Agenda of Council Annual Plan - Wednesday, 12 February 2025

3. Draft Annual Plan 2025-26
Reference Te Tohutoro:	24/2254465
Responsible Officer(s) Te Pou Matua:	Peter Ryan, Head of Corporate Performance & Planning
Accountable ELT Member Pouwhakarae:	Bede Carran, General Manager Finance, Risk & Performance / Chief Financial Officer

1. Purpose and Origin of the Report Te Pūtake Pūrongo

1.1 The purpose of this report is to present to the Council for consideration and adoption:

· The Draft 2025/26 Annual Plan, including attached documents;

· The Draft 2025/26 Annual Plan Consultation Document; and

· The Draft 2025/26 Annual Plan consultation and engagement process to be undertaken.

1.2 The Council is required to prepare and adopt an Annual Plan for each financial year (s.95(1) Local Government Act 2002). The purpose of the plan is to:

· contain the proposed annual budget and funding impact statement for 2025/26;

· identify any variation from the financial statements and funding impact statement in the Council’s Long-Term Plan for 2024-34;

· provide integrated decision-making and co-ordination of the Council’s resources; and

· contribute to the accountability of the Council to the community.

1.3 The decisions in this report are of high significance in relation to the Christchurch City Council’s Significance and Engagement Policy. The Council’s Draft Annual Plan for 2025/26 varies to some degree the information contained in the Long-Term Plan (LTP) 2024-34 for that year. Individually, these changes may not be regarded as being significant or material, however collectively they are significant when the relevant factors in Council’s Significance and Engagement Policy are considered.

2. Officer Recommendations Ngā Tūtohu

That the Council:

1. Receives the information in the Draft Annual Plan 2025-26 report.

2. Notes that the decisions in this report are of high significance in relation to the Christchurch City Council’s Significance and Engagement Policy.

3. Notes the Recommendations of the Council’s Audit and Risk Management Committee at its meeting on 10 February 2025, (Attachment A of this report to be provided under separate cover).

4. Approves and adopts for consultation the information contained or referred to in the staff report which provides the basis for the Draft 2025/26 Annual Plan, together with any amendments made by resolution at the meeting, and which includes the following attachments of this report:

a. Financial Overview, including financial changes to that contained in the Long-Term Plan 2024-2034 (Attachment B).

b. Funding Impact Statement (Attachment C).

c. Rating information (Attachment D)

d. Financial Prudence Benchmarks (Attachment E).

e. Proposed Capital Programme, including schedule of changes to LTP (Attachment F).

f. Proposed minor changes to Levels of Service (Attachment G).

g. Proposed Fees and Charges (Attachment H).

h. Prospective Financial Statements (Attachment I).

i. Reserves and Trust Funds (Attachment J).

j. Capital Endowment Fund (Attachment K).

k. Summary of Grants (Attachment L).

l. List of properties for seeking the community views and preferences as to their future use (Attachment M).

5. Approves and adopts for public consultation the Consultation Document for the Draft 2025/26 Annual Plan (Attachment N of this report to be provided under separate cover).

6. Approves the following process for the Draft 2025/26 Annual Plan consultation:

a. All relevant information and documents, including the Consultation Document, be made available on the Council’s website from 26 February 2025.

b. Hard copy information and documents to be made available at Council libraries and service centres from 26 February 2025 onwards.

c. The period for making submissions will run from 26 February 2025 to 11:59pm on 28 March 2025.

d. For people who indicate they wish to present oral submissions, hearings will be held in in April 2025 (exact dates will be confirmed and communicated to those submitters closer to the time).

7. Authorises the General Manager Finance, Risk and Performance/CFO to make any non-material changes to the Draft 2025/26 Annual Plan documents and/or information attached to or referred to in the staff report.

8. Notes that the Council will meet on 26 June 2025 to adopt the final Annual Plan 2025/26.

3. Executive Summary Te Whakarāpopoto Matua

3.1 Annual Plan workshops were held from August through to December 2024. These workshops, (many publicly live-streamed), sought guidance from the Council by presenting issues and options around proposed changes to major infrastructure activities, (Three Waters, Parks, Transport, as well as other activities), and the financial position and financial changes / impacts since the Long-Term Plan 2024-34 (LTP) was approved in June 2024.

3.2 Information and staff advice on a variety of proposals carried forward from the LTP process were presented at the workshops. Guidance was received and has been incorporated into the preparation of the Draft Annual Plan.

3.3 At its meeting on 10 December 2024, the Council confirmed the framework, direction and specific content of the Draft 2025/26 Annual Plan. This included:

3.3.1 An overall rates increase of 8.93%

3.3.2 Using $6 million of subvention receipts to reduce the rates increases

3.3.3 Using $6 million of forecast current year (2024/25) operating surplus to reduce the rates increases and reduce debt

3.3.4 Adding $1.1 million to enable district plan changes

3.3.5 Inclusion of additional rating of $5/10/15 million (plus inflation) over three years to help meet the balanced budget benchmark by 2027/28

3.4 Further and full details of the outcomes of the 10 December meeting follow in this report.

3.5 Since that date, staff have collated Council feedback in creating the Draft Annual Plan documents presented in this report.

4. Background/Context Te Horopaki

4.1 In accordance with the Local Government Act 2002 (LGA), the Council adopted its LTP 2024-34 in June 2024. The LTP sets out service delivery and associated levels of service, capital programmes and budgets over that ten-year period. The LTP was based on several key Council directions including:

· That levels of service would not be reduced.

· That the core capital programme (excluding One New Zealand Stadium at Te Kaha) would increase from $483 million in 2023/24 to $668 million 2026/27.

· That the One New Zealand Stadium at Te Kaha would be completed and hosting events by the beginning of the 2026/27 financial year.

· Staff would be recruited for the new Parakiore Recreation and Sports Centre.

· Asset renewals would be sustainable.

· That a variety of climate resilience and environmental initiatives / grants would be funded.

4.2 The LTP also factored in inflation (at 3.64%) based on BERL forecasts (BERL being the Cost Price Index (CPI) for local authorities).

4.3 The purpose of an Annual Plan is to provide a one-year schedule of updates to the LTP, if any are required by changing circumstances. Further points to note in respect of an Annual Plan are:

4.3.1 Annual Plans are not designed as a mechanism to revisit the entire LTP. That requires an amendment to the LTP, which also requires (among other matters) that the amended LTP be audited.

4.3.2 Where that list of updates is not material (as is sometimes the case in the first year after an LTP is adopted) a local authority may opt to not consult on its Annual Plan.

4.3.3 Annual Plans, being limited in scope relative to an LTP, are not required to be audited.

4.4 Development of the Draft Annual Plan 2025/26 included addressing the following matters:

4.4.1 Fluctuations and revisions of the BERL inflation forecasts.

4.4.2 The settlement of the Christchurch Wastewater Treatment Plant (CWTP) fire insurance