Significant Planning Assumptions - Supporting documentation for the 2021-31 Long Term Plan Consultation Document - Say It Napier logo
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Significant Planning Assumptions Supporting documentation for the 2021-31 Long Term Plan Consultation Document
SIGNIFICANT PLANNING ASSUMPTIONS
Introduction
In order to plan for the long term, it is imperative to make assumptions about various aspects in the future. The significant assumptions made about the future
form an important part of the planning framework.
Schedule 10 of the Local Government Act 2002 requires that the Council identifies the significant forecasting assumptions and risks underlying the financial
information set out in the LTP. Where there is a high level of uncertainty the Council is required to state the reason for that level of uncertainty and provide an
estimate of the potential effects on the financial assumptions. The level of uncertainty is determined by reference to both the likelihood of occurrence and the
financial materiality.
The significant planning assumptions are listed on the following pages.
Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
INFLATION
Low Actual inflation rates and industry Unlikely Minor to Moderate Preparing an annual budget and
Annual Cost Adjustors movements will vary from these resetting rates combined with
Inflation rates have been forecasts. Incorrect adjustor forecasts a triennial review of the LTP
LGCI LGCI
estimated using the could result in Council over or mitigates this risk and effect aging
Year Operating Capital
BERL Local Government underfunding operational and
2022/23 2.9 3.0 Cost Adjustor Forecasts capital costs.
2023/24 2.5 2.6 (September 2020). We
also assume that the At the point in time of writing
2024/25 2.5 2.6 Reserve Bank will use the LTP, construction i.e., year
2025/26 2.5 2.7 monetary controls to keep on year adjustments for capital
CPI within the 1.5 percent movements were higher than
2026/27 2.5 2.6 to 3 percent range. inflation which may impact on the
2027/28 2.6 2.8 capital budget requirements set
out in the plan.
2028/29 2.7 2.8
2029/30 2.7 2.9
2030/31 2.6 2.7
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 1Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
POPULATION GROWTH
Council are considering potential options for future long-term growth in and around Napier as part of the Heretaunga Plains Urban Development Strategy (HPUDS) review. The review of HPUDS will commence in 2021 and
expected to finalise in early 2022. The review of HPUDS will provide opportunity for stakeholders and interested parties to provide their views on any options that are within the agreed scope of the review. The outcomes of the
review will be used for informing the Infrastructure Strategy and capital programme for the LTP 2024-2034. HPUDS objective is to preserve the fertile soils in the Heretaunga Plains and therefore promotes intensification rather
than greenfield development.
Moderate The actual population growth and its Possible Moderate Forecasted growth can be
composition could differ It is possible that accommodated within the levels of
Total Annual
Projections are based on the population Development of Council’s Capital service outlined in this plan.
Year Napier City Growth Rate
Statistics NZ population estimates from Plan and Infrastructure Strategy Where higher levels of growth
2020 63,500 estimates from 2013 Stats NZ based on take into account population create demand for new
census data given the the 2018 census growth; unless the population infrastructure, Council can collect
2021 63,900 0.63
delays in analysis of the data will somewhat growth is substantially above or financial contributions to meet
2022 64,300 0.63 2018 census data. differ from the below the medium high scenario a portion of the costs of new or
estimates based on there are no major impacts on the upgraded investment.
2023 64,700 0.62
the 2013 census capital plan.
2024 65,050 0.54 data.
A slower than projected rate
2025 65,400 0.54
of growth could see lower
2026 65,750 0.54 than anticipated revenue
generation (from development
2027 66,100 0.53
levies, resource consents and
2028 66,450 0.53 financial contributions). Growth
assumptions also affect planned
2029 66,750 0.45
levels of service for Council
2030 67,050 0.45 activities and influence asset
management planning (particularly
2031 67,350 0.45
in terms of new growth-related
Year 11 to 30 infrastructure and renewals).
2036 68,610 0.32
Significantly higher growth
2041 69,620 0.27 would mean that activities and
infrastructure face unsustainable
2046 70,540 0.26
pressure and may fail to deliver
2051 71,140 0.11 levels of service.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 2Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
HOUSEHOLD GROWTH
The projected increased in household units for the Moderate Actual physical growth could differ Possible Variations in population growth Close monitoring of population
LTP 2021-2031 period are 1,853. The projections could impact upon the demand for growth through the National Policy
are halfway between Medium and High Statistics NZ Projections are based on community facilities and level of Statement on Urban Development
projections from 2016. Statistics NZ population service for infrastructure over time. Capacity will mitigate expected
estimates from 2013 Changes may require acceleration risks.
