Contents

1 Introduction ............................................................................................ 1

1.1 Our Council ................................................................................................... 1 1.2 From the Mayor ............................................................................................ 2 1.3 From the Chief Executive ............................................................................. 4 1.4 At a Glance – Key Decisions & Changes from Draft LTP .............................. 7 1.5 Other Decisions consulted on alongside LTP ............................................. 18 1.6 Rates information....................................................................................... 22 1.7 Long Term Financial Strategy .................................................................... 34 1.8 Report from the Auditors ........................................................................... 50

2 Our Direction ......................................................................................... 53 2.1 Our City Profile ........................................................................................... 53 2.2 Community Outcomes ................................................................................ 55 2.3 Strategic Priorities ..................................................................................... 58 2.4 Organisational Performance ...................................................................... 63 2.5 Sustainable Development .......................................................................... 66 2.6 Our Key Assumptions ................................................................................. 67

3 Working Together.................................................................................. 72 3.1 Collaborative Relationships........................................................................ 72 3.2 Regional Initiatives .................................................................................... 74 3.3 Grants & Awards......................................................................................... 76

4 Services We Provide .............................................................................. 77 4.1 Strategy & Planning ................................................................................... 78

4.1.1 Strategic & Community Policy ...................................................................................... 81 4.1.2 Environment & City Planning ....................................................................................... 84 4.1.3 Harbour & Catchments................................................................................................... 86 4.1.4 Economic Development & Marketing .......................................................................... 89 4.1.5 City Centre Revitalisation............................................................................................... 92 4.1.6 Village Planning............................................................................................................... 95 4.1.7 Emergency Management ................................................................................................ 97

4.2 Stormwater .............................................................................................. 100 4.2.1 Stormwater Management ............................................................................................. 102

4.3 Wastewater .............................................................................................. 106 4.3.1 Wastewater Management............................................................................................. 108 4.3.2 Wastewater Treatment Plant........................................................................................ 112

4.4 Water Supply ............................................................................................ 115 4.4.1 Water & Demand Management................................................................................... 117

4.5 Transport .................................................................................................. 121

4.5.1 City Roading & Safety................................................................................................... 123 4.5.2 Transport Facilities ........................................................................................................ 127

4.6 Solid Waste............................................................................................... 129 4.6.1 Waste Minimisation & Recycling ................................................................................ 131 4.6.2 Landfill Management.................................................................................................... 134 4.6.3 Rubbish Collection ........................................................................................................ 137 4.6.4 City Cleaning.................................................................................................................. 139

4.7 Community & Leisure ............................................................................... 142 4.7.1 Arts & Heritage.............................................................................................................. 144 4.7.2 Libraries .......................................................................................................................... 147 4.7.3 Community Recreation Programmes ......................................................................... 150 4.7.4 Indoor Recreation .......................................................................................................... 152 4.7.5 City Landscape............................................................................................................... 155 4.7.6 Sports Fields & Outdoor Courts .................................................................................. 159 4.7.7 Cemeteries & Crematorium ......................................................................................... 162

4.8 Environment & Regulatory....................................................................... 164 4.8.1 District Plan Administration & Monitoring............................................................... 166 4.8.2 Building Compliance..................................................................................................... 169 4.8.3 Environmental Standards............................................................................................. 172 4.8.4 Animal Control .............................................................................................................. 175

4.9 Democratic Process .................................................................................. 177 4.9.1 Governance & City Leadership ................................................................................... 179 4.9.2 Council Property............................................................................................................ 182

5 Funding Our Work ............................................................................... 186 5.1 Introduction ............................................................................................. 186 5.2 Financial Forecasting Planning Assumptions........................................... 188 5.3 Prospective Statement of Comprehensive Income.................................. 195 5.4 Prospective Statement of Changes in Equity ........................................... 196 5.5 Prospective Statement of Financial Position ........................................... 197 5.6 Prospective Statement of Cash Flows...................................................... 199 5.7 Notes to the Prospective Financial Statements – Depreciation............... 201 5.8 Statement of Accounting Policies ............................................................ 202 5.9 Funding Impact Statement ...................................................................... 212

6 Our Statutory Policies ......................................................................... 221 6.1 Introduction ............................................................................................. 221 6.2 Revenue & Financing Policy ..................................................................... 222 6.3 Policy on Significance............................................................................... 257 6.4 Summary of Related Policies.................................................................... 262

7 Appendices .......................................................................................... 263 7.1 Capital Expenditure Programme (inflation-adjusted) ............................. 264 7.2 Full Prospective Funding Impact Statements for each Activity............... 271

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7.2.1 Strategy & Planning ...................................................................................................... 272 7.2.2 Stormwater ..................................................................................................................... 279 7.2.3 Wastewater ..................................................................................................................... 280 7.2.4 Water Supply.................................................................................................................. 282 7.2.5 Transport......................................................................................................................... 283 7.2.6 Solid Waste ..................................................................................................................... 285 7.2.7 Community & Leisure .................................................................................................. 289 7.2.8 Environment & Regulatory .......................................................................................... 296 7.2.9 Democratic Process........................................................................................................ 300

7.3 Council's Reserves.................................................................................... 302 7.4 Glossary.................................................................................................... 305

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1 Introduction

1.1 Our Council You can contact your Mayor and Councillors to discuss anything relating to Council services.

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1.2 From the Mayor

Our city is a great place to call home and I'm proud to lead your Council as we present our Long Term Plan (LTP), which looks ten years ahead.

Everything we do is to improve the experience of living, working and raising a family in Porirua. That means balancing investment in key areas like infrastructure, improving the harbour and developing the city centre, while keeping a lid on rates by tightening our belts where needed.

This is a tough budget, and it needed to be. Without hard decisions, the community could have faced an extremely high rate increase. That wouldn't be acceptable, so we have gone through the budget, line-by-line, identifying savings and striving for greater efficiency. At the same time,because we reject the short-term thinking of deferring vital infrastructure works, we will more than double the renewal of wastewater and stormwater budgets over the life of this Plan which will deliver cost savings in the long run. The cross-harbour sewerage link, Pauatahanui reticulation project and Duck Creek pump station are examples of these important infrastructure works.

For the 10 years of the Plan we have set a funding 'envelope' which we believe to be fair and reasonable, beginning with a 3.4%

average rate increase in Year 1. This average rate increase is 0.2% more than was consulted on in the draft LTP and takes account of submissions and the increase in insurance costs. You will also note that we will increase 'user pays' for some services as well as find new sources of income like sponsorship to help fund some activities.

Our strategic priorities which set the direction for all decisions are:

• Connected and distinctive villages, able to have their respective spaces and characters shaped by the people who live in them;

• A healthy and protected harbour as the heart of our city of villages;

• Prosperity, growth and better opportunities through a City Centre Revitalisation; and

• A great city experience. Quality, affordable and efficient services at every point enabling residents, businesses and visitors to make the most of their city experience.

Operating reductions to take effect from this financial year include:

• Plimmerton Library will be closed;

• Grant support to community groups reduced;

• Fewer litter bins around the city.

The Council will meet rising costs by increasing the amount that users of some services pay, including:

• Cost of landfill fees increased;

• Increased user pays for community and recreation services;

• Boatshed and pole moorings.

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Strategic longer term decisions that will affect rate levels (usually relating to debt):

• Removing the Proposed Performing Arts Theatre (saving about 3% pa on rates)

• More than doubling of spending on stormwater and wastewaterinfrastructure;

• The need for a new Council building which will be considered as part of the City CentreRevitalisation project;

• Closer ties with other councils through shared services or possible amalgamation.

As stated above, the Council has done its best to present you with a budget that contains costs without compromisinginvestment in infrastructure and facilities that matter to residents. We have done so in the face of some hefty increases in insurance premiums and the need to make provision for leaky home settlements. These costs are significant, but I am pleased to report to you that they have been absorbed into the budget we are presenting by savings we have made in other areas.

I am pleased to offer support in principle for the Aotea College Te Manawa(performing arts) Redevelopment project. We will be determining over the next year how best we can provide this support.

I am also pleased to be supporting in principle the concept of a writers walk in Porirua city centre. This will involve working with the Porirua Community Arts Council as part of the City Centre Revitalisation project. There is no specific

budget for this at the current time, however, this will be considered in a future LTP or Annual Plan, prior to any such work commencing.

