement Act 1991 (RMA) and the Building Act 2004.This process contributes towards safe and resilient Fee/subsidy - Majoritycommunities, and continuous improvement in water Rates/general funds -

Residualquality and security of supply. The regional communitygains assurance that activities requiring consent are in Minor capital expenditure

may be required:accordance with regional policies and the RMA. RMAand building (dams) consent holders directly benefit fromgaining compliance and holding consent. The benefits Rates/general funds - Fullof these services accrue both in the immediate and longterm. Processing resource consent applications isconsidered to be largely private good, with an elementof public benefit. The allocation of costs to those whobenefit from the services or cause such costs, is beneficialas the community does not have to bear such costs.

Capital costs are minor and as they do not directly relateto individual consent applications, they are funded fromrates/general funds for efficiency reasons.

Operating expenditure:Consents activity: Consentsadvice and information

Individuals may require information and advice on thelawfulness of intended, proposed or existing activities.The regional community benefits from informed Rates/general funds - Fullparticipation and decision making. Resource users benefit Fee/subsidy - Residualfrom guidance on regulation, appropriate use and Minor capital expenditure

may be required:development of resources. These services support safeand resilient communities and efficient and effectiveservice delivery, and the benefits accrue both in the Rates/general funds - Fullimmediate and long term. We consider the provision ofconsents advice and information to be a public andprivate good. The public good is served by the informedease of transacting and engaging with the council. Privategood exists where advice relates to applications whereindividuals derive a direct benefit. Fees can be chargedfor some advice, as per the council's Charging Policy.

Operating expenditure:Monitoring: State of theEnvironment monitoring

The regional community benefits from improvedknowledge and management of the regionalenvironment. This activity is a public good which supports Rates/general funds - Full


the enhancement of indigenous biodiversity andbiosecurity, and continuous improvement in water qualityand security of supply. The benefits accrue in in theimmediate and long term. Rates/general funds - Full

Operating expenditure:Monitoring: Compliancemonitoring, environmentalincidents response and wastemanagement andcontaminated sites

Need is created by individuals who have consents andthose whose actions or inactions risk or harm theenvironment. The local and regional communities benefitfrom environmental protection via the monitoring,enforcement and clean-up actions carried out by thecouncil. This activity supports the enhancement of

Fee/subsidy - Majority(Licence and Enforcementfees)

Rates/general funds -Residualindigenous biodiversity and biosecurity, and continuous

Draftrevenu

ean

dfina

ncingpo

licy

16



improvement in water quality and security of supply. Thebenefits of these services accrue both in the immediateand long term. This activity is mostly a private good,


Rates/general funds - Fullhowever compliance provides public benefit. Theallocation of costs to those who benefit from the services,or those who cause such costs, is beneficial to thecommunity, as the community does not have to bearsuch costs.

Environmental Services

Operating expenditure:Natural Hazard ManagementIndividuals and communities live or plan development inareas that are subject to natural hazards. Natural hazardmanagement supports safe and resilient communities, Rates/general funds - Full

Capital expenditure may berequired:

and the benefits accrue immediately and in the longterm. Individuals and the community benefit fromreduced risk to property, projection losses and loss of

Rates/general funds - Fulllife. Community wide benefit includes hazard identificationand risk reduction analysis throughout the region. Hazardmanagement is primarily a public good, with an elementof private benefit to individuals and groups of individuals.

Operating expenditure:HydrologyThe community wants advanced warning of water risks,and to have our water resource sustainably managed.Hydrology monitors and reports on water quantity Rates/general funds -

Majority(rainfall, groundwater, surface water, rivers and lakes),which contributes to continuous improvement in water Fee/subsidy – Residualquality and security of supply, and safe and resilient Capital expenditure may be

required:communities. Individuals and the community benefit fromearly notification of rainfall in significant rivers, andmanagement of Northland's water resources. There is Rates/general funds – Fullcommunity wide benefit from monitoring andunderstanding our various water resources andinformation. The benefits of these services accrue bothin the immediate and long term. Hydrology activity isprimarily a public good with an element of private benefitto individuals and groups of individuals. Fees and chargesare levied for compliance related activities.

Operating expenditure:BiosecurityThe community wants animal and plant pests to becontrolled, and our region’s unique ecosystems to beprotected. The regional community benefits both in the Rates/general funds -

Majorityimmediate and long term from the enhancement ofindigenous biodiversity and biosecurity in Northland, and Fee/subsidy - Residualfrom the contribution towards a thriving regional Capital expenditure may be

required:economy through increased land productivity. Weconsider the provision of biosecurity activities to belargely a public good, with an element of private benefit,where pest control is provided to individuals and/orgroups of individuals.


