Revenue and Financing Policy

Transcription

1 It is likely that in the future other relationship agreements will be required for Council to enter into in a post treaty settlement environment especially for those Tangata Whēnua/Māori not covered by the Local Leadership Body. 4. Te Tuia Internal Capability Building Programme In accordance with Council s strategic challenge outcome of: We inter-connect with the community through collaboration and effective communication and there is an effective Māori contribution to Council decision-making. The Council has in place an internal capacity building programme named Te Tuia bringing people together. Te Tuia is an operational working group that supports, prioritises, coordinates and monitors current and future work activity carried out across the organisation aimed at improving engagement with Māori/Tangata Whēnua. Te Tuia supports a whole of Council approach to developing organisational capacity and practices in order to assist the Council to: engage with Tangata Whēnua/Māori to meet legal requirements, build and maintain positive relationships, and respond to political changes that impact on relationships between Tangata Whēnua/ Māori and Council. Revenue and Financing Policy PART 1 The Introduction, Summary of Changes and General Rating Information section does not form part of the Revenue and Financing policy. It is provided to assist readers to understand the context of the policy and the funding tools available to Council. 1.1 Introduction The majority of the income Council collects is through rates (62% in 2012/13). The balance is from grants, subsidies, dividends and user fees. The Revenue and Financing Policy was reviewed as part of this Ten Year Plan preparation. The Revenue and Financing policies determine from where and whom Council is seeking to fund its operations. This policy sets out why and how the funding sources are used. In order to ensure the incentives the funding approach creates are consistent, Council applied the following general principles: 1. Increase in use of fees and charges. 2. Extensive use of beneficiaries and user pays through targeted rates. 3. Use of Uniform Annual General and other fixed charges to legislative maximum of 30%. 4. Use of targeted rates on Differential Rating Areas and inner/outer zone. 5. Limited use of General Rates (on capital value). Despite these principles, there is an element of cross subsidisation in the way the rates are distributed across the district. This is appropriate as many goods and services are what are known as public good. Council has tried to manage the demand for goods and services in the pricing signals that rate setting and fees and charges send. 1.2 Summary of Major Changes The changes to the way Council collects rates include: A new dog control rate targeted at ratepayers in residential areas to cover the cost of responding to complaints about nuisance caused by stray dogs in urban areas. Dog registration fees are used to cover most of this service. A new noise control rate. The cost of responding to noise complaints are currently funded by a uniform charge paid by every ratepayer in the district. However, Council is proposing these costs should be met by those who generate the most service requests ratepayers in residential areas. 253