Over the past few months there has been growing community concern about the uptake of health, educational and economic opportunities by many children and young people in Porirua City.

In terms of population, we are the youngest community in New Zealand with 1/4 of our population under the age of 15. This presents the city with challenges, as many of the statistics do not bode well for the well-being of our future citizens. As a responsible Council we should work to ensure we are securing the best opportunities for future generations by the decisions we make in this Plan.

The Council has detailed its strategic intent with the priorities set out in this Plan. We must focus on why we seek to improve prosperity, infrastructure and lifestyle, as we work to create a better life experience for coming generations.

We must however, go further than this.

We must be prepared to strongly advocate to Central Government, and local social, health and education service providers who work and make decisions in our communities to ensure every Porirua child can access everything they are entitled to. Our success will be judged on our children growing up to be strong and equal contributors to a great Porirua City.

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1.3 From the Chief Executive

Tough Budget for Tough Times Like all other Local Authorities around the country Porirua City Council has been working hard on the review of its Long Term Plan (LTP).

This LTP budget has been based on the vision set out in the Mayor's opening statement and the following two important principles:

(1) A prudent budget that keeps debt levels manageable, invests in future assets, provides a return in terms of public use of investment and supports intergenerational equity; and

(2) Prioritising infrastructural investment expenditure made by Council to ensure assets are maintained and significant programmes of work are completed.

Porirua City Council has assets of over $1 billion and this LTP invests $126.75 million in capital works on the major strategic assets, water supply, wastewater,stormwater, and transport over the next 10 years. This represents a major investment to build or replace the city’s major assets, crucial to the liveability of our city.

This LTP has again been prepared in difficult economic circumstances that have

continued since the 2009 global financial crisis. The slow economy is reflected in our forecasted growth in the rating base which is assumed to be just 0.8% in Year 1, 0.5% in Years 2 and 3, then moving up to 1.0% per annum for the remaining seven years.

As a result of changes made following the LTP public consultation process, the average annual cost of property rates has increased from 3.2% to 3.4% for the first year of the Plan. This is below the level of cost increases the city faces and achieving it will mean some tough choices in the level of services we deliver, but recognises that many residents are also feeling the effects of the depressed economy. Some costs which have previously had rates input will become fully user-paid.

The major external cost increases Council faces include insurance, construction and materials for infrastructure and providing for leaky home settlements. These are not fully reflected in the Consumer Price Index (CPI) which is why it is difficult to use that index as a direct comparator with local government cost increases.

The Cost for Ratepayers The draft LTP indicated an average rates increase of 3.2%. However, due to late notification of an increase in insurance costs and changes in response to submissions, the average rate increase will now be 3.4%.

As in the draft LTP, the subsequent nine years will be CPI plus growth in the rating base - resulting in forecast average rate increases of 3.0% for Year 2 and 2.9% for Year 3 of this Plan.

Balancing the Budget The Local Government Act 2002 requires the Council to have a 'balanced budget'

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where operating revenues meet operating expenses budgeted for that year.

However, the legislation allows Councils to budget for a deficit if it resolves that it is financially prudent to do so. Our Council decided to do this in 2009 and planned for a balanced budget in 2016/17. I am pleased to report that we are still on track toward this goal.

One of the drivers for the 2009 decision was to ensure "intergenerational equity", which means that each generation pays its fair share of the real costs of the Council services it consumes over time. Loan funding for long term infrastructure such as water pipeline renewals or roads is one way of achieving that objective, which is why the Council routinely loan funds capital works.

The Council is forecasting that its operating expenditure will increase from $71.03 million to $95.09 million, a 33.9% increase over the ten year period. These increases are a result of:

• Growth – there are or will be, more households in Porirua based on growth assumptions of 0.8% in Year 1, 0.5% in Years 2 and 3, then moving up to 1.0% per annum for the remaining seven years.

• Depreciation and interestpayments – the increased capital expenditure programme means corresponding increases in costs in these areas.

• Price increases – inflation and the factors that influence it will mean that it costs more to operate and deliver Council services. Economic forecasts from BERL Economics indicate that costs in general could increase by 43% over the 10 year period.

Debt Levels Capital projects will increase the city's public debt over the 10 year period from $45 million to a projected maximum of $77 million in Year 7 (2018/19) and back to $52.5 million in Year 10. A key reason for this Year 7 peak in debt is to fund construction of the two Transmission Gully Motorway link roads (on and off ramps) in Waitangirua and Whitby. However, despite this increase the Council will be operating well within the acceptable limits contained in its Liability Management Policy. The Council retains capacity to borrow for unexpected events. More detailed information on this can be found in the Long Term Financial Strategy (section 1.7 of this Plan).

Rate Funding for Depreciation The Council resolved in 2009 that it was prudent to begin to rate-fund for depreciation of the city's water, stormwater and wastewater network from Year 1 of the 2009-19 LTP to address the issue of intergenerational equity. We remain on track to meet this target.

From Year 7 in the 2012-22 LTP, the cash generated from the depreciation reserves for stormwater will assist in funding the stormwater capital renewals. In Year 8, the depreciation reserves will also start contributing to water supply and wastewater renewals and will steadily increase in the following years. It is anticipated that this funding will reduce the loan funding requirement by $4.7 million during the 10 years of the Plan and signals our intention to move away from funding the renewals of these infrastructural assets from loans.

Other Ways to Save Costs As well as capping the average rate increase, the Council is also looking at

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other ways of working that will reduce costs or generate non-rates income.

It is looking at different service delivery models, new revenue or funding sources, working more closely with neighbouring councils on services which can be shared, moving the cost of some services from rates to a user pay system, and also divesting those services in which, either our lack of scale or operational expertise, makes imprudent to continue to deliver.

We are also currently investigating joint management of our solid waste services with Wellington City Council and also talking to the other local authorities about joint management of water services. This

would involve moving services into Council controlled organisations. Decisions on these ventures will be finalised in the next 12 months, as the work is in its initial stages only.

In addition over the next six months, we will be preparing a defined scope of work and project brief which illustrates the distinction between cost and revenue identification and analysis of Council activities along with developed costings prior to a final decision on a review being made.

Every area of the Council will be subject to scrutiny to ensure that we are delivering our services as effectively as possible.

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1.4 At a Glance – Key Decisions &

Changes from Draft LTP

INTRODUCTION This section outlines the key changes made to the Draft LTP as a result of public consultation, including an update on the key issues highlighted in the Summary document.

Public consultation on the Draft LTP 2012-22 was held 03 April – 03 May 2012. From the 235 submissions received on the Draft LTP, a wide range of subjects were covered across all groups of activities provided by the Council, as summarised in the graph below. Council also consulted at the same time on some other matters related to the Draft LTP. These matters and the decisions Council made on them are summarised in the following section 1.5.

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% Submissions addressing each Activity Group

68 %

9% 6% 9%

22% 20 %

83 %

12 % 11 %

26 %

0%

20 %

40 %

60 %

80 %

1 00%

The geographic spread of submitters to the 2012-22 Draft LTP is summarised in the following graph. The proportion of submitters from each electoral Ward fluctuates each year depending on the nature of consultation issues, for example, for the two previous Annual Plans, significantly more submitters came from the Eastern Ward, whereas for the 2009-19 LTP significantly more submitters were from the Western Ward. The proportion of submitters from outside Porirua is consistent with the previous two Annual Plans and the 2009-19 LTP.

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Geograhic Location of Submitters (2012-22 LTP) Total Submitters = 235

2%

11%

3% 2%

8%

2%

12%

18% 30%

4%

2% 5% 0.4% 0.4%

0%

5%

10%

15%

20%

25%

30%

35%

76% Submit ters from Porirua 19% Submitters outside Porirua 5% Submit ters (unknown locat ions)

Eastern Western Northern Kapit i Lower Hutt Wellington Other Regions Unknown

Organsiation Individual The public hearing was held 16-18 May 2012. From the 235 submissions received on the Draft LTP, a total of 66 submitters (28%) presented their submissions at the hearing.