Total
house- census data given the or slow-down of growth-related
hold Development Split delays in analysis of the projects. Council’s Financial
num- 2018 census data. Strategy outlines how such
Year bers Infill Greenfield Rural
projects are to be funded. Impacts
2020 25929 20236 4845 848 on individual ratepayers will not
be significant unless growth is
2021 26093 20306 4932 855
significantly above or below that
2022 26256 20376 5019 861 forecast
2023 26419 20445 5106 868
2024 26562 20484 5207 871
2025 26705 20523 5309 873
2026 26848 20562 5410 876
2027 26991 20600 5511 879
2028 27573 20973 5703 896
2029 27697 21003 5795 899
2030 27822 21032 5888 902
2031 27946 21062 5980 905
Year 11 to 30
2036 28587 21241 6428 918
2041 28888 21166 6804 918
2046 30669 22310 7387 972
2051 30530 22155 7404 971
Napier City Council is preparing the development of a
Napier Spatial Plan in preparation of the Heretaunga
Plains Urban Development Strategy (HPUDS) review
which is due later in 2021 early 2022. The HPUDS
review will provide the opportunity to assess new
greenfield areas for development as well as identifying
the priority areas for intensification or infill. The
forecast mix of residential growth is as follows:
HPUDS –
Napier regional target
Development type City split by 2045
Intensification (infill 73% 60%
and brownfields)
Greenfield 24% 35%
Rural 4% 5% NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 3Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
AGEING POPULATION
Napier’s population is ageing, with 28% of the Moderate Actual population aged over 65 Possible Minor Council will monitory demographic
population projected to be 65 years or over by 2033 years could differ changes through census
(compared to 22.9% in 2023). This is the medium If the population ages at a faster information and other economic
projection from Stats NZ. rate than anticipated, this could indicators. Planned project
These projections have create unanticipated demand for related to retirement housing
the estimated resident services for older people, higher and implementing Napier City
population of the area at demand for secure housing for Council’s Positive Ageing Strategy
30 June 2013 as a base older persons, and result in a can be delayed or brought
in lieu of the updated higher than anticipated proportion forward as updated demographic
statistics from the 2018 of ratepayers on a fixed income. projections become available.
census.
GROWTH IN RATING BASE
Growth in the rating base (number of properties from Moderate Actual growth in the rating base Possible Moderate Income from rating will be
which council collects rates) is driven by growth in could differ. reviewed and adjusted as
the number of households and industrial\commercial The growth allowance The rate of growth will impact on population projections become
expansion represents a conservative the average rates increase for more certain.
estimate relative to the existing ratepayers
Based on historic data and the growth assumptions potential income from
in this LTP an allowance of 0.3% per annum has the projected increase in
been included for additional rates revenue as a households.
result of growth in the rating base. This represents a
conservative estimate relative to the potential income
from the projected increase in households.
Clause 15A of Schedule 10 of the Local Government
Act 2002 requires the projected number of rating
units to be outlined for each year covered by the plan.
These projections can be found in the table below:
NCC Projected Rating Units
Year Beginning
June Rating Units % Change
2020 26325
2021 26516 0.73%
2022 26709 0.73%
2023 26902 0.72%
2024 27074 0.64%
2025 27246 0.64%
2026 27418 0.63%
2027 27590 0.63%
2028 27762 0.62%
2029 27914 0.55%
2030 28066 0.54%
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 4Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
CAPITAL PROGRAMME DELIVERABILITY
Programmes and projects are assumed to be Moderate The risk is that the capital Possible The implication of any shortfall in Council will be working proactively
delivered within budget and on time. programme is not able to be project delivery are: to plan for the delivery of major
The plan includes a significant increase in capital Unforeseen interruptions delivered on time and within the The risk of falling • Projects may cost more than projects proposed in the plan. A
expenditure, particularly in the first two years as this is to business as usual, such budget available. short on delivery of planned due to inflation greater lead time will improve the
supported by the availability of Government funding. as that experienced during the Capital Plan will • Less funds will need to be chances of delivery on time and
the COVID19 lockdown, remain relatively borrowed in the short term. on budget. Council does have an
can result in overspend or low as long as NCC Delaying new borrowing in-house civil works capability that
slippage of timeframes for is able to hire and will impact on the timing of will be utilised to deliver projects
Council projects. engage the right financing costs wherever possible.
employees and • Delays in proposed Where projects are not able to be
contractors with improvements to services completed as scheduled within
the capacity to any given year Council will carry
deliver (discussed forward the budget and funding.
in assumption 7
below).
