Part C: ​Financial information

Our finances

Financial overview

Your rates

For 2016/17, total rates are to increase by 4.8 percent before allowing for growth of 1.2 percent in our ratepayer base. After allowing for expected growth, our total rates are to increase by 3.6 percent.

Rates on the average residential property (valued at $570,745) are expected to increase by 5.4 percent to $2,317 (excluding GST) in 2016/17. An average rates increase of around 2.7 percent for commercial properties is expected, this includes the impact of increases in metered water charges in 2016/17. These increases average to a 3.6 percent rates impact over all ratepayers, after growth in the ratepayer base has been taken into account.

2016/17 Sector
  Residential Commercial
Average property value $570,745 -
Average rates $2,317 -
Average rates increase (after growth) 5.4% 2.7%

Explaining your rates

Our total rates revenue is split between general rates and targeted rates.

General rates are used to fund activities where the Council is unable to clearly identify a specific group of ratepayers who receive the benefit of that activity, or where is it not possible or suitable for that group to be targeted to pay. General rates are split over two categories: the base sector general rate (residential) and the commercial sector general rate. These are both assessed based on a rate per-dollar of capital value. The Council has a general rates differential in place that decides how the general rate is shared between the residents and businesses in each category.

In 2016/17, the commercial sector general rate per dollar of capital value is to remain at 2.8 times the base sector general rate for a residential property of the same value.

Targeted rates are used to fund activities where the Council is able to clearly identify a specific group of ratepayers who receive the benefit of the activity, and where it is proper that this group be targeted to pay. The Council sets targeted rates to fund costs associated with the city’s water, sewerage and stormwater systems. Separate targeted rates are also set for our base (residential) sector, commercial sector, downtown commercial sector, Marsden Village, Tawa driveways and business improvement district (BID) for the Miramar, Khandallah and Kilbirnie business districts.

Your total rates bill will be made up of the general and targeted rates that apply to your property.

Property valuations and rates distribution

The Council sets the total amount of rates required to fund its spending based on the budgeted costs. For the majority of its rates the Council then uses property valuations as the basis to distribute the total rates requirement proportionally across all properties in Wellington.

The Council is on a 3-yearly valuation cycle and for the 2016/17 rating year the September 2015 valuations will be used to distribute the total rates requirement across all rateable properties.

It is important to note that your rates bill does not automatically change when your property value changes. Your rates bill will only be impacted by the change in your property’s capital value relative to the change in capital value for the entire city. The final rates bill for an individual property will depend on:

Changes to rates or rating mechanisms

A new targeted rate for the Kilbirnie Business Improvement District under the terms of the Business Improvement District Policy, for $80,000 (excluding GST) will be applied to commercially rated properties in the Kilbirnie Business Improvement District area.

Liability for this rate will be calculated as a fixed amount of $500 (excluding GST) per rating unit, plus a rate per dollar of rateable capital value for any capital value over $1 million per rating unit.

Funding our activities

When we’re deciding how to fund an activity, we consider a wide range of factors including:

Our Revenue and Financing Policy outlines how we propose to fund our activities. In 2016/17 we propose to make no changes to the policy.

User charges

For 2016/17, user charges are increasing in a number of areas. Our fees are set in accordance with our Revenue and Financing Policy. The areas where fees are changing are as follows:

Understanding the Council’s budgeted surplus

The Council is forecasting a net operating surplus of $12.8 million in 2016/17. The majority of this surplus arises from cash funding received for capital purposes (Crown grants for housing, development contributions, NZTA subsidies and bequests). This income flows through to the net operating surplus to be available to fund capital expenditure. Offsetting this are some depreciation costs on assets that we have resolved not to fund.

Borrowings

Total borrowings are forecast to be $479.1 million at the end of 2016/17. Our forecast asset base totals $7.2 billion in 2016/17.

Land sale

The Council only owns property assets that are necessary for public works or another purpose aligned to Council strategies. Property assets falling outside of this will be considered for sale or redeployed.

Reflected in the 2016/17 plan is $2 million worth of property asset disposals, with proceeds being used to reduce Council borrowings. Every specific property asset sale will be publicly consulted upon as per the standard Council process.

Each year we review the underlying assumptions and costs that make up each activity. For each activity we consider the impact of a number of factors including:

This means the costs for each activity may differ from those we had originally forecast in the Long-term Plan 2015–25.