Council officers analysed submissions on each topic and provided advice relating to the Draft LTP 2012-22 for the Council's consideration on 6 June 2012. The Council resolved at this meeting that some submitter requests and associated matters be incorporated into the final LTP adopted on 27 June 2012. Key changes are listed below, with section references for where else they appear in the LTP document.

Topic Summary of change to Draft LTP Stormwater Stormwater network upgrades – Based on strong support from submitters management for infrastructure investment, the Stormwater upgrade budget was

increased by $200,000 per annum (this equates to an additional $2.2 million over 10 years when costs are inflated). The rates impact will not be seen until the 2013/14 year, when loan repayment commences. This change brings the capital expenditure budget for Stormwater upgrade work up to $6.3 million over 10 years (compared to $4.1 million in the Draft LTP). This budget is three times that budgeted for stormwater upgrades in the previous 2009-19 LTP. The stormwater upgrade programme will provide greater capacity at targeted points in the stormwater network to reduce flooding after heavy rainfall. The added investment will move the level of service delivery risk from its present state of 'high' to 'low' over the ten year period (see section 1.7). As such, the long term target for the number of maintenance requests related to the Stormwater network has been lowered from 25 to 20 requests per 1000 households.

Annual Residents Reinstate the survey budget of $50,000 per year from the Strategic & Survey Community Policy activity (section 4.1.1) to assess residents' feedback on

Council services (rather than every third year as proposed in the Draft LTP).

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Topic Summary of change to Draft LTP Local Authority Protection

Programme (LAPP)

Additional annual costs of $156,000 associated with the insurance premium for the LAPP Fund has been included. Funding of future increases in premiums and increasing the provisions for the required excess beyond 2012/13 will depend on Council's decision about its future in the Fund (currently under review). This change is summarised in the Long Term Financial Strategy (section 1.7), in each of the water service activities impacted: Stormwater Management (section 4.2.1); Wastewater Management (section 4.3.1); Wastewater Treatment Plant (section 4.3.2) and Water & Demand Management (section 4.4.1), and in the financial assumptions regarding Insurance (section 5.2).

Rubbish bins Both the City Landscape (section 4.7.5) and City Cleaning (section 4.6.4) operational budgets were increased by $7,500 per annum across the 10 years of the LTP. This enables retention of some of the litter bins that were originally planned to be removed from parks, reserves and suburban shopping centres. Due to overall budget reductions in these two activities however, some litter bins will still be removed across the city. The impact of this reduction to service levels will be monitored during the coming year to ensure negative effects are limited as far as practicable.

Surf Lifesaving The City Landscape activity (section 4.7.5) annual operational budget has been increased in order to fund improvements to the level of service provided by the Surf Lifesaving service in Porirua. The cost starts at $6,000 for 2012/13.

Libraries The Libraries activity (section 4.7.2) annual operational budget has been increased to enable retention of current operating hours. The cost starts at $10,000 for 2012/13. Note that closure of Plimmerton Library is scheduled to occur during Year 1 (2012/13).

Porirua City Partners Programme/ Porirua Foundation

An additional $40,000 per annum (rates funded) will be available to support the existing resourcing of the Partners Programme and associated external revenue sourcing by the Council. This change is referenced under Organisational Performance (section 2.4) and Collaborative Relationships (section 3.1).

Regional Amenities Fund

Porirua City Council decided not to contribute to the Wellington Regional Amenities Fund – a levy for events and activities defined as benefiting the region, such as the Wellington Orchestra and the New Zealand School of Drama. The Fund would have required $72,000 in funding from Porirua

City ratepayers in the set up year (2012/13) and increasing costs from then on. The Mayoral Forum will be informed of this decision (see section

4.1.4 for more details). Wi Neera to

Onepoto Walkway A budget of $150,000 has been added for the design/cost/consent stage to build a walkway/cycleway along Titahi Bay Road (from Wi Neera Drive to Onepoto) to be completed in Year 2 (2013/14), as part of the City Landscape activity (section 4.7.5). Construction is scheduled for Year 4 (2015/16). By adopting this timing, the project can be considered for subsidy from the NZ Transport Authority as part of the next Regional Transport Plan, which is a 3 year plan and has been concluded for the current LTP period. This budget addition constitutes a reinstatement of the project from the 2009-19 LTP, which was removed from the Draft 2012-22 LTP due to

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Topic Summary of change to Draft LTP competing infrastructure priorities.

Aotea College – Te Manawa Redevelopment

Support in principle for the Aotea College Te Manawa (performing arts) Redevelopment project has been noted in the Arts & Heritage (section 4.7.1). A separate report to Council on options for providing support will be scheduled during 2012/13.

Review of Costs and Revenue

The Chief Executive will prepare, before the end of the 2012 calendar year, a defined scope of work and project brief which illustrates the distinction between cost and revenue identification and analysis of Council activities along with developed costing prior to a final decision on the review being made. This undertaking is referred to in Organisational Performance (section 2.4).

Writers Walk Support in principle for the concept of a writers walk in Porirua city centre has been noted in City Centre Revitalisation (section 4.1.5). This will involve working with the Porirua Community Arts Council as part of the City Centre Revitalisation project. There is no specific budget for this at the current time, however, this will be considered in a future LTP or Annual Plan, prior to any such work commencing.

CITY PRIORITIES Four strategic priorities the Council has agreed to take the city forward are:

A city of villages Connected and distinctive villages, able to have their respective spaces and characters shaped by the people who live in them

A healthy & protected harbour

At the heart of our city of villages, providing recreational, economic and cultural opportunities, now and in the future

A growing city Prosperity, growth and better opportunities for all Porirua residents through city centre revitalisation

A great city experience

Quality, affordable and efficient services at every point enabling residents, businesses and visitors to make the most of their city experience

BUDGET PRIORITIES In order to stay within the final 3.4% average rate increase, the Council reviewed all operating costs and adopted budget changes to lower these costs over the 10 year time frame. The Council looked carefully at all the services it provides and rated them by level of importance: Critical, Important or Less Important, to agree the level of funding for each service. Those

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rated Critical were allocated the most funding and this investment over time will result in a reduction in risk in terms of reliability and quality of the service delivered.

The diagram below summarises the funding priorities the Council has put each group of activities within. Note that some activities and functions were higher priority than others within some individual groups of activities (further detail is provided in the Long Term Financial Strategy, section 1.7). Final service changes, including those resulting from public consultation, are summarised for each Activity in section 4, Services We Provide.

FINANCIAL STRATEGY Until 2009, Porirua City enjoyed steady growth but the global financial crisis has had a significant impact on the local and national economy and has caused this growth to slow significantly. The forecast growth in the property rating base for the city is assumed to be 0.8% for Year 1, then dropping to 0.5% for Years 2 and 3, then moving up to 1.0% annually for Years 4 – 10.

A major financial issue for the Porirua City Council is its very high dependence on rates as its principal source of revenue. In the 2011/12 financial year, for example, 70% of Council's total revenue comes from rates compared with the national average of approximately 58%. Against this backdrop the Council is steering a prudent course of action and adhering to the following principles:

• keeping debt levels manageable whilst investing in future assets that provide a return in terms of public use of investment and support intergenerational equity;

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• Prioritising infrastructural investment expenditure to ensure assets are maintained and significant programmes of work are completed.

The Council's Long Term Financial Strategy is provided in full in Section 1.7 below.

Balancing the Budget

Councils are required to budget each year for operating revenues at a level sufficient to meeting the operating expenses budgeted for that year. This is known as the "balanced budget". The Council may budget for a deficit if it resolves that it is financially prudent to do so.

Balancing the budget is also about ensuring intergenerational equity across present and future generations to ensure that each generation pays its fair share of the costs of benefiting from the services Council provides. For example loan-funding critical water pipeline renewals means that future generations will be paying for that benefit whilst the current generation will pay a lesser amount.

Summary of the Forecast Income Statements for 2012-22

2012/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating Surplus/ (Deficit) ($'000)

(3,438) (3,003) (2,564) (1,289) 2,419 3,825 22,1241 3,627 3,861 3,795

The table above indicates that there is a forecast operating deficit for Years 1 through 4. In the subsequent Years 5 through 10 an operating surplus is forecast. This is consistent with the forecasts for the 2009-19 LTP. The Council has made this "core" decision believing that it will maintain predicted levels of service and that it has made adequate provision for maintenance and renewals on its key infrastructure for the 10 years of this LTP and in subsequent years. It's important to note that operating deficits in the first four years of the Plan are not cash deficits.