CONTRACTOR AVAILABILITY
That Council will be able to find skilled contractors to Moderate The risk is that there is not sufficient Possible Challenges in procuring services Council will proactively work with
undertake the work programmed in this plan. contractor capacity to deliver the impact on Council’s ability to the local contractor community to
Currently there is very little surplus capacity in the capital programme on time or that deliver on time and to budget, procure major works.
contracting market due to the housing boom and the contract prices increase significantly ultimately affecting the longevity Where projects are not able to be
increased level of capital works proposed my many so that works cannot be delivered and durability of this plan. completed as scheduled within
local authorities. within the budget available. any given year Council will carry
forward the budget and funding.
RESOURCE CONSENTS
Conditions for existing resource consents held by Low Conditions of Resource Consents Possible Moderate Constant monitoring of the
Council will not be significantly altered. Any resource may be altered significantly or regulatory environment and
consents due for renewal during the 10 year period Advance warning of likely Council may not secure resource Material changes to resource performance against existing
will be renewed accordingly, such as the consent for changes is anticipated. consents required for new activities consent conditions can result in conditions provide a record of
the Wastewater Treatment Plant. or be unable to renew existing a need for upgrade to assets and compliance to support future
resource consents upon expiry. changes to the manner in which processes and renewals.
Significant initiatives that will require new consents they are operated. This would
include the wastewater outfall and discharge location have financial implications for
into the ocean. It is assumed that all necessary Council.
consents will be granted when required with
reasonable conditions
THE RESOURCE MANAGEMENT ACT 1991
In responding to the Randerson review of the Low Conditions of Resource Consents Possible Moderate Constant monitoring of the
Resource Management Act 1991, the Government has may be altered significantly or regulatory environment and
announced its intention to replace it with three new Advance warning of likely Council may not secure resource Material changes to resource performance against existing
pieces of legislation: changes is anticipated consents required for new activities consent conditions can result in conditions provide a record of
Natural and Built Environments Act and a transitional period or be unable to renew existing a need for upgrade to assets and compliance to support future
Strategic Planning Act is likely. More detail resource consents upon expiry. changes to the manner in which processes and renewals.
Climate Change Adaptation Act about the changes will be they are operated. This would
available later in 2021. have financial implications for
It is assumed that new legislation will require more Council.
serviced land available for development in the next 3
to 5 years.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 5Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
LEVELS OF SERVICE
There are no significant changes to the level of core Low A change in services or levels of Unlikely Moderate Any future changes to service
or essential services within the plan. In the longer Level of service changes service delivered may be demanded An increase or decrease in levels are subject to consultation
term, Council’s investment programme in support of are generally triggered by the community or necessitated by Council’s levels of service usually with our community.
growth will potentially increase certain levels of service by increased community a change in primary legislation. have a direct impact on Council’s
incrementally over time. expectations or demand rates requirement. Increased
or new legislative levels of service inevitably require
requirements imposed more resourcing.
by central government.
Resident Satisfaction
Surveys and other
engagement strategies
generally support the
levels of service planned
in this LTP.
SERVICE DELIVERY
Section 17A of the LGA requires a review of the cost Moderate Local Government Act, Section 17A Possible Minor Section 17A reviews will only
effectiveness of current arrangements for meeting reviews may recommend a change Since section 17A reviews are be conducted as scheduled,
the needs of the community for good quality local of method of delivery of Council based on cost effectiveness, any with a clearly defined scope and
infrastructure, local public services and performance services or funding requirement. changes will potentially lower objectives. A summary of any
of regulatory functions. projected rates increases for review and recommendations will
No assumption has been made in this LTP ensuing years. However there is be put to Elected Members for
regarding the cost implications of implementing any a risk that recommended changes consideration and decision. Any
recommendations from section 17A reviews. to funding, governance or service changes will be consulted on in
delivery arrangements for an accordance with the Significance
At this point in time no significant impacts are and Engagement Policy and
expected as a result of s17A reviews. activity will result in costs that
are not accounted for in current included in subsequent Annual
budget. Plans and / or Long Term Plans.
USEFUL LIVES OF SIGNIFICANT ASSETS
The assumed useful life of significant assets as Low Useful life may be shorter/longer Unlikely Minor Asset capacity and condition
outlined in the Statement of Accounting Policies Asset lives are based than expected which may result in Depreciation and interest is continually monitored, with
determine the annual charge for the consumption or upon estimates made by unbudgeted cost, or replacing an costs would increase if capital replacement works being
wearing out of assets (depreciation). engineers and registered asset prematurely. expenditure was required earlier planned accordingly. Preparing
valuers. than anticipated. However, these an annual budget and resetting
impacts could be mitigated rates combined with a triennial
as capital projects could be review of the LTP mitigates the
reprioritised in the event of early risk of inaccurate asset-lifecycle
expiration of assets. estimates.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 6Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
DEPRECIATION
Depreciation rates applying to existing assets are Low The cost adjustor forecasts could be Unlikely Insignificant
outlined in the Statement of Accounting Policies incorrect. Capital projects could take Depreciation rates and useful
and is based on the assumed useful lives of assets. longer to complete than budgeted. The impact of applying incorrect lives of assets are reviewed on a
Depreciation on new major infrastructural assets is To some extent these factors depreciation rates is not regular basis to ensure accuracy
calculated on actual expected rates commencing mitigate each other. considered material in the context of depreciation expense
from expected time of completion of the project. of the LTP.