2 254 The non-residential stormwater rate was proposed to change from a fixed amount per property to an amount based on the capital value of your property. Wainui and Patutahi township ratepayers will now be charged a targeted stormwater rate to bring them into line with the rest of the district. The basis for the stormwater rate will be reviewed with a view to moving to using the value of improvemements as the base. This review will occur during 2012/13 and will be consulted on alongside the 2013/14 Annual Plan. A new Ruatoria river erosion protection rate will cover the operating costs of protection works on the Waiapu River. This is a new service and Council proposes that 90% of costs will be met from targeted rates on direct beneficiaries, indirect beneficiaries and contributors. The remaining 10% will be funded by everyone in the district. A new rural rubbish rate will cover some of the costs of operating rural transfer stations as well as a rubbish sticker system for rural residents. A new river channel maintenance rate will cover the cost of maintaining the Motu and Matawai streams and the Waiku-Pehiri, Waikohu, Mangahei, Waihora, Waimoko, Hikuwai and Waimata Rivers. For the 2012/13 year this will be funded by everyone in the district. Council proposes that these costs should be met by the ratepayers who will benefit, therefore during the 2012/13 year Council will review the funding with a view to moving to a targeted rate. Any change will be consulted on alongside the 2013/14 Annual Plan. A change to the coastal protection rate will affect 140 properties in the Wainui Foredune Protection scheme. Those with houses closer to the sea will pay more than those further back. Rural property owners, like city residents, will pay a UAGC for every house that someone lives in on their property. At present pastoral farm ratepayers only pay one UAGC. A rates remission will be available for employee houses in certain circumstances. A change to the economic development rate which has now merged with the tourism rate. Funding is now 40% general rate, 50% targeted rate and 10% UAGC. With the end of the Tairawhiti Development Partnership, pastoral and forestry sector will no longer pay a targeted rate towards economic development services. The rates on most properties will change from year one, but the level of change (including decreases in some areas) will vary throughout the district. This is because your rates are affected by three factors: 1) the rating valuation of your property. Council uses the capital value of your property to assess general rates and some targeted rates 2) a review of the revenue and financing policies of Council who pays what, why and when 3) changes to the cost of delivering Council activities and services. 1.3 General Rating Information The Local Government Act 2002 (Section 101(1)) requires that Council manage its revenues, expenses and other financial responsibilities in a prudent manner and in a way that promotes the current and future interests of the community as a whole. Council will comply with all statutory requirements and its financial management responsibilities in accordance with generally accepted accounting practice. Council s Revenue and Financing Policies (under sections 102(4) and 103 of the Local Government Act 2002) are outlined on pages of this document. The decision-making process required to adopt a Revenue and Financing Policy is set out in the Local Government Act 2002, Sections 76 to 82. In essence the process involves Council determining the activities that should be undertaken and the sources of funding that are most appropriate having regard for: 1. In relation to each activity to be funded (under section 101(3)): the community outcome to which the activity primarily contributes the distribution of benefits between the community as a whole, any identifiable part of the community and individuals the period in or over which those benefits are expected to occur the extent to which the actions or inaction of particular individuals or a group contribute to the need to undertake the activity the costs and benefits including consequences for transparency and accountability of funding the activity distinctly from other activities. 2. 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. The diagram below illustrates the process of creating a Revenue and Financing Policy. (Activity Level) Identifying Activities What services and level of services should be provided? Funding Sources for each Activity Consideration of: Community outcomes Beneficiary pays Exacerbator pays Intergenerational equity Costs/benefits of separate funding. (Council Level) Funding Sources for Council Aggregation of funding which is available and appropriate for each activity and modification to take account of community wellbeing.

3 The Local Government (Rating) Act 2002 allows for each separately used or inhabited part of a rating unit to be charged a Uniform Annual General Charge (UAGC) and Targeted Rates (where applicable). Council adopted a policy on 18 December 2003 to charge each separately used and inhabited part of a rating unit and this was implemented on 1 July The definition on what constituted a separate part is updated from time to time and can be found in the definitions section of this policy. 1.4 Balancing the Funding Requirements The Local Government Act requirement to consider the periods in or over which benefits are expected to occur relates to allocating costs of capital expenditure fairly between the ratepayers of today and tomorrow to ensure intergenerational equity. The usual mechanism to achieve this is borrowing so that servicing and repayment costs are spread over the period of the enjoyment of the asset. Council may also choose to run surplus and/or deficits to achieve a similar outcome. 1.5 The Overall Impact of the Revenue & Financing Policy The fees, charges and other funding mechanisms used in this policy aim to be sustainable and not to adversely impact on the social, economic, environmental and cultural wellbeing of both the current and future ratepayers. In setting fees, charges and rates Council recognises the need to consider factors of fairness and equity including wellbeing and ability to pay. 1.6 Cap on Certain Rates The Local Government Rating Act sets a maximum amount that can be collected from certain rates. Rates included in the cap are the Uniform Annual General Charge (UAGC) and Targeted Rates set on a uniform basis as a fixed amount per rating unit or separately used or inhabited part. This maximum amount is 30% of the total rates revenue. There are two rates excluded from the cap. These are Fixed Rates for water supply and Fixed Rates for sewage disposal. When the cap is exceeded one or more of the activities funded in this way moves to a districtwide General Rate based on capital value. 1.7 Burden of Rates The primary liability for rates rests with the property owner. Section 10 of the Act defines a ratepayer as being the person named as a ratepayer in the rating information database (RID) and the district valuation roll (DVR). Section 11 of the Act provides the test in determining who should be entered into the RID. The Section 11 test also provides clarity of leasing situations. In its simplest form, Section 11 ratifies the concept that the burden of rates lies with the owner. However, that burden can be transferred to a lessee providing there is a registered lease from the owner to the lessee, which includes the formal transferring of the rates burden. Such a lease must be for a minimum period of 10 years. 1.8 Rating Unit A rating unit is the entity that actually attracts liability for rates. It is the equivalent of a separate property or separately used or inhabited part of a rating unit. Two or more Certificates of Title (CTs) or pieces of land may constitute one rating unit if: in common ownership; and is used jointly; and is contiguous If there is no Certificate of Title the Valuer General must make a ruling. 1.9 Rating Areas The district is divided into six areas for rating. These are referred as Differential Rating Areas (DRAs). For some funding streams, reference is made to DRA1, DRA1A, DRA2, DRA3, DRA4 and DRA5. These areas were defined by Council in previous rating resolutions between 1991 and 2002 and are recorded on Council s rating area maps. These are used to define the area that a Targeted Rate applies to. DRA 1 Gisborne City. DRA1A The semi urban/buffer zone around Gisborne City including Wainui and Makaraka. DRA 2 Poverty Bay Flats including immediate fringe hill properties, Muriwai, Manutuke, Patutahi, Makauri, Ormond, part of Waimata, Makorori, and Tatapouri. DRA 3 Whangara, part of Waerenga-o-Kuri, Ngatapa, Whatatutu and Te Karaka. DRA 4 DRA 5 Rural hinterland including Tiniroto, Otoko, Matawai, Motu, Tolaga Bay. The East Cape north of Mangatuna (Hicks Bay, Te Araroa, Tikitiki, Ruatoria, Waipiro Bay, Te Puia Springs, Tokomaru Bay). Inner Zone DRA1, DRA1A and DRA2 Outer Zone DRA3, DRA4 and DRA5 255