Debt Levels

The Council's Liability Management Policy, which sets out the Council's borrowing limits, states that our external interest should not exceed 15% of our operating income.

A commonly used measure in international literature for assessing debt levels is interest payments as a proportion of income. This sets the benchmark at less than 10% of income. For Porirua City this percentage ranges from 4.7% to 6.2% over the 10 years of this Plan.

The LTP will increase the City debt over the 10 year period from $45 million to a projected maximum of $77 million in Year 7 (2018/19) and back to $52.5 million in Year 10 (2021/22). This maximum is well within the limits set.

The increase in Council's debt is caused by funding (through loans) of major infrastructural renewal, for example, stormwater and wastewater reticulation as well as work associated with the Transmission Gully Motorway Link Roads. These major capital projects, estimated to cost

The large increase in net surplus in Year 7 (2018/19) relates to a one-off subsidy from the NZ Transport Authority to reimburse costs for the construction of two link roads for Transmission Gully Motorway (see City Roading & Safety, section 4.5.1)

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$128.99 million, will be funded from loans, development contributions and cash reserves. The Transmission Gully Link roads also attract a New Zealand Transport Agency subsidy.

Funding for depreciation

The Council resolved in 2009 that it was prudent to begin to rate fund for depreciation of the city's water, stormwater and wastewater network from Year One of the 2009-19 LTP to address the issue of intergenerational equity. We remain on track to meet the target of 5% of the depreciation cost from 2009/10 and building by 5% each year to a maximum of 30% in Year 3 (2014/15) of this 2012-22 LTP.

From Year 7 in this LTP, the cash generated from the depreciation reserves for stormwater will assist in funding the capital renewals for the stormwater area. In Year 8 (2019/20), the depreciation reserves will also start contributing to water supply and wastewater renewals and will steadily increase in the years following. It is anticipated that this funding will reduce the loan-funding requirement by $4.7 million during the 10 years of the Plan and signals our intention to move away from loan-funding the renewals of these infrastructural assets.

Council's Investments

The Council has cash investments that accumulate slowly over the 10 years of the LTP that are invested in such as way that the Council maintains liquidity and that cash is available when needed. The Council also has a small property portfolio where it seeks to achieve market returns which in turn are applied to the Council's general funds.

MITIGATING COUNCIL'S INFRASTRUCTURE RISK Council's level of investment in its core infrastructure for water supply, wastewater, stormwater and transport has been set at a level that seeks to maintain or improve the reliability of the assets (see section 1.7 for more information on asset risks). By investing in an asset renewals programme, it is expected that the level of risk of failure in part of the network, leading to a loss of service to customers, will reduce over the ten-year period.

Council has managed its risk to loss or failure of a service over the last four years by:

• Having a prioritised and appropriately funded renewals programme,

• Responding to significant outages using the Council’s maintenance staff and established local contractors who are resourced to repair breakages,

• Reprioritising the renewals programme, and

• In the event of a major failure in part of the network which is not included in the ten year capital works programme, Council has maintained a borrowing capacity so it is able to respond with additional investment.

Customer surveys have shown that this approach results in a high level of customer satisfaction with the water services. In the case of water supply the Council is seeing evidence of a reduction of breaks leading to fewer water outages. The Council will continue to manage the service risk in this manner.

MAJOR PROJECTS The Council has contained costs without compromising investment in infrastructure. Renewals in the wastewater, water and stormwater networks are the Council's top priority.

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High profile projects are summarised below. Full project budgets are provided in sections 7.1 and 7.2 and activity work programmes are described in section 4.

Major Network Infrastructure projects:

• Water Services – $37 million. Significant increased investment in pipeline replacement has been made to improve the integrity of the network over time.

o Wastewater – $16 million will be spent over the 10 years to renew deteriorating sewer mains and reduce infiltration of stormwater into the wastewater pipelines. As well, $6 million is budgeted over Years 2 and 3 for the rehabilitation of the Wastewater Cross Harbour Link from Paremata to Onepoto that will lessen the load on the City Centre network and provide an additional link.

o Drinking Water (Water Supply) – $11 million will be spent over the 10 years of the Plan for ongoing water pipe renewals.

o Stormwater network upgrades – $6.3 million over 10 years will be spent to provide greater capacity at targeted points in the stormwater network to reduce flooding after heavy rainfall. Based on strong support from submitters for infrastructure investment, the Stormwater upgrade budget was increased by $200,000 per annum (this equates to an additional $2.2 million over 10 years when costs are inflated). The rates impact will not be seen until the 2013/14 year, when loan repayment commences. This change brings the capital expenditure budget for Stormwater upgrade work up to $6.3 million over 10 years (compared to $4.1 million in the Draft LTP). This budget is three times that budgeted for stormwater upgrades in the previous 2009-19 LTP.

• Road resurfacing – $11 million is budgeted across the 10 years of the Plan for renewing the city's roads on a 15 year cycle. This covers all local roads not including SH1 and SH58 and includes a mix of asphalt, cement and chipseal resurfacing.

• Transmission Gully Motorway Link Roads – $35 million is budgeted from Year 5 for the construction of two link roads between the City and Transmission Gully. The Council has a budget assumption that 54% of the link road cost will be funded by the New Zealand Transport Agency. There is a peak in the projected debt levels in later years of this Plan which will be used to fund these connection roads in Waitangirua and Whitby.

• Development at the Landfill – $7.8 million is budgeted over the 10 years to provide additional capacity and to increase the life of the landfill. Reducing leachate and greenhouse gas emissions are included in this work.

• Wi Neera to Onepoto Walkway – A report on the design/cost/consent stage will be completed in Year 2 (2013/14) at an estimated cost of $150,000 with construction scheduled for Year 4 (2015/16).

Major New infrastructure projects:

• Duck Creek Pump Station – $2.9 million is budgeted in Year 5 to upgrade the existing wastewater pump station to provide additional storage and accommodate planned

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growth in the Whitby area. The additional storage will help prevent wastewater discharges in high rainfall events.

• Pauatahanui Reticulation – $1.3 million is budgeted in Year 2 to provide water and sewer services to central village properties to protect the inlet environment. This is being considered to address current issues with on-site wastewater disposal. A number of properties in the village were historically developed with basic on-site wastewater disposal systems that are not equipped to cope with all the demands of modern life. Some form of reticulation is needed to protect the sensitive natural environment in this area from wastewater discharges and in the interests of maintaining public health. The engineering and funding options for a possible reticulation scheme will be considered by the Council in July 2012. The preferred option will then be discussed with residents.

Other Major Projects:

• Strategic Land Purchase – $25.7 million over 10 years of the Plan provides the capacity for property investment to help achieve economic development or infrastructure objectives. $5 million of the budget will fund land purchased for the provision of the Transmission Gully Motorway Link Roads. This fund could also be used to purchase property required to implement the City Centre Revitalisation Plan. This budget is an estimate of what might be required as the Council draws down loans for property purchases only if relevant sites become available. This budget could be diverted to fund infrastructure renewals in the future if this is a more prudent priority.

• City Centre Revitalisation – $19 million is budgeted across 10 years of the Plan to revitalise the City Centre and improve business and visitor growth in the city. The project includes the attraction of private sector investment into the area. The future of the Council's administration building could assist in this project as a decision needs to be made within the next three years about whether to earthquake strengthen the building or to relocate to another building within the city. Much of the Council's investment funds the construction of a through road from Cobham Court to Lyttleton Avenue.

• Village Programme – $5.6 million is budgeted across the 10 years of the Plan for ongoing village development. The award-winning Village Planning Programme is a groundbreaking partnership between Porirua City Council and its communities. It puts communities in charge of developing a vision for their neighbourhoods and then partnering with the Council to make it happen. The budget funds minor works in communities such as park improvements, walkways and traffic calming as well as operational projects.

