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Operating Levies
· Section
4.1 of the Museum's plan (Attachment A) includes a concise summary of the
levy funding decisions over recent years.
“The level of operational levy increase
requested from contributing local authorities is 5.4%.
The funded depreciation has been removed from the
operating budget for the next 5 years and included as part of the capital
budget funded by the contributing local authorities.
The base operating deficit for the 2024/25 financial
year is ($527,486) with a net operating deficit, including self-generated
income, of ($2,099).
In 2020 Christchurch City Council advised that they
were trying to achieve substantial savings across the board, largely as a
result of the Covid-19 pandemic, and requested a 0% levy increase. The
resulting levy increase for 2021/22 and 2022/23 was 0.29% (effective 0% for
CCC) and 0.65% (effective 0% for CCC) respectively. In 2023/24 the Board
approved a budget increase of 22% for consultation. After meeting with the
Councils Consultative Committee, it was agreed that depreciation for the next
five years will be capitalised and added to the redevelopment project funding
in each contributing council’s long-term plan. Payment of this portion
of the ‘operating levy’ as capital means Councils can borrow and
thus lessen their load on rates. This resulted in a 4.5% increase in
operating levies for 2023/24.
Whilst it would be preferable for the base operating
result to be break-even, the Museum has agreed that we will aim for a
break-even scenario after the self-generated revenue/expenditure.”
· Section
4.1 also provides the key forecasting assumptions applied to the Museum's
levy-funded operations.
· The
increases indicated are consistent with previous years projections and workings
and are aligned with Council's funding in the Draft LTP. In FY2028 The
forecast indicates a 7.3% increase which is largely driven by staff increases
ahead of moving back to Rolleston Ave.
· At
the adoption of the 2023/24 Annual Plan Council agreed in principle to
removing the funding of depreciation from the rates-funded operating levy and
adding it to the future year debt-funded capital levy related to the Museum’s
redevelopment. This has been reflected in the Draft LTP Capital Grants.
· Funded
depreciation is signalled to be reinstated as part of the annual operating
levy calculations following the reopening of the Museum in late 2028. This increases
to an additional $5.9m between FY 2029 and 2031. This mechanism allows the
Museum to build an Asset Replacement Reserve for future year capital
renewals.
·  Section
6 of the Museum Plan Provides a seven-year forecast and outlines the key
funding assumptions in the redevelopment forecasts.
· Council's
share of operating and capital levies have been checked and agreed to the
Draft LTP Assumptions up to 2030 based on the Museum’s preliminary
forecasts provided in December. The LTP forecasts need to be updated from
2031 in the final LTP for additional levy-funded depreciation on existing
assets that was omitted from the earlier draft forecast received.
· Before
the next LTP the Museum and CLAs will collectively review the levy-funded
depreciation methodology. This has been set out in a draft Museum Asset
Replacement Principles document. The Museum needs a mechanism to
accumulate a sinking fund for asset renewals that balances the impact on
ratepayers for short-to-medium asset lives versus any future redevelopment of
the more permanent structures.
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