Draftrevenu

ean

dfina

ncingpo

licy

17



Operating expenditure:BiodiversityIndividuals and the community may compromise theenvironment, or may wish to foster and enhance theenvironment. They benefit in the immediate and long Rates/general funds -

Majorityterm from improved image, retention/enhancement ofproductive values of land, reduction in adverse effects, Fee/subsidy - Residualand enhancement of priority ecosystems/natural Minor capital expenditure

may be required:resources. The wider community benefits from theenhancement of indigenous biodiversity and biosecurity.The provision of biodiversity activity is considered to be Rates/general funds – Fulla public good. However, there can be an element ofprivate benefit, where Environment Fund grants andactivities are provided to individuals or a group ofindividuals. Beneficiaries of the Environment Fund mustalso provide a significant contribution towards theprojects.

Operating expenditure:Land and WaterIndividuals and the community may compromise theenvironment, or may wish to foster and enhance theenvironment. They benefit in the immediate and long Rates/general funds -

Majorityterm from improved image, retention/enhancement ofproductive values of land, reduction in adverse effects, Fee/subsidy - Residualand enhancement of priority ecosystems/natural Minor capital expenditure

may be required:resources (improved water quality, reduced run-off andsedimentation and reduced frequency of flooding). Thewider community benefits from the enhancement of Rates/general funds – Fullindigenous biodiversity and biosecurity. The provision ofland and water activity is considered to be a public good.However, there can be an element of private benefit,where Environment Fund grants and activities areprovided to individuals or a group of individuals.Beneficiaries of the Environment Fund must also providea significant contribution towards the projects.

River Management

Operating expenditure:River Management: Floodprotection works rivermanagement

Individuals and the public require flood risk reductionwhen living or undertaking developments in flood riskareas. The community benefits from reduced incidenceof damaging floods in Northland. Individual land owners

Targeted rates - Majority

Rates/general funds -Residualbenefit from the reduction in property damage and

primary projection losses. The benefits of these services Fee/subsidy - Residualsupport safe and resilient communities, and accrue both

Capital expenditure on riverasset infrastructure isundertaken as part of thisactivity:

in the immediate and long term. We consider rivermanagement works to be both a private and public good.Where specific works are carried out, these works providea greater benefit to identifiable individuals and groupsof individuals. Targeted rates - Full

The use of targeted rates for each river scheme promotesaccountability and affordability as residents and businessweigh up the costs of flood protection works against the

Draftrevenu

ean

dfina

ncingpo

licy

18



level of risk. The council recognises it may not be realisticor cost effective to precisely identify either directbeneficiaries on the flood plain or indirect beneficiariesin the economic catchment, and proxies will need to beused. It will not always be feasible for the council torecoup costs from some types of beneficiaries. Exception:Should the cost of collecting a separate targeted rate onsmall schemes exceed the benefits, then those works willbe funded from rates/general funds.

Capital expenditure includes any interest and capitalrepayments where debt is raised. This includes rivermanagement infrastructure.

Customer Services and Community Resilience

Operating expenditure:Customer ServicesThe community wants to access council information andservices and to transact with the council. The provisionof customer services supports efficient and effective Rates/general funds - Fullservice delivery, and is also used to support prosperousrelationships with tangata whenua. The communitybenefits from having easy access to council informationand services, and the council benefits from closerrelationships with the community, and improvement inits reputation. These benefits accrue immediately and inthe long term. We consider customer services to belargely a public good, with an element of private benefit,where information and support is provided to individuals.

Operating expenditure:Civil Defence and EmergencyManagement

The community desires the response capability andadvanced warning provided in emergency events, andbenefits from these services. The maintenance of a Rates/general funds -

Majorityresponse capability and planning for major emergencyevents benefits the regional and national community. Fee/subsidy - ResidualThe benefits of these services accrue both in the Minor capital expenditure

may be required:immediate and long term. Civil defence and emergencyresponse is a public good which supports safe andresilient communities. It benefits all individuals andlandowners during emergency events, so the majority isfunded from rates/general funds.

Rates/general funds – Full

Operating expenditure:Civil Defence and EmergencyManagement: Funding forcommunity projects andvolunteer emergency services

The community wants to have access to emergency andrescue services, and the on-going provision of othercommunity projects. We consider these activities to bepublic goods which contribute to safe andresilient communities. The wider community benefits

Targeted rates - Majority

Rates/general funds -Residual

include reduced risk to loss of life and having a saferregion, and occur both immediately and in the long term.To provide transparency to the ratepayers, council hasdeemed it appropriate to set a targeted rate for thefunding of organisations involved in lifesaving activities

Draftrevenu

ean

dfina

ncingpo

licy

19



in the region. Given the reasonably small quantum offunding, the council has deemed it appropriate to userates/general funds to fund community organisations viathe non-contestable funding process.