• Porirua Harbour and Catchments – $2.3 million is budgeted across the 10 years to implement the Porirua Harbour Strategy including environmental work, education and monitoring. Porirua Harbour, comprising the Onepoto Arm and the Pauatahanui Inlet, is considered by the Council and community as the centrepiece of the City, and as such is one of the Council's strategic priorities. The Harbour is the largest estuary system in the lower North Island. As well as having a nationally significant wildlife area, the estuary has cultural, recreational, economic and other wildlife habitat values. The Porirua Harbour and Catchments Management Programme includes a schedule of coordinated and targeted action to restore the health of Porirua Harbour and its

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contributing streams, such as riparian planting, harbourside restoration and community education.

Significant projects removed from the LTP:

• Porirua Performing Arts Theatre – The Council had budgeted $3 million in the previous LTP that would be a third of the cost of building this proposed theatre. Funding depended on other community partners contributing likewise. As the partners can no longer continue funding this project, the Council budget was removed.

CHANGES TO KEEP COSTS DOWN You will see above that core infrastructure is expensive. At the same time, the Council is committed to keeping the budget within its 3.4% average rate increase. The Council reviewed all operating costs to lower costs over the 10 year time frame. Resulting changes to service levels are listed below and detailed in 'Services We Provide' (Section 4 of this Plan).

Some reductions in service:

• Fewer litter bins in parks and suburban areas – As a result of public consultation, both the City Landscape (section 4.7.5) and City Cleaning (section 4.6.4) operational budgets were increased by $7,500 per annum across the 10 years of the LTP. This enabled retention of some of the litter bins that were originally planned to be removed from parks, reserves and suburban shopping centres. However due to overall budget reductions in these two activities, some litter bins will still be removed across the city. The impact of this reduction to service levels will be monitored during the coming year to ensure negative effects are limited as far as practicable.

• City Cleaning – cleaning will be reduced at the Titahi Bay and Cannons Creek shopping centres to be consistent with all other suburban shopping centres.

• Libraries – From Year 1 the Plimmerton branch library will close. All other libraries will remain open and retain current operating hours.

• Pataka – Major exhibitions will be reduced if non-rates funding like sponsorship is not found. Pataka staff will develop a strategy aimed to secure sponsorship for exhibitions.

• Community Grants – the community grants pool has been reduced over five years from $245,000 to $195,000.

• Community development – services will be reduced such as community training and grant information and support.

• Reduced financial support for some events – from Year 2 event organisers will need to pay for Council services provided by the Works Business Unit.

Getting more out of existing infrastructure:

• Footpaths – footpaths in a marginal condition will have to be used for an additional year before repairs are made.

• Roads – reduced expenditure in the short term on road maintenance.

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• Canopies – the maintenance cycle of the canopy structure will be extended on a short term basis.

• Trash Palace and Poly Palace – a reduction in repairs at Trash Palace and Poly Palace from 2016.

Introducing more user pays:

To help manage costs, the Council has reviewed fees and charges across its services and will continue to do so on an annual basis:

• Parking – expand paid parking options in the CBD.

• Landfill fees – increase by up to 19% (in parity with neighbouring landfills) and to cover Emission Trading Scheme charges and budget targets.

• Libraries – increase charges for overdue books from 60 cents to $1 per item.

• Sportsfields and Outdoor Courts – fees and charges will continue to be reviewed annually with an increased emphasis on user pays.

• Boatshed and pole moorings – cost will increase as per annual fee reviews.

• Aquatic Centre and Cannons Creek Pool – fees and charges will be reviewed every second year to keep in line with market drivers and inflation.

• Commercial water charges – increased water charges to commercial premises.

• Cemeteries and Crematorium – fees and charges will continue to be reviewed annually with an increased emphasis on user pays.

Selling non-strategic assets:

Council will continue to review whether or not city assets are returning the best value for residents. Reviews underway include Council's reserve holdings and a review of the ownership and management of Moana Court Pensioner Housing. The Council is considering whether to sell or lease Moana Court Pensioner Flats to a social service provider. This was consulted on in parallel with the Draft LTP 2012-22.

WORKING WITH OTHER COUNCILS The Council continues to work with its regional neighbours on shared services, joint ventures and other regional models for delivering services. In Year 1 of the Plan the Civil Defence and Emergency Management (CDEM) services will move to a regional structure at no significant extra cost to Porirua City.

The Council is also working with Wellington City Council on a proposal to establish a Council Controlled Trading Organisation for the provision of waste services and there is also an investigation underway on the costs and benefits to Porirua ratepayers of joining Capacity Infrastructure Services for city water supply, under a Council Controlled Organisation. These are significant changes to service delivery methods and will be consulted on once the proposals are clear. The work on these changes is in its initial stages only. More details on these initiatives can be found in 'Regional Initiatives' (section 3.2).

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1.5 Other Decisions consulted on alongside LTP

While consulting on the 2012-22 Draft LTP, the Council also consulted on some related matters to the Plan. These matters include: Fees and Charges Review, the future ownership and management of Moana Court Pensioner Housing, Subsidiary Financial and other Statutory Policies, Regional Amenities Fund, E-Voting for Local Elections and the Draft Porirua Transportation Strategy. The details of these matters and the decisions the Council made on them are set out in the table below. Note that service and budget implications associated with these decisions have been described in relevant Activity sections (section 4).

Consultation Matter

Description Reference

1 Fees & Charges Review

• Fees and charges for resource consents (under the Resource Management Act 1991) and building consents (under the Building Act 2004) have been reviewed for 2012/13.

• The Council reviews these fees and charges annually. For the last financial year 2011/12 fees were increased to match the Consumer Price Index at 4%.

• The Council proposed to increase fees and charges for resource consents and building consents by 5.7%. That adjustment is in line with the Local Government Cost Index.

Council Decision: • That Council adopt the 'Schedule of Resource Consents'

to the Statement of Proposal - Review of Administrative Fees and Charges Under the Building Act 2004 and Resource Management Act 1991 for the financial year 2012/13, dated 1 March 2012 as the Schedule of Administrative Charges under the Resource Management Act 1991 for 2012/13.

• That Council adopt the 'Schedule of Building Consents' to the Statement of Proposal - Review of Administrative Fees and Charges Under the Building Act 2004 and Resource Management Act 1991 for the financial year 2012/13, dated 1 March 2012 as the Schedule for Fees and Charges under the Building Act 2004 for 2012/13.

District Plan Administration & Monitoring (Section 4.8.1) Building Compliance (Section 4.8.2)

2 Future Ownership and Management of Moana Court Pensioner Housing

• Council sought expressions of interest from social service providers for owning or leasing the land and buildings at Moana Court. A social housing provider could provide more appropriate services and develop a more financially sustainable model for the service.

• Any change to the provision of social housing by the Council has been defined as a Significant Decision in the Council’s Significance Policy, and therefore must meet certain criteria and requirements set out in that Policy.

Council Property (Section 4.9.2)

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Consultation Matter

Description Reference

• The Council acknowledges that there is potential for the sale price of the complex to be less than the current valuation of $1.65 million.

Council Decision: • That the Council receive a report on 27 June 2012 on

whether to sell or lease Moana Court to a social service provider.

3 Subsidiary Financial and Other Statutory Policies

• The Council has several Subsidiary Financial and Other Statutory Policies to help guide decision making and the management of the Council’s business. Some of the policies are mainly funding and financial in nature and are intended to provide predictability and certainty about sources and levels of funding.

• Of these Subsidiary Financial and Other Statutory Policies, the Council's Revenue and Financial Policy and the Significance Policy are required by the Local Government Act 2002 to be included in the LTP.

• The Revenue and Financing Policy has been updated to reflect changes in legislation, to be more readable, and to introduce the sources of funding for each activity. The Significance Policy has been updated to reflect changes in legislation and to be more readable.

• The Revenue & Financing Policy has had the operational funding sources for all activities clearly stated to reflect the 10 year budget. The funding sources have been displayed in some cases as bands or a range to indicate the variation that can occur over the 10 years. In the activity sections, the funding bands are described in more detail - especially to show the changes over 10 years. An example is the intended move for some activities to a greater proportion of fees & charges than general rates.

