Revenue and financing policy | Kaupapa here whiwhika, tahua

The Council adopts a Revenue and Financing Policy prior to the adoption of the 10 year plan and may amend sections of it in subsequent Annual Plans. A review of the Revenue and Financing Policy is undertaken as part of the development of each 10 year plan.

Under the LGA this is a two-step process:

The first step, in accordance with LGA Section 101(3) (a), is to consider each of the following in relation to each of the Council’s activities:

1. the community outcomes to which the activity primarily contributes
2. the distribution of benefits between the community as a whole, any identifiable part of the community, and individuals
3. the period in or over which those benefits are expected to occur
4. the extent to which the actions or inaction of particular individuals or a group contribute to the need to undertake the activity
5. the costs and benefits, including consequences for transparency and accountability, of funding the activity distinctly from other activities.

The second step, in accordance with LGA Section 101(3) (b), requires the Council to consider the overall impact of any allocation of liability for revenue needs on the current and future social, economic, environmental, and cultural wellbeing of the community

Policy details

The Dunedin City Council’s funding policy is to treat both operating and capital expenditure in the same way:

1. The extent to which the provision of a service by the Council is a public or private good will largely determine the extent to which rates or fees and charges fund capital expenditure. For example, if the revenue funding policy for libraries is 95% public good and 5% private benefit, we would expect to fund the capital expenditure on book purchases in the same way, i.e. 95% by general rates and 5% by fees and charges.
2. Sometimes debt may be used to fund capital expenditure. Its repayment will be made from the same sources in the same ratio as for operating expenditure.

Options for funding Council activities

The Council uses the following sources of funding:

General rates

This is used to fund public goods where it is not possible to clearly identify customers or users. The general rate is also used to fund activities where, for reasons of fairness and equity, consideration of the wider community good indicates that this is the most appropriate way to fund an activity.

The general rate is based on the capital value of each rating unit in the district and will be set on a differential basis based on land use. Capital value is comprised of land value and the value of improvements on the land. The Council will not be using a Uniform Annual General Charge.

Targeted rates

This form of rate is used where an activity benefits an easily identifiable group of ratepayers and where it is appropriate that only this group be targeted to pay for some or all of a particular activity. Dunedin City Council uses the following targeted rates:

1. Community Services (funding part of the Parks and Reserves and Botanic Garden activities)
2. Kerbside recycling collection service
3. Drainage (combined targeted rate for sewage disposal and stormwater)
4. Commercial drainage – capital value
5. Water – Ordinary
6. Water – Volume
7. Water – Quantity of Water (rating units with water meter or extraordinary water supply)
8. Fire Protection (water supply for fire protection)
9. Allanton Drainage
10. Blanket Bay Drainage
11. Curles Point Drainage
12. Tourism/Economic Development
13. Warm Dunedin
14. Private Street Lighting

Fees and charges

Fees and charges are direct charges to identifiable people or groups who use certain Council services such as dog control, swimming pools and building inspection. In these instances, identifiable people benefit from those services, and they are required to pay all or part of the cost of that service. Fees and charges are reviewed annually to reflect increased costs of service provision and/or maintain the cost recovery principles underlying the setting of fees.

Development contributions

Development contributions may be recovered from those persons undertaking development, the contribution being a fair, equitable and proportionate portion of the total cost of capital expenditure necessary to service growth over the long term.

Grants and subsidies

Grants and subsidies are received from external agencies to support certain activities, such as Waka Kotahi New Zealand Transport Agency, which provides subsidies for roading services.

Rents, interest and dividends

The Council receives revenue from property rentals, interest and dividends to help offset the general rate requirement.

Borrowing

While borrowing may be used from time to time, usually to give effect to the principles of intergenerational equity, the repayment and servicing of the debt is funded by rates, fees and charges and other sources. Borrowing is a mechanism only; the revenue and financing policy applies to its repayment and servicing.

Summary of funding options

New reticulated utility services (water, wastewater or stormwater) policy

In 2010, the Council approved the “New Reticulated Utility Services (Water, Wastewater or Stormwater) Policy” funding policy. The key components of this policy are as follows:

The Council’s existing policy on reticulation of services is that services will only be provided for areas which are zoned as requiring access to reticulated water, wastewater and/or stormwater infrastructure, as detailed in rules in the District Plan relating to subdivisions.

New reticulation systems will be considered in existing developed areas not already reticulated where there is a clear and demonstrated need in terms of public health, environmental effects or other significant reason.

If a new system is installed by the Council in terms of:
3.2 and 3.3 above, each connection once established, or potential connection will be subject to the Drainage Rate and Water Rate and any other charge applicable to the type of connection, in accordance with the Council’s funding policy in operation at that time, to fund the on-going operation of the service.

In addition to the funding of the on-going operational costs, consideration will also be given to the contribution payable towards the capital cost of providing the new reticulated service by those who directly benefit from receiving the new service, based on the following:

For all existing properties (excluding vacant sections), or properties which have a building consent issued, on the date that the Council decides to proceed with any new reticulation service, a percentage contribution up to a maximum of 100% of their share of the assessed cost of providing the service. The percentage contribution will be determined after considering a range of factors listed in the policy.

For all future properties that are built in the area serviced, that are not in existence or do not have building consent issued prior to the date that the Council decides to proceed with any new reticulation service, they shall contribute 100% of their share of the assessed cost of providing the services.

Revenue and financing policy – funding schedule

Table 1 outlines how it is proposed to fund each activity of the Council.