The depreciation of other items is based on actual
expected depreciation rates with a half year applied
in the year of purchase. Depreciation is calculated on
book values projected at 30 June, plus new capital.
SOURCES OF FUNDS FOR FUTURE REPLACEMENT OF SIGNIFICANT ASSETS
It is assumed that significant infrastructural assets Low Levels and sources of funding Unlikely Minor If sufficient funds are not available
will be subject to continual renewal, and funded in differ from those forecast, meaning for asset renewal within any given
the LTP. The source of funding any replacement of Council needs to find other ways User charges have been set year, Council, due to its strong
other significant assets is determined and disclosed. fund continual renewal of significant at previously achieved levels. balance sheet, is able to borrow
Refer also to the Funding of Capital Expenditure in the infrastructure assets Depreciation is funded through funds to meet its expenditure
Revenue and Financing Policy, the Financial Strategy rates. requirements.
and the Infrastructure Strategy.
ASSET REVALUATIONS
Roading, Library and Investment Property assets are Low The forecast revaluation could be Unlikely Minor Council has the ability to smooth
assumed to be revalued annually. incorrect, affecting the validity of the the impact of any changes on
estimates. Variances in depreciation charge rates subject to meeting or
Restricted assets relating to Sportsgrounds, following revaluation would impact explaining any variance from the
Grandstands and Halls, Buildings on Reserves, on the operating expenditure balanced budget requirements.
Swimming Pools and Inner Harbour are assumed projections. Triennial reviews of the LTP
to be revalued three yearly using the inflation rates provide for regular opportunities to
outlined in Assumption 1. update forecasts.
Operational assets relating to Land and Buildings
are assumed to be revalued three yearly using the
inflation rates outlined in Assumption 1.
Water, Wastewater and Stormwater Below and Above
Ground assets are assumed to be revalued three
yearly using the inflation rates outline in Assumption 1.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 7Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
INVESTMENTS
Moderate Changes in market interest rates and Possible Moderate The possible effect is mitigated
Year Investment Interest Rate average levels of cash on deposit by Council taking a conservative
or invested may differ significantly Lower than assumed rates of approach to rates of return.
2022/23 0.8%
from the plan. Investment income on return could result in Council
2023/24 0.8% the commercial and industrial land receiving less than forecast
2024/25 0.8% portfolio may grow at a different rate investment income.
to the applied inflation factors.
2025/26 2.6%
2026/27 2.6%
2027/28 2.6%
2028/29 2.6%
2029/30 2.6%
2030/31 2.6%
INTEREST ON LOANS
Interest rates on borrowed funds are largely influenced Low Interest rates on borrowed funds are Possible Major Such increases are mitigated
by factors external to New Zealand’s environment. The largely influenced by factors external in terms of Council’s overall
annual interest rate assumption on all new external to New Zealand’s environment. A 1% increase in interest rates rating requirement as exposure
loans and the average cost of external debt is based A significant change to interest would increase total rate funded to external rates of interest is
on the Local Government Funding Agency (LGFA)’s rates would affect the validity of the interest costs (for both internal and reduced via the use of internal
long term borrowing yield interest rates for Unrated estimates. external debt) by approximately loans.
Guarantors and are as follows: $1.2m in 2021/22 rising to impact
of $4m in 2030/31.
Annual Average
Interest Cost of
The impact of this level of
Rate External
increase in interest costs on rates
Year Assumption Loans
is 1.8% in 2020/21, rising to 4.2%
2022/23 0.70% 0.70% in 2025/26 and reducing to 3% in
2030/31 as debt is repaid in years
2023/24 0.70% 0.70%
6 - 10.
2024/25 0.70% 0.89%
2025/26 1.47% 1.16%
2026/27 2.23% 1.47%
2027/28 3.00% 1.69%
2028/29 3.00% 1.85%
2029/30 3.00% 1.98%
2030/31 3.00% 2.08%
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 8Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
Council applies an average cost of capital when
charging activities for funds borrowed. This includes
external borrowing, the use of cash reserves and other
funds (internal borrowing).
