Part D: ​Financial information

Financial Prudence

The government has introduced the new Local Government (Financial Reporting and Prudence) Regulations 2014 which has a series of measures and benchmarks, disclosed in the following pages. These measures further highlight the financial performance of Council in a way that is consistent and standardised.

These measures allow for comparison of financial performance with other Councils. However, readers are urged to read the commentary and explanations provided to give context to the information, as it is not always possible to compare Wellington City Councils’ results with other Councils due to their size, location and provision of services.

The Council considers there are three key financial areas that demonstrate whether a Council is being managed in a prudent manner; they are in broad terms the level of rate increases, level of borrowings and the balancing of the budget. A Council sets what it believes to be prudent levels for each of these areas when it adopts its Long-term Plan.

Rates Increase

The Financial Strategy outlines the Councils strategy on rate increases and how to maintain the ratepayers willingness to pay rates as they perceive the value of the services provided by Council. There are two measures that indicate Councils adherence to its strategy:

1. Percentage limit on rate increases averaged over the first three years of the 2015–25 Long-term Plan before growth (in the rating base) is 4.5%.
The percentage rate increase for 2015/16 is 4.9%
2. Dollar limit on rate increases for rates revenue not to exceed is set at $301.5 million for 2015/16.

The Council has committed to adhering to limits as set out in Long Term Financial Strategy as set out elsewhere in this 2015–25 Long-term Plan.

Borrowing levels

The Financial Strategy outlines its guiding principles on the level of borrowing the Council may undertake, and in broad terms:

a) Debt cannot be used to fund operations, and
b) The current level of debt will not restrict a future Councils ability to fund new assets through debt.

The Council has met all of its borrowing measures set out in the following pages, as the Council continues to be prudent in carefully managing its debt levels and ensuring that future generations are not impeded in their ability to borrow to fund future capital expenditure.

Balanced Budget

This measure is designed to highlight whether a Council has achieved a balanced budget as discussed in the financial overview. The Council’s aim is to be as close to the 100% as possible, as large variances would indicate that ratepayers are either paying too much or too little rates that could lead to intergenerational issues in later years.

2015-25 Long-term Plan disclosure statement for the period commencing 1 July 2015

What is the purpose of this statement?

The purpose of this statement is to disclose the council's financial performance in relation to various benchmarks to enable the assessment of whether the council is prudently managing its revenues, expenses, assets, liabilities, and general financial dealings.

The council is required to include this statement in its long-term plan in accordance with the Local Government (Financial Reporting and Prudence) Regulations 2014 (the regulations). Refer to the regulations for more information, including definitions of some of the terms used in this statement.

Rates affordability benchmark

The council meets the rates affordability benchmark if—

These limits are based on the Local Government Cost Index and the limits are set each year during the Annual Plan process. This will cause some limits to be different than those disclosed in the 2015–25 Long-term Plan. Where this occurs both the Annual Plan and Long-term Plan limits will be disclosed.

Rates (income) affordability

The following graph compares the council's actual rates increases with a quantified dollar limit on rates increases included in the financial strategy included in the council's long-term plan. The quantified limit for the first three years of the Long-term Plan is $301,552,000 and is $417,880,000 for the last seven years of the Long-term Plan (quantified limit for the 2014/15 Annual Plan was $249,671,000).

Rates (income) affordability graph.

Rates (increases) affordability

The following graph compares the council's planned rates increases with a quantified limit on rates increases included in the financial strategy included in this council Long-term Plan. The quantified limit for the first three years of the Long-term Plan is an average annual increase after growth of 4.5% and an average annual increase of 3.9% after growth for the ten year period of the Long-term Plan (quantified limit for the 2014/15 annual plan was a 3.9% increase).

Rates (increases) affordability graph.

Debt affordability benchmark

Net borrowing as a percentage of income

The following graph compares the council's proposed borrowing with a quantified limit on borrowing stated in the financial strategy included in the council's long-term plan. The quantified limit is net borrowings, comprised of borrowings less cash and cash equivalents, being less than or equal to 175% of income. For this measure income is defined as total revenue less vested assets and development contribution income.

Net borrowing as a percentage of income graph.

Balanced budget benchmark

The following graph displays the council's revenue (excluding development contributions, financial contributions, vested assets, gains on derivative financial instruments, and revaluations of property, plant, or equipment) as a proportion of operating expenses (excluding losses on derivative financial instruments and revaluations of property, plant, or equipment).

The council meets this benchmark if its revenue equals or is greater than its operating expenses.

Balanced budget benchmark graph.

Essential services benchmark

The following graph displays the council's planned capital expenditure on network services as a proportion of expected depreciation on network services.

The council meets the essential services benchmark if its planned capital expenditure on network services equals or is greater than expected depreciation on network services.

Essential services benchmark graph.

Debt servicing benchmark

The following graph displays the council's planned borrowing costs as a proportion of planned revenue (excluding development contributions, financial contributions, vested assets, gains on derivative financial instruments, and revaluations of property, plant, or equipment).

Because Statistics New Zealand projects the council's population will grow more slowly than the national population growth rate, it meets the debt servicing benchmark if its borrowing costs equal or are less than 10% of its revenue.

Debt servicing benchmark.