4 Prosperous Safe Vibrant Tairāwhiti Tairāwhiti Tairāwhiti Environmentally Sustainable Tairāwhiti Skilled and Educated Tairāwhiti The range of activities undertaken by Council is designed to fulfil these outcomes. The process of preparing the Ten Year Plan addresses how Council can fulfil these outcomes at the level of service required by the community. The Revenue and Financing Policy determines how these outcomes should be funded. General Rates General Rates are regarded as a tax that funds the collective community benefit of an activity across the district as a whole. There are two types of General Rates, the General Rate on Capital Value (CV) and the Uniform Annual General Charge (UAGC) Funding mechanisms Who Should Pay The following paragraphs provide some simple definitions of the different funding mechanisms. In deciding how Council s activities may be funded, Councillors have a number of choices. They can decide to obtain the funds from any one or more of the following sources and the choice will be different for each Council activity. During 2011 Council has completed a full review of funding for each activity to determine an equitable funding policy. In determining the appropriate mix of funding mechanisms Council has considered all the available options for funding Council activities. Throughout the policy there is a strong theme of beneficiary pays and the maximisation of income from user fees and charges. In this Ten Year Plan the Council has identified the following Council outcomes. General Rates on CV These are rates which are directly related to the value of the property and are more like a tax than a charge for services. They are charged as a rate in the dollar of Capital Value. Sometimes the General Rate might pay for those items for which costs could be considered to increase with the amount of property owned. At other times the General Rate pays for those things for which there is no identifiable user or group of users. General Rates - UAGC Some of Council s services are more related to the existence of a property or a household than to land or capital value, or area. In these cases Council applies a fixed charge per property. Examples are public toilets, civil defence and litter bins in public areas. NOTE: Investment income and profits from Council s Commercial Operations (Business Units) are treated as internal dividends to the Treasury Activity and are used to offset part of the General Rate on Capital Value. Individual rate contributions for are estimated to be: Commercial Property 36,000 Connected Empowered Healthy Tairāwhiti Tairāwhiti Tairāwhiti Gisborne Holdings Ltd 784,000 Waikanae Top 10 Holiday Park 26,000 Gisborne Vehicle Testing 95, ,