• The other Subsidiary Financial and Other Statutory Policies include the Liability Management Policy, Investment Policy, Policy on Development and Financial Contributions Policy, Rates Remission and Postponement Policy, and the Policy for Remission & Postponement of Rates on Maori Freehold Land. These policies have been updated to reflect changes in legislation, to be more readable, and to reflect new population statistics, etc.

Council Decision: That the Council adopt the following policies: • The draft Investment Policy; • The draft Liability Management Policy; • The draft Rates Remission and Postponement Policy; • The draft Policy on Remission and Postponement of Rates

on Maori Freehold Land; • The draft Policy on Development and Financial

Our Statutory Policies (Section 6)

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Consultation Matter

Description Reference

Contributions.

4 Regional Amenities Fund

• The Council sought feedback on contributing to a proposed Wellington Regional Amenities Fund. This

Fund would gather local rates to ‘top up’ funds for facilities that provide regional benefits in the arts, culture

and environmental attractions and events sectors, for example, the Wellington Zoo.

• The Fund would require $72,000 in funding from Porirua City ratepayers in the set up year (2012/13). In the first

full year of operation (2013/14) Porirua City’s ratepayers' share of the fund would be $144,000 towards a $2 million

regional fund balance (this regional balance will grow incrementally each year by $250,000, with a cap of $3

million). This translates to an average increase per rateable property in Porirua of $4.06 in the set up year

(2012/13), rising to $12.18 in Year 5 (2017/18) of the scheme.

Economic Development & Marketing (Section 4.1.4)

• Porirua City ratepayers would provide 7.2% of the overall fund amount.

• Each Council in the Wellington region has agreed to report back to the Mayoral Forum on their LTP

consultation results and a recommendation.

Council Decision: • That the Council not contribute to the Wellington

Regional Amenities Fund.

5 E-Voting for Local Elections

• The Council sought feedback on whether or not the Council should use e-voting for local elections. Porirua City may have the opportunity to take part in a pilot of

the e-voting system in 2013. This service can be provided within existing budgets.

Governance & City

Leadership (Section 4.9.1)

Council Decision: • That the Council participate as a trial site for any local

government election e-voting pilot should it be requested to do so.

6 Porirua Transportation Strategy – Draft

• The Council sought feedback on the draft Porirua Transportation Strategy which sets out a twenty year

vision for travel by all modes of transport for Porirua City. The Draft Strategy rests on the construction of the

Transmission Gully Motorway (TGM) project, consistent with the Western Corridor Plan, the Regional Land

Transport Strategy and the policy position of Porirua City Council. The Council's Transport activity and budgets in

the LTP are consistent with the Draft Porirua Transportation Strategy.

City Roading & Safety (Section 4.5.1)

Council Decision: That the Council:

• Makes no significant changes to the Draft Transportation

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Consultation Description ReferenceMatter

Strategy as a result of consultation; • Notes that roading and safety issues will be considered as

part of the Capital Works Programme; and • Notes that the Council will continue to work closely with

NZTA in all roading network issues.

% Submissions addressing Parallel consultation matters

11%

9%

6% 5%

3%

1%

0%

2%

4%

6%

8%

10%

12%

Moana Court E-Voting in Local Regional Amenit ies Porirua Fees & Charges Financial & Other Elect ions Fund Transportat ion (Regulatory) Statutory Policies

Strategy

From the 235 submissions received on the Draft LTP, the proportion that included reference to the parallel consultation matters are summarised in the graph below.

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1.6 Rates information Rates are a property tax to fund local government activities. The amount of rates charged varies between properties because of differences in capital values, and differences in services provided for residential, rural and commercial properties. Property valuation changes, which the Council has no control over, will also affect the rates paid. Prospective financial statements for the 10 year period that detail the rate funding requirements can be found in 'Funding Our Work' (section 5).

Rates Increase over 10 Years The average ratepayer will see a 3.4% increase in property rates in 2012/13 based on the final budget in this LTP. The annual increases in the average property rate-funding required across the ten years from 2012/13 are shown below. These figures take into account additional income from new properties in the city each year, which expands the rating base. This means the cost of Council services is spread over a greater number of properties. Property growth in Year 1 is assumed to be 0.8%, years 2 and 3 to be 0.5%, then moving up to 1.0% annually from Year 4.

2012/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22

Year 1 2 3 4 5 6 7 8 9 10

Rates Income ($million)1

46.49 48.12 49.75 52.03 54.32 56.60 58.86 61.21 63.66 66.20

Increase from previous year

4.2% 3.5% 3.4% 4.6% 4.4% 4.2% 4.0% 4.0% 4.0% 4.0%

Average effect on ratepayers2

3.4% 3.0% 2.9% 3.6% 3.4% 3.2% 3.0% 3.0% 3.0% 3.0%

1 These figures include inflation, but exclude GST

2 These figures take into account additional income from new properties in the City each year. Property growth in Year 1 is assumed to be 0.8%, 0.5% in Years 2 and 3, moving up to 1.0% annually from Year 4.

Rates Charged by Greater Wellington Regional Council The property rates figures in this LTP exclude the rates assessed by the Greater Wellington Regional Council, which also appear on your rates bill. See http://www.gw.govt.nz for information on Greater Wellington's rates for 2012-22.

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http://www.gw.govt.nz

Rates Comparison against Related Cost Indices The graph below shows the comparison between the Council's forecasted cumulative average rates increases and forecasts of two key economic indices, the Consumer Price Index (CPI) and the Local Government Cost Index (LGCI). The LGCI (developed by the economics consultancy BERL), identifies the rate at which the costs facing local government are increasing. The LGCI is made up of a number of specific indexes that provide figures for operational and capital expenditure, such as the transport index, three waters index and the general goods and service index. Market impacts such as capacity and resource constraints caused by the Christchurch rebuild, are built into the LGCI.

What the graph highlights is that the Council is tracking conservatively between the two indices.

Average Property Rates Increase vs Related Cost Indices

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Year 1 (2012/13)

Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 (2012/22)

Cum

ulat

ive

Cos

t Inc

reas

e

Average Property Rates Local Government Cost Index (LGCI) Consumer Price Index (CPI)

The Council's average rate increase is higher than CPI due to the allowance made for the impact of growth (increase in the number of rateable properties) of the City on the Council's operating costs. The increase in Year 3 and 4 reflect the change in growth assumptions from 0.5% to 1.0%.

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24

25

Residential Properties – Rate Increase for 2012/131,2

2011/12 2012/13 Annual Annual % Rates per week ($) Annual rates rates ($) increase from increase

Property Value ($) ($) 2011/12 ($)

$150,000 $1,515 $1,540 $26 1.70% $30

$250,000 $1,856 $1,896 $41 2.19% $36

$350,000 $2,197 $2,252 $55 2.52% $43

$450,000 $2,538 $2,608 $70 2.77% $50

$550,000 $2,879 $2,964 $85 2.96% $57

$750,000 $3,561 $3,676 $115 3.22% $71

$1,000,000 $4,414 $4,566 $152 3.44% $88

1 Figures include Uniform Annual General Charge but exclude targeted rates 2 Figures exclude rates assessed by Greater Wellington Regional Council (go to http://www.gw.govt.nz) for information on Greater Wellington's proposed rates for 2012/13)

Rural Properties – Rate Increase for 2012/131,2

Property Value ($)

2011/12 Annual rates

($)

2012/13 Annual rates ($)

Annual increase from 2011/12 ($)

% increase

Rates per week ($)

$250,000 $1,037 $1,083 $46 4.43% $21

$450,000 $1,515 $1,581 $67 4.40% $30

$550,000 $1,753 $1,830 $77 4.40% $35

$750,000 $2,231 $2,329 $98 4.39% $45

$1,000,000 $2,828 $2,952 $124 4.38% $57

1 Figures include Uniform Annual General Charge but exclude targeted rates 2 Figures exclude rates assessed by Greater Wellington Regional Council (go to http://www.gw.govt.nz) for information on Greater Wellington's proposed rates for 2012/13)

Business Properties – Rate Increase for 2012/131,2

Property Value ($)

2011/12 Annual rates ($)

2012/13 Annual rates ($)

Annual increase from

2011/12 ($)

% increase

Rates per week ($)