Year Investment Interest Rate
2022/23 0.70%
2023/24 0.70%
2024/25 0.89%
2025/26 1.16%
2026/27 1.47%
2027/28 1.69%
2028/29 1.85%
2029/30 1.98%
2030/31 2.08%
NEW ZEALAND TRANSPORT AGENCY
It is assumed that the level of subsidies received Low That the level of NZTA subsidies Unlikely Moderate Council has little influence over a
through the NZTA is 51% for both maintenance works changes decision to reduce the subsidy.
and new construction and renewal works. A change in subsidy level could If subsidy revenue is less than
affect the validity of the estimates expected, Council may be
by way of funding available for required to change to levels of
subsidised work and potentially service and/or find unbudgeted
the level of service delivered. Total funding to cover capital and
NZTA subsidy of $58.2m has been operating costs.
provided for in this plan.
A 3% reduction in the assumed
subsidy rate would mean Council
receives about $287,850 less than
the forecast subsidy in 2021/22
and about $286,266 less in
2030/31.
A 6% reduction in the assumed
subsidy rate would mean Council
receives about $575,699 less than
the forecast subsidy in 2021/22
and about $572,532 in in 2030/31.
If the subsidy was amended to
only fund maintenance, operations
and renewals (rather than
improvement activities), Council
would receive around $790,500
less than the forecast summary
in 2021/22 and about $1.1m in
2030/31.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 9Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
LEGISLATION
Legislation impacting on local government will Moderate Government policy shifts may Possible Moderate Council will keep a watching
continue to evolve, particularly in light of COVID-19, significantly affect services delivered brief on policy proposals and
the 2020 report New Directions for Resource Reforms impacting on by Council, result in unforeseen Changes to Local Government the progress of legislative
Management in New Zealand and indications of the local government costs, or not allow for reasonable Legislation are ongoing and issues amendments through the House
increasing climate change intervention such as a sector have been implementation/transition currently flagged include Three to predict (as far as possible) any
proposed policy for managed retreat. [Note that ongoing (reintroduction Waters (discussed separately), financial and procedural impacts.
potential changes in legislation associated with 3 of wellbeings into the repeal and replacement of the
Waters is being considered as a separate assumption] Local Government Act, Resource Management Act, water Financial impact resulting from
establishment of a new fluoridation, amendments to the a need to respond to significant
It is assumed that Central Government will work with water regulator, for Building Act 2004, zero carbon legislative/policy amendments
councils to ensure that any legislative changes are example). Unexpected transition and standardising could be met by rates increases or
managed appropriately and to ensure benefits from its regulatory changes may kerbside recycling. New or fees and charges.
commitment to partnership with the local government arise from national or amended legislation may require
sector are realised. international events changes to levels of service
or unbudgeted capital and/or
For the purpose of this plan, the assumption is that operating expenditures.
any legislative reform or amendments will not require
Council to assume responsibilities that require
additional resources and hence additional cost.
EMISSIONS TRADING SCHEME
It is assumed that the Emissions Trading Scheme is Moderate Changes could be made to the Possible Minor The risk of Council facing
retained in its current form and that ETS charges can scheme by the government that Some additional ETS charges additional charges is mitigated by
be met through Napier City Council’s interest in the have an adverse impact on NCC, or have been allowed for in this plan the inclusion of LGCI adjustors.
Omarunui Landfill. Emissions obligations have been the carbon price could be higher or and any further increases would Triennial LTP review allows for
hedged by way of forward purchase agreements and lower than expected. impact on financial forecasts. adjustment as required.
the cost is recovered by landfill refuse charges.
WASTE DISPOSAL LEVY
This plan has been prepared on the assumption Moderate The increase to the waste disposal Possible Because an increase in the Council to keep a watching brief
that the Government proposal, announced by then levy may be larger or smaller waste levy would result in higher on developments. Adjustments
Associate Minister for the Environment in July of than signaled, or the phased operating cost for Council can be pursued through an Annual
2020, to increase the waste disposal levy applicable implementation may differ from (kerbside waste, transfer station Plan if required.
to Class 1 (Municipal) landfills will be implemented as that scheduled, particularly given operation, litter control etc), this
indicated according to the following draft schedule. a change in Associate Minister for increased cost would need to
This implementation schedule would see the levy the Environment following the 2020 be met with increased rates and
progressively increase from $10 per tonne to $60 per General Election. fees/charges. This plan has been
tonne of household waste disposed to landfill. prepared in anticipation of the levy
increases indicated in July 2020.