Operating expenditure:Oil Pollution ResponseFuel tankers visit Marsden Point Oil Refinery, whichconstitutes a major oil spill risk. The local commercialtourism service and fishing fleets and the substantial Fee/subsidy - Majorityrecreational vessel fleet use the region’s coastal waters Rates/general funds -

Residualand associated refuelling facilities. The council's OilPollution Response supports safe and resilient Capital expenditure may be

required:communities, and a thriving regional economy. Theregional and wider communities benefit from clean seasand coastal environment, and commercial shipping Rates/general funds - Fullbenefits from a spill response system and the availabilityof resources for clean-up of spills. The benefits of theseservices accrue both in the immediate and long term.Where evidence permits, the council will seek to chargethe exacerbator, however it is not always feasible or costeffective to do so.

Operating expenditure:Harbour Safety andNavigation

Need is created by recreational and commercial coastalwater users. Harbour safety and navigation supports safeand resilient communities. The provision of harbour safety Fee/subsidy - Majorityand navigation services provides both public and private Rates/general funds -

Residualbenefits, which accrue both in the immediate and longterm. The regional community benefits from safer coastal Capital expenditure is

required:areas for recreation. The public, including commercialand recreational users, benefits from safe water transportand the provision of services. Charges are levied on larger Rates/general funds - Fullvessel and coastal structure owners, as direct beneficiaries,in accordance with the Navigation, Water Transport andMaritime Safety bylaw and the council’s Charging Policy.The application of user charges promotes transparencyand accountability and reduces the rating requirementon the community.

Capital expenditure is required for property plant andequipment (including cyclical renewal of vessels, vehiclesand navigational aids) to carry out this activity.

Operating expenditure:Transport: Regional TransportManagement

Legislation requires, and the community desires, anintegrated transport network. Regional TransportManagement is a public good which supports efficient Rates/general funds -

Majorityand effective land transport policies and public transport,and safe and resilient communities. The regional Fee/subsidy - Residualcommunity benefits from the provision of an affordable, Capital expenditure may be

required:integrated, safe, responsive and sustainable transportsystem. The benefits are on-going, however there isimmediate benefit to the transport users. Rates/general funds - FullD

raftrevenu

ean

dfina

ncingpo

licy

20



Operating expenditure:Transport: PassengerTransport Administration

The community desires access to public transport servicesand total mobility schemes. Passenger TransportAdministration supports efficient and effective land Fee/subsidy - Majoritytransport policies and public transport, and safe and Rates/general funds -

Residualresilient communities. The entire Whangārei districtbenefits from the provision of community passenger Targeted rates - Residualtransport services, including the flow on effects of

Capital expenditure may berequired:

reduced congestion and improved road safety inWhangārei urban areas where passenger servicesoperate. Rates/general funds – Full

Where public transport is provided in other areas acrossthe region there is both community and individualbenefit. The community benefits from having individualsbeing able to engage in day-to-day activities. Theindividual benefits from being able to travel and accessthe community when they otherwise might not be ableto do so. The benefits of these services are immediate atthe time of using the service/transport. The regionbenefits from the provision of a passenger transportsystem.

Each bus service is funded from a combination of centralgovernment funding (where available), user fees andcharges and a targeted rate. This combination of fundingpromotes affordability and transparency and allows thecouncil to take advantage of available subsidies. Settinguser fees at an affordable level is intended to encourageand promote use of the bus service.

Corporate Excellence

Operating expenditure:Corporate Services: All exceptCommercial Investments

Corporate Excellence provides corporate services to therest of the council, including finance, human resources,health and safety, continuous improvement, information Rates/general funds -

Majoritymanagement, information technology, the Chief ExecutiveOfficer (CEO) Office and property. This activity is a public Fee/subsidy - Residualgood which supports efficient and effective servicedelivery. Corporate services are allocated to activitiesbased on relevant cost drivers.

Capital expenditure isrequired:


Commercial investmentsCorporate Services:Commercial Investments

Commercial investment activity supports improved returnson council investments, and a thriving regional economy.The community desires that the council's commercial Rates/ general funds -

Majorityinvestments are managed prudently for the benefit ofcurrent and future ratepayers. The regional community Fee/subsidy - residualbenefits immediately and in the long term from the direct Commercial investments

provides net investmentrevenue funding tocontribute towardsrates/general funds

investment income generated from commercialinvestments, as this revenue is applied to fund counciloperations, including economic development, and helps

Draftrevenu

ean

dfina

ncingpo

licy

21



to keep rates affordable. The community also benefitsfrom any wider economic development gains that mayaccrue from investment and commercial decisions.

Capital expenditure mayrelate to specific commercialdevelopment projects:

Operating:We consider the entire revenue streams andcapital growth associated with investment activities area public good.


Capital: Investments can be tailored to achieve a mix offinancial and strategic objectives. The growth of councilinvestments, through further investment and capitalappreciation promotes intergenerational equity, whichensures assets are available for future benefit of thecommunity.

Draftrevenu

ean

dfina

ncingpo

licy

22

Documents

Draft revenue and financing policy · Overview TheLocalGovernmentAct2002(LGA)requiresthecounciltoadoptaRevenueandFinancingPolicy,outlining thecouncil’sapproachtofundingitsoperatingandcapitalexpenses