5 Targeted Rates Targeted Rates allocate the costs over one or more categories of property and/or to fund one or more identified activities. Targeted Rates are used to allocate the cost of activities to an area or to the particular category of properties within the district that are perceived to receive the benefit. Targeted Rate Fixed Fixed Targeted Rates are fixed rates which apply in specific areas and you pay them if you have access to the service. Ratepayers who do not have access to the service consequently do not pay. Examples are Water Rates, Refuse Collection Charges and Wastewater (sewage) Charges. Targeted Rates Variable Variable Targeted Rates also only apply if the property is in the area to which they apply, but the rates are based on the value or size of your property. Examples are Flood Control Rates (based on capital value) or Drainage Rates (based on the area of your property). Targeted Rates Differential Sometimes a Targeted Rate, whether it is fixed or variable, needs to be adjusted according to some usage criterion, or to a particular location where the activity is used. This is called a Differential Targeted Rate and applies to some activities like parks and reserves or rural fires. A Mixture of Several Types of Funding Sometimes activities are not funded by rates or property taxes at all. Examples of non-rate funded income are: Subsidies and Grants An example is the subsidy Government provides through NZTA for road maintenance. User Fees and Charges If the user of the service can easily be identified and if there is clear private benefit of a service, a fee can be collected directly from the user. If it is possible to efficiently impose a charge Council does so, on the basis of either recovering the full cost of the service, the marginal cost added by additional users, or at a rate that the market will pay. Examples are building consents, hire of CDs from the Library and dog licences. Revenue from Interest and Dividends Council receives interest on funds invested or investments and may receive dividends from its Council Controlled Organisations, Business Units and/or shares in other companies. These are consolidated through the Council s Treasury section and utilised to reduce General Rates. Borrowings Council can choose to borrow money and pay it back from rates or other income over a period of time. Council uses two forms of borrowing; internal loans where an activity borrows from the Treasury section and external borrowing. The external borrowing is used to support the Council s balance sheet as a whole. This includes working capital. External borrowings are always lower than internal loans due to the utilisation of Council internal financial reserves to partly fund internal loans. Capital Realisation Money gained through sale of assets. Reserves Money set aside in holding accounts for specific purposes for example, if the rent from community housing is more than the cost of running the community housing, a portion of the surplus is placed in a reserve account which may only be used for some project to do with community facilities. Development Contributions Developers are required to pay contributions towards the capital costs Council incurs in developing additional infrastructure to support the growth their developments contribute to Differentials In past years Council has had six rating areas and has charged different rates-in-the-dollar to each area. This was based on the degree of benefit accruing from each activity. In considering the distribution of costs, particularly in relation to rating on a capital value basis, in far fewer cases could Council argue that there was any case for retaining differential areas. Many of the rates in the funding policy are therefore Undifferentiated or sometimes differentiated in terms of Inner Zone and Outer Zone only. There are several cases where full differentials have been retained and these are generally classified as Targeted Rates. These are: Road Maintenance and Construction Landuse differentials are used for road maintenance where currently residential has a weighting of 1.0; pastoral and horticultural have a weighting of 1.5, commerce and industry have a weighting of 2.0 and forestry has a weighting of

6 Soil Conservation, Water Resources, Stock Control, Rural Fires and one or two other activities were considered to have a different fall of expenditure between properties in the vicinity of the city and those which were rural. For those activities, two geographical zones were established; the Inner Zone which aligns with the DRA1, DRA1A and DRA2 differential rating areas, and the Outer Zone which aligns with the DRA3, DRA4, and DRA5 differential rating areas. Loans for specific projects will be funded through separately determined Targeted Rate, charged to the beneficiaries of the loan. Total rates invoiced by sector Sector Residential/Lifestyle 72 35,000,594 Commercial/Industrial 9 4,230,397 Horticultural and Pastoral 15 7,529,407 Forestry 4 2,071, ,832,079 Apart from those listed above and a few specific Targeted Rates there are no other commercial, lifestyle, or urban farm differentials. All properties with the same land use pay the same rate in the dollar based directly upon the property value. The Revenue and Financing Policy is arranged under five main activity groupings with a total of 26 individual activities within the groupings. These significant activities will link in directly with the Activity Management Plans in Volume 1 of the Ten Year Plan Rates Incidence Who pays the rates? Total rates invoiced by DRA Area DRA1 City 60 29,042,875 DRA1a City Surrounds 5 2,646,255 DRA2 Poverty Bay Flats 11 5,050,676 DRA3 Whangara, part of Waerenga-o- Kuri and Ngatapa 6 3,005,867 DRA4 Rural Hinterland including Tiniroto, Otoko, Matawai, Motu, Tolaga 9 4,533,241 Bay DRA5 East Cape, north of Mangatuna 9 4,553, ,832,079 UAGC by sector Sector Residential/Lifestyle 84 10,626,638 Commercial/Industrial 6 749,486 Horticultural and Pastoral 8 945,185 Forestry 2 265, ,587,