An increase in levy money collected by the Ministry Changes to the proposal would
for the Environment would result in larger levy money impact on the projected operating
payments back to Napier City Council in accordance budget for the Waste Minimisation
with section 31 of the Waste Minimisation Act 2008. Activity group and would likely
This money has not been factored into forecast require changes to projected rates
financial statements due to uncertainty. increases.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 10Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
NATURAL DISASTERS
It is assumed that Napier will not face any major High One or more natural disasters Possible Major to Severe Napier City Council takes a
natural disasters or events causing significant harm occur, resulting in injury or death continuous improvement approach
Natural disasters are Damage and injury impacts
will occur which cause widespread or catastrophic and/or damage to property and to emergency preparedness and
inherently unpredictable, on Council’s ability to deliver
damage to our community or infrastructure. infrastructure. business continuity planning.
and severe weather planned levels of service and/
events forecast to become or increase operating expenses A key focus for this plan will be
stronger and more to ensure business continuity improving the city’s resilience.
damaging as a result of and community welfare. Damage There will be a number of
climate change. to infrastructure may require earthquake strengthening and
uninsured or unbudgeted repairs. resilience projects aimed at
helping us mitigate the adverse
impact of a significant event and
manage our event insurance
costs.
EARTHQUAKE PRONE BUILDINGS
Council has carried out a program of detailed seismic Moderate Costs relating to strengthening and Possible Moderate To mitigate the risk of overspend
assessments of major Council owned buildings over refurbishment works or rebuilding on the Civic Precinct, work will
If additional buildings are identified
several years. Most major buildings have now been may exceed the provisions in the be preceded by preparation of
as requiring strengthening, the
assessed. Several buildings have been strengthened LTP detailed business cases, including
cost of that remediation could
as a result. reconsidered strengthening
surpass the $3.3 million set aside
options or rebuild options, and
It is assumed that strengthening work will be carried in years 3 and 4 of this plan. Cost
updated costings with adequate
out on the following buildings (currently assessed as is ultimately determined by the
contingency provisions.
earthquake prone): scale of the works required, which
aren’t known. Council may need
Taradale Plunket Rooms – Building is unoccupied.
to find unbudgeted money to
Strengthening work will be carried out subject to a
cover the cost, or look to reducing
business case identifying the future use of this building
levels of service (such as closing
Henry Charles Village Hall – Separate budget for a building or relocating services)
Strengthening and refurbishment is provided for in until work can be carried out.
year 1 and 2 of the Plan.
Faraday Centre – Current funding is available for
strengthening and resolution of ownership issues
subject to a business case.
It is assumed that budget set aside over the 10 years
of this plan ($3.3 million excluding the Civic and
Library buildings, Henry Charles Hall and Faraday
Centre which are provided for separately) is sufficient
for remedial work on any other buildings found to
be earthquake prone upon completion of future
assessments during the lifetime of this plan.
It is assumed that the budget included in this plan will
cover the full cost of ensuring any development on the
Civic Precinct site is quake-resistant.
Options for future accommodation for the public
library, governance, customer services and office
accommodation will be determined based on a
masterplan for the Civic Precinct along with a full
business case.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 11Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
CLIMATE CHANGE
Napier City Council is assuming that the climate Medium There is a risk that climate changes Possible Major Council activities will build
change impacts on the City will fall somewhere (including increased temperature, appropriate mitigation responses
between the medium and high concentration pathway The pathway scenarios changes in rainfall patterns, If the impacts of climate change into infrastructure development.
scenarios from the Hawke’s Bay Regional Council, have been developed by increased frequency and severity have been underestimated or The Council will continue to
Gisborne District Council and Envirolink commissioned NIWA based on global of extreme weather events, and timeframes are too conservative, monitor climate change science
NIWA report ‘Climate Change Projections and Impacts climate models updated sea level rise) happen sooner than, Council will fail to meet levels of and the response of central
for Tairāwhiti and Hawke’s Bay’ (November 2020) for the publication of the or are worse than, expected. This service across many activities, government and adapt its
Intergovernmental Panel would mean city infrastructure is not but particularly in regards to response where required.
As part of this assumption, Napier City Council on Climate Change Fifth prepared to cope with the effects. Three Waters, public amenities
acknowledges the regional context for climate Assessment Report in Conversely, climate changes may in waterfront areas and parks
change management and adaptation; with Hawke’s 2013 and 2014. happen slower than predicted (either and reserves. Quality of life in
Bay Regional Council having declared a Climate The pathway scenarios due to uncertainty in forecasts, or Napier will reduce as a result, and
Emergency in June of 2019. do not take into account increased mitigatory action) meaning the integrity of property will be
possible new mitigation that changes to services and compromised. Increased pressure
activities like actively infrastructure happen prematurely. on, and potential damage to key
reducing gas emissions or infrastructure could place pressure
increasing carbon sinks. on Council finances.