$250,000 $3,964 $4,101 $138 3.5% $79

$450,000 $6,351 $6,592 $241 3.8% $127

$550,000 $7,544 $7,838 $293 3.9% $151

$750,000 $9,932 $10,329 $397 4.0% $199

$1,000,000 $12,915 $13,442 $527 4.1% $259

1 Figures include Uniform Annual General Charge but exclude targeted rates

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Property Rates for 2012/13 (Year 1) The tables below give an estimate of the rates that property owners will pay for the 2012/13 year. The actual rates will be set after the adoption of the final LTP in June 2012. Property rates for Year 2 and beyond have been projected. The Property Rating Categories (Residential, Rural, and Business) are based on properties of different values and are described in detail in Section 5.9 Funding Impact Statement. All amounts expressed include GST calculated on the basis of the prevailing rate at the time of supply.

http://www.gw.govt.nzhttp://www.gw.govt.nz

2 Figures exclude rates assessed by Greater Wellington Regional Council (go to http://www.gw.govt.nz) for information on Greater Wellington's proposed rates for 2012/13)

Motel Properties – Rate Increase for 2012/131,2

2011/12 2012/13 Annual Annual increase % Rates per week ($) Annual rates rates ($) from 2011/12 ($) increase

Property Value ($) ($)

$250,000 $2,450 $2,522 $72 2.93% $48

$450,000 $3,626 $3,749 $123 3.39% $72

$550,000 $4,214 $4,362 $148 3.52% $84

$750,000 $5,389 $5,589 $200 3.70% $107

$1,000,000 $6,859 $7,123 $263 3.84% $137

1 Figures include Uniform Annual General Charge but exclude targeted rates 2 Figures exclude rates assessed by Greater Wellington Regional Council (go to http://www.gw.govt.nz) for information on Greater Wellington's proposed rates for 2012/13)

Shopping Plaza Properties – Rate Increase for 2012/131,2

2011/12 Annual 2012/13 Annual Annual increase % Rates per week ($) Property Value ($) rates ($) rates ($) from 2011/12 ($) increase

$250,000 $3,356 $3,467 $111 3.31% $67

$450,000 $5,257 $5,451 $194 3.69% $105

$550,000 $6,207 $6,442 $235 3.79% $124

$750,000 $8,108 $8,426 $318 3.92% $162

$1,000,000 $10,484 $10,905 $421 4.02% $210

1 Figures include Uniform Annual General Charge but exclude targeted rates 2 Figures exclude rates assessed by Greater Wellington Regional Council (go to http://www.gw.govt.nz) for information on Greater Wellington's proposed rates for 2012/13)

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http://www.gw.govt.nzhttp://www.gw.govt.nzhttp://www.gw.govt.nz

How Rates will be Spent (2012/13)

Water Supply Transport 11% 11%

Democratic Process 7%

Environment & Wastewater Regulatory 12%

4%

Solid Waste 4%

Strategy & Stormwater Planning

5%14%

Community & Leisure 32%

How Rates Will Be Spent The pie chart below shows the portion of rate-funding that goes towards each of the Council's Groups of Activities in 2012/13.

Note that the names and groupings of activities (below) have been updated from the 2009-19 LTP to more accurately align with the Council's updated priorities (see section 2.3 for an explanation of these changes).

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Where Funding will come from (2012/ 13)

Grants & Subsidies, 4%

Fees & Charges, 22%

Investment Revenue, 1%

Rates Revenue, 73%

Where Operating Funding Will Come From The Council has some other sources of income in addition to property rates, as shown in the pie chart below. Non-cash items such as vested assets and asset revaluations have been excluded.

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Operating Expenses of Council (2012/13)

Consulting & Professional Fees, 2%

Contracted Services, 20%

Staff Costs, 30%

Repairs & Maintenance, 3%

Purchase of Materials, 2% Depreciation, 27%

Other, 10%

Insurance, 2% Fuel, Power & Gas, 4%

Operating Expenses of Council The pie chart below shows the breakdown of operating expenses by type for 2012/13. 'Other' costs cover items such as staff training, printing and stationery, but excluding interest on borrowings, and by themselves account for less than 2% of operating expenses each.

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Capital Expenditure $238.9 million over the next 10 years

Environment & JV Wastew ater Regulatory 0.14% Treatment Plant 8%

Wastew ater 11% $26.74

Democratic Process

$0.33$18.51 Transport 23% Strategy and

$55.05 Planning 11% $26.23

Organisational Performance 11%

$27.12

Water Supply 9% 13% $29.91 $21.78

Community & Stormw ater 3% Leisure 8% $18.53 $6.92

JV Landfill Mgmt 3% $7.81

Capital Expenditure Programme This pie chart below shows the portion of capital expenditure that goes toward each of the Council's Groups of Activities for the 10 year term of the Plan as follows:

• 46% is related to renewals for the replacement of existing assets,

• 38% is related to capacity to meet the additional demand of increasing household numbers, and

• 16% is to improve the level of service.

Full financial details of the capital expenditure programme are provided in section 7. Organisational Performance projects are described in section 2.4 and major projects (ie those above $500,000 over the 10 year term) are detailed for each activity in 'Services We Provide' (section 4). Note the $238.9 million for capital expenditure includes the capital expenditure for the joint ventures. The joint venture capital expenditure is not included in the Funding Impact Statements.

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Key Financial Indicators The graph below provides a comparison of the trend in rates income against expenditure categories for the 10 years from 2012/13. Note that the Council moves from a deficit to a surplus budget in Year 5 (2016/17) as detailed in the Long Term Financial Strategy (section 1.7).

The key reasons for the increasing trend in expenditure over the 10 years are:

• Rates revenue will increase from $46 million to $66 million,

• Operational expenditure will increase from $71 million to $95 million,

• Operational expenditure and rates are impacted by the forecast increases to CPI and LGCI and the growth in the property rating base (ie increase in property numbers serviced by the Council),

• Capital expenditure ranges between $11 million and $29 million over the 10 year period, with the exception of a peak of $62 million in Year 7 (2017/18) which relates to construction of the two link roads for Transmission Gully Motorway, and

• Borrowings are influenced by the timing and extent of our Capital Expenditure. The increase to a maximum of $13 million in Year 7 is well within the Council's Liability Management Policy. This borrowings peak will be repaid rapidly in Years 8-10 from operating surplus (including subsidies).

Key Financial Indicators 2012-22

Rates Operational Expenditure Capital Expenditure Borrowings

-40

-20

0

20

40

60

80

100

1 2 3 4 5 6 7 8 9 10

$ (M

illio

n)

Years 1 - 10 (2012-22)

32

Healt

h Serv

ices

Comm

unica

t ions

Electr

icity

Prope

rty Ra

tes (20

12/13)

Trans

port

Food

Mortg

age

How do Rates Compare Against Other Household Costs? The graph below shows how 2012/13 rates for an average property compare against other common household costs (as measured in 2010).

Comparison of Rates (2012/ 13) against other Household costs for an average-priced residential property in Porirua (valued at $380,000)

(Source: St at ist ics NZ Household Economic Survey: Year ended June 2010)

$25 $30 $42 $45

$135 $155

$260

$0

$50

$100

$150

$200

$250

$300

Cost

per

Wee

k ($

)

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1.7 Long Term Financial Strategy

Introduction Until 2009 Porirua City enjoyed steady growth, but the global financial crisis has had a significant impact on the local and national economy and has caused this growth to slow significantly. The forecasted growth in the rating base for the City is 0.8% in Year 1, 0.5% in Years 2 and 3, then moving up to 1.0% per annum for the remaining seven years of the LTP.

The preparation of this 10 year Financial Strategy has, for the Council, highlighted the financial challenges facing the City in what is a very difficult economic climate both globally and nationally.

A major financial issue for the Council is its very high dependence on rates as its principal source of revenue. In the current financial year, for example, 70% of Council's total revenue comes from rates compared with the national average of approximately 58%. As a young city Porirua does not have legacy investments such as investment proceeds from the sale of public utilities or large land and property endowments which other long-established cities use to offset the reliance on rates.

This high dependency on rates means that the Council has very few options available to absorb cost increases; it either has to increase rates or lower the levels of service.

With the slowing down of the economy there is also a decrease in non-rate revenue which further compounds the issue.