7 UAGC by area General rates by sector Sector Sector Urban 66 8,284,197 Rural 26 3,338,781 Rural Townships 8 964, ,587,198 Residential/Lifestyle 66 2,512,372 Commercial 8 322,536 Horticultural and Pastoral 3 118,464 Forestry , ,824,770 3% 8% 23% Residential/Lifestyle - 66% Residential/Lifestyle Commercial Hort & Pastoral Forestry The incidence of rates collected through the UAGC falls primarily on the urban residential sector. General rates by DRA Area DRA1 City 48 1,828,709 DRA1a City Surrounds 9 335,930 DRA2 Poverty Bay Flats ,011 DRA3 Whangara, part of Waerenga-o- Kuri and Ngatapa 7 292,931 DRA4 Rural Hinterland including Tiniroto, Otoko, Matawai, Motu, Tolaga ,054 Bay DRA5 East Cape, north of Mangatuna 7 260, ,824, Summary of Revenue and Financing Policies Council sets its long term revenue to fund its ongoing operations and asset management programmes. The funding sources used depend on the Councils analysis of the individual activities. These are outlined below. The percentage of funding from each funding source may vary slightly from year to year. For some activities a range of funding is set. In this case the percentage used in the table is for the first year of the Ten Year Plan. The fees and charges components are a target and where not achieved the shortfall will be funded proportionally by the remaining funding streams for the activity. Where an activity or sub activity has not been specifically referenced in the policy or for new schemes/activities they will be funded in a way that is consistent with similar activities and after taking into account the considerations in Section 101(3) of the Local Government Act

8 Activity Group (2012/13 ) Rates Funding (000s) Activity UAGC General Rate (CV) Targeted Rates User Fees & Charges Subsidies & Grants Internal Charges 125 Commercial Operations 0 Gisborne Vehicle Testing - FS % 0 Waikanae Top 10 Holiday Park - FS % 0 Commercial Forestry - FS % 125 Commercial Property (including Municipal Buildings and minor non-commercial legacy property) - FS % 0 Council CCO s - FS ,793 Community Services and Planning 1,065 Aquatic & Recreation Facilities - FS % 40% 1,599 Libraries - FS % 10% 4,619 Parks and Open Spaces - FS12-009, FS12-010, FS12-011, FS12-012, FS % 66% 6% 0 Community Housing - FS12-014, FS % Minimal 1,100 Arts and Culture - FS12-016, FS12-017, FS % 9% 2,410 Community Planning and Development - FS12-019, FS12-020, FS12-021, FS % 5% 8,604 Environmental Policy and Services 2,971 Environmental Services FS12-023, FS12-024, FS12-025, FS12-026, FS12-027, FS % 1% 800 Building Services - FS12-029, FS % 80% 1,434 Environmental Health - FS , FS12-032, FS12-033, FS12-034, FS % 2% 54% 1,216 Environmental Policy - FS12-036, FS % 8% 1,035 Civil Defence and Emergency Management FS12-038, FS12-039, FS % 61% 8% 225 Animal Control - FS12-041, FS % 70% 5% 916 Resource Consents - FS % 25% 2,077 Governance and Support Services 2,211 Governance - FS % (134) Support Services (including Treasury) - FS12-046, FS12-047, FS12-048, FS % balance after internal charges 27,474 Infrastructure Services 8,556 Roading - FS12-050, FS12-051, FS12-052, FS12-053, FS % 39% 14% 40% 2,126 Water Supply - FS % 1% 6,957 Wastewater - FS % 1% 2,701 Stormwater - FS % 80% 2,488 4,646 Flood Protection - FS12-058, FS12-059, FS12-060, FS12-061, FS12-062, FS Solid Waste - FS12-064, FS12-065, FS12-066, FS12-067, FS % 95% 61% 36% 3% 49,066 Total Note 1: These activities (in priority order) move to General Rates funding if the statutory 30% cap is breached. Community Planning & Development Civil Defence & Emergency Managements Activity 260

9 Uniform Annual General Charge is and is made up of the following components: 2012/13 UAGC 2012/13 Landfills and Transfer Stations Library Roading Theatres and Halls 8.79 Economic Development 3.40 Museum Community Liaison 7.34 Community Properties Representation and Democratic Process Corporate Expenses of District 4.80 Civic Expenses of District (including Museum) 7.46 Cemeteries 5.78 Civil Defence Community Development Litter bins and Cleaning Public Areas Public Conveniences Environmental Health Community Planning and Development