Should the effect have been
overestimated, there is little
impact on the period of this Plan,
but it could result in unnecessary
spending in the long term.
PARKLANDS RESIDENTIAL DEVELOPMENT
The budget for the LTP assumes the sale of 305 Low That the sales are higher or lower Unlikely Moderate Sale data will be regularly
residential lots in the Parklands development. This is than the annual forecast compared reviewed, with supply and pricing
based on the past sales and the amount of Council to the Long Term Plan. Customer demand and availability reviewed if necessary.
owned land zoned for the development. of builders has a direct impact on
the number of lots offered and the
The land available is expected to be exhausted in actual sales completed. These
year 6 (2026/27) of this plan and revenue from the factors are indirectly impacted
development will cease at this point. by the national economy for
better or worse. Higher or lower
sales than budgeted will impact
on revenue and cash reserves.
Special projects for Council that
are funded from this source may
be delayed if this funding is not
available.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 12Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
DEVELOPMENT AND FINANCIAL CONTRIBUTIONS
The LTP budgets assume the revenue from infill, Low That the number of subdivisions Possible Moderate Council will manage the financial
greenfield and rural lots levied under the District actioned are higher or lower than the implications as far as possible by
Plan will come from Financial Contributions. The annual forecast Slower subdivision rates than monitoring subdivision approvals
contribution received are to fund the growth/capacity Council funds infrastructure in projected will impact the revenue and timing.
cost of development. growth areas and growth does not from Development Levies/
Council may choose to incentivise residential eventuate. Financial Contributions and
developments in the CBD/CD fringe by reducing the consents and may result in
Financial Contributions charged for inner city living some of the cost of providing
where there is no additional demand on services. This the development being met by
will encourage the strategic outcome of City Living ratepayers
supporting a vibrant CBD.
The desirability of Development Contributions may
be revisited once the Heretaunga Plains Urban
Development Strategy review is complete.
THREE WATERS
The Government is reviewing how to improve the High It is highly likely that new regional Likely Major Council has signed the Three
regulation and supply arrangements of drinking entities will be established to take Waters Memorandum of
water, wastewater and stormwater. While there is responsibility for waste water and With the Government’s focus Understanding which will ensure
still significant uncertainty about the outcomes of the water supply during the period of on the three waters reform it is we keep abreast of policy and
review, it is assumed that Council will deliver Three this plan. It has been signaled that possible in the long term that legislative developments and
Waters services over the life of the LTP. Stormwater is to be included but the local authorities will no longer be should be able to plan for any
scope of this is not decided. responsible for these activities. financial and procedural impacts.
WATER STANDARDS
The Government has produced Exposure Drafts for High It is highly likely that Council will Likely Major Council is progressing with some
the new Drinking Water Standards. It is expected that need to comply with the new of the required improvements as
these will go through largely unchanged and this will standards within one year of the new This leads to discussion around part of the 3W Reform Tranche
have implications on treatment and monitoring for the standards coming into force. This short and long term options for 1 funding which will start Council
supply is likely to force Council to provide configuration of councils supply. on the journey. Additionally
additional treatment at all bores. If I.e. implementing short term alternatives are being provided in
this is not achieved the supply could treatment solutions at existing the LTP to determine which is the
become non-compliant and further bore sites or fast tracking best way forward.
action from the regulator could outcomes for Councils Water
result. Master Plan and providing a
robust solution that provides for a
resilient, future proofed network.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 13Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
COVID-19 ALERT LEVELS AND BORDER RESTRICTIONS
This plan assumes that New Zealand is able to Moderate That significant community Possible Major Napier City Council can mitigate
contain any further significant community transmission transmission is detected either in impacts on organisational
of COVID19, and remains at Alert Level 1 throughout New Zealand or in Hawke’s Bay, A majority of Council’s workforce productivity to an extent by having
2021. It is assumed that vaccination of essential staff and the New Zealand Government be required to work from home. a workforce equipped to quickly
and border workers will begin in the second quarter of moves either the whole country or Essential service personnel transition to working from home.