By way of example, in the first year of this LTP, the Council is facing increases in external costs including insurance and construction and material costs plus a provision for "leaky homes" settlements which collectively add costs equivalent to a rate increase of 5%.

Ratepayers have raised concerns about the level of rates compared with similar properties in neighbouring cities. Rating levels relate to the levels of service that a council provides and in Porirua's case it provides a higher level of service, for example in the Arts and Recreation areas, than other similar local authorities. However, when many of the Council’s financial ratios such as Debt and Operational Expenditure per capita are compared with other councils, its performance indicates fiscal restraint.

It is against this backdrop that the Council is steering a prudent course of action and adhering to the following principles:

• A prudent budget that keeps debt levels manageable, invests in future assets, provides a return in terms of public use of investment and supports intergenerational equity,

• Prioritising infrastructural investment expenditure made by the Council to ensure assets are maintained and significant programmes of work are completed, and

• The Council takes the view that rates are an investment in the City and require a prudent and responsible approach to how they are spent.

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Budget Priorities The diagram below summarises the budget priorities the Council has put each group of activities within. These budget priorities reflect the Council's strategic priorities, as outlined in the Mayor's opening statement (section 1.2) and Strategic Priorities (section 2.3).

In setting budget priorities, the Council looked carefully at all the services and rated them as 'Critical', 'Important' or 'Less Important'. The ranking process took into account the current risk profile of each asset class and whether or not the Council considers it a priority to reduce risks for certain assets over the duration of the LTP (see 'Asset Management Issues' further below in this LTFS). Some services were also placed in a separate category called "Other Options" where options for new revenue or working with neighbouring councils on shared services will be explored.

Note that some activities and functions were higher priority than others within some individual groups of activities. These differences are detailed in the lists surrounding the diagram below.

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Balancing the Budget The Local Government Act (2002) requires Council to budget each year for operating revenues at a level sufficient to meeting the operating expenses budgeted for that year. This has become known as the "balanced budget" requirement.

The legislation also goes on to say that Council may budget for a deficit if it resolves that it is financially prudent to do so.

In assessing a financially prudent decision consideration is to be given to:

• the estimated expenses of achieving and maintaining the predicted levels of service provision set out in the LTP, including the estimated expenses associated with maintaining the service capacity and integrity of assets throughout their useful life;

• the projected revenue available to fund the estimated expenses associated with maintaining the service capacity and integrity of assets throughout their useful life;

• the equitable allocation of responsibility for funding the provision and maintenance of assets and facilities throughout their useful life; and

• the funding and financial policies adopted under section 102 (see section 6).

Notwithstanding the requirements of the Act, the balancing of the budget is also about ensuring intergenerational equity across present and future generations. It is about ensuring that each generation pays its fair share of the costs of benefiting from the services the Council provides. For example, loan-funding critical water pipeline renewals means that future generations will be paying for that benefit whilst the current generation will pay a lesser amount. However, if infrastructure renewals were rate-funded, then it would place a significant burden on the current generation for past under-investment of pipeline infrastructure. In order to address these issues, the Council has loan-funded this expenditure as well as taking a phased approach to the introduction of rating for depreciation to spread the costs more evenly over the generations.

The LTP indicates a forecast operating deficit for Year 1 through to Year 4. In Year 5 through to Year 10 an operating surplus is forecast. This is consistent with the forecasts for the 2009-19 LTP. The Council has made this "core" decision believing that it will maintain predicted levels of service and that it has made adequate provision for maintenance and renewals on its key infrastructure for the 10 years of this LTP and in subsequent years.

Summary of the Forecast Income Statements for 2012-22

2012/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating Surplus/ (Deficit) ($'000)

(3,438) (3,003) (2,564) (1,289) 2,419 3,825 22,1242 3,627 3,861 3,795

The large increase in net surplus in Year 7 (2018/19) relates to a one-off subsidy from the NZ Transport Authority to reimburse costs for the construction of two link roads for Transmission Gully Motorway (see City Roading & Safety, section 4.5.1)

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2

Understanding an Operating Deficit The Council has an operating deficit for Year 1 through to Year 4. An operating deficit is not a cash deficit.

The table below uses figures from the Draft LTP 2012-22 for Year 1 (2012/13) to show that while Council has a cash surplus it has to take account of non-cash items, the biggest of which is depreciation resulting in an operating deficit. Readers should note that the surplus operating cash flow ($11.897 million in 2012/13) is used to help fund the Council's capital expenditure programme. If the Council did not have this operating cash surplus it would be in serious financial difficulty and as such would not be considered fiscally prudent.

Summarised Forecast Cashflows and Operating Statement (2012/13)

Cashflows Cash Receipts Rates Fees charges & subsidies Investment Income

($000)

46,447 16,990

611

Operating Transactions Operating Revenue Rates Fees charges & subsidies Investment Income Vested Assets Asset Revaluations

($000)

46,490 17,009

611 2,069

523

Total Operating Cash Receipts 64,048 Total Operating Revenue 66,702

Operating Expenses Suppliers & Employees Interest Expense

46,650 3,244

Suppliers & Employees Interest Expense Depreciation

48,446 3,548

18,146

Total Operating Cash Expenses 49,894 Total Operating Expenses 70,140

Surplus/ Deficit in Operating Cash Flows 14,154 Operating Surplus / (Deficit) (3,438)

Reconciliation

Surplus/Deficit in Operating Cash Flows Less Depreciation Interest on Landfill Aftercare Provision Movements in Other Working Capital Accounts Plus Vested Assets Asset Revaluations

14,154

18,146 215

1,824

2,069 523

Operating Surplus / (Deficit) (3,438)

Note: Vested Assets are the infrastructural assets such as roads and footpaths that are transferred to Council by developers at the time of subdivision completion.

Depreciation is an accounting method to spread the replacement costs of the Council's assets such as property and underground pipes over their useful lives.

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As mentioned in the introduction, the Council has a high dependency on rates as its principal source of income. The graph below shows that the dependency over the 10 years of the Plan trends only slowly downwards. Council would need to create further dividend yielding investments, such as investment properties, for this trend to change favourably.

Proportion of Rates Revenue to Total Cash Revenue %

100.0%

80.0% 69.5% 72.5% 71.6% 70.5% 70.6% 68.8% 68.6% 69.3% 69.1% 68.9%

60.0% 56.8%

40.0%

20.0%

0.0% 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

Annual LTP LTP LTP LTP LTP LTP LTP LTP LTP LTP Plan Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Note: The lower figure in year seven results from an increase in subsidies from New Zealand Transport Agency arising from the construction aspect of two Link Roads for the Transmission Gully motorway.

The Council is forecasting that its operating expenditure will increase from $71.03 million to $95.09 million, a 33.9% increase, between 2012 and June 2022. These increases are a result of:

• Growth – there are or will be more households in Porirua based on growth assumptions of 0.8% in Year 1, 0.5% in Years 2 and 3, then moving up to 1.0% per annum for the remaining seven years of the Plan.

• Depreciation and interest payments – the increased capital expenditure programme means corresponding increases in costs in these cases.

• Price increases – inflation and the factors that influence it will mean that it costs more to do business. It is forecasted by the BERL Group that costs in general for the local government sector could increase by 43% over the same 10 year period.

Council's Investments The Council's Investment Policy requires that funds are invested in such a way that Council maintains the liquidity of its investments such that cash is available when needed. The Council's Balance Sheet (Prospective Statement of Financial Position) indicates a build up of investments that represent the (cash) amount equivalent to the reserves the Council holds.

Apart from its cash investments, Council does not hold large investments. It prefers not to expose itself to the risks of equity investments. The two small shareholdings it currently has relate to the Council being able to optimize the value of owning the shares to contribute to achieving goals and objectives for the City.

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The Council has a small property portfolio where it seeks to achieve market returns which are in turn applied to the Council's general funds.

Debt Levels and Borrowing Limits It is Council policy to offer security for its borrowings by way of a charge over its rates (see summary of Council's Liability Management Policy in section 6.4). Since the global financial crisis the Council's main source of borrowed funds has been through a commercial arrangement with a trading bank. However, the Council is looking to diversify its funding options and may seek to borrow from the New Zealand Local Government Funding Agency Limited (LGFA)3 which will require an equity share in the agency4. Council wi