2021, and vaccination of the general public to begin in the Hawke’s Bay region is subject to working (predominantly out of
the second half of the year. further lockdowns and restrictions on Napier City Council’s depot, but Napier City Council will take a
movement. This would impact upon also including staff at specific continuous improvement approach
As in the Pre-election Update, border restrictions both Council activities and services, facilities like the Aquarium) would to emergency preparedness and
are assumed to start easing from 1 July 2021 and and the emotional, physical and be require increased levels of business continuity planning.
to be lifted on 1 January 2022. Is it predicted that financial wellbeing of our community. PPE and possibly need to change
international visitor numbers will not recover to pre- times and places of work in order There is a national vaccine
COVID-19 levels until 2023. to effectively socially distance. programme being undertaken to
Both situations would disrupting reduce the level of infection across
business and usual and reduce the community in the future.
productivity.
Staff time and resources would
likely need to be diverted to
helping residents in acute difficulty
due to business closures, job
losses or poor health. Initiatives
may include rates remissions/
postponements, support for social
services, emergency funding and
welfare calls and visits.
COVID-19 ECONOMIC RECOVERY
While the COVID-19 restrictions saw a quarterly High The risks are twofold; that GDP Possible Moderate Preparing an annual budget and
decline in GDP of 12.2% in the June quarter of 2021, recovery is slower than anticipated resetting rates combined with
recovery has been swift. This plan assumes New New Zealand’s economic and/or that the peak national If GDP recovery is slower than a triennial review of the LTP
Zealand’s economy recovers to pre-COVID-19 levels outlook is highly uncertain unemployment rate exceeds 6.9%. predicted, the Napier community mitigates this risk and potential
of activity by early 2022, as per the Reserve Bank’s and will be dependent on could face longer periods of lower effects.
Monetary Policy Statement of November 2020. global health outcomes incomes, high unemployment
and the return of and low investment. This impacts
It is assumed that the national unemployment rate international tourism. on people’s ability to pay rates,
will peak at a forecast 6.9% by the end of 2021. reduces revenue for Council-
Once border restrictions are eased and economic owned business and tourism
activity continues to recover, the unemployment rate activities and could stagnate
is forecast to fall gradually, reaching 4.0% by the end new residential development and
of 2025, as per the Half Year Economic and Fiscal business innovation. Projected
Update (December 2020) from The Treasury. rates rises may need to be
revisited, or significant capital
projects either rescheduled,
rephrased or alternative funding
sought.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 14Consequence of uncertainty/
Assumption Level of Uncertainty Risk Risk Likelihood Mitigation
risk on the integrity of the LTP
COVID-19 IMPACTS ON COUNCIL BUDGET
No significant financial impacts have been noted Moderate NZ returns to COVID19 alert level 4 Possible Major ($1m-$5m) Council can use loan funding to
from Covid-19 in the LTP. This is based on actual for a considerable period of time. minimize any financial impact and/
results since the pandemic closures began in March There has been very That international visiting groups that A return to COVID19 alert level or reduce levels of service.
2020 when local and national visitor numbers have little financial impact on are booked at the Municipal Theatre 3 or 4 would impact the tourism
increased and offset most of the international gap. the tourism business are unable to enter the country due business units (depending on the
units since returning to to restrictions. period of the lockdown). Lower
COVID19 Alert Level 1 That Alert Levels impact on visitor numbers would result in
conferences and events being held lower revenue
at the Napier War Memorial Centre.
HAWKE’S BAY REGIONAL AIRPORT
It is assumed that Hawke’s Bay Airport will not Low Community transmission of Covid19 Possible Moderate New Zealand is implementing
experience any further significant reductions in resulting in further lockdowns within stringent border controls
passenger numbers as a result of COVID19 travel the community, reducing traveller Napier City Council holds a 26% for international arrivals to
restrictions, however will continue to operate at a loss numbers and extending the period share in the airport along with manage the risk of community
for 2020/21 and 2021/21 and mean that shareholders of time during which the airport the Crown and Hastings District transmission, and is assumed
do not receive dividends for the foreseeable future. continues to operate at a loss. Council, and usually receives an that public vaccination will begin
The Hawke’s Bay Airport Statement of Intent for the annual dividend. In 2019, the total in the second half of 2021. Napier
2021 Financial Year states that “HBAL is forecasting dividends paid was $577,990, City Council has not anticipated
losses for the first two years of the post Covid-19 however no dividends were paid receiving dividend money until
recovery period which makes the prospect of any in 2020 due to the economic 2025.
dividend payments unlikely until FY2022/23”. Napier impact of COVID19. The Airport
City Council’s forecast anticipates that dividend is predicting that further dividends
payments will not commence again until 2025. will not be payable until 2022/23;
Napier City Council has taken
a more conservative approach
and is not anticipating dividend
payments until 2025. Future
lockdowns and disruption to
tourism could push this timeframe
back even further.
NAPIER CITY COUNCIL - 2021-31 LTP SUPPORTING DOCUMENT | STRATEGIC DIRECTION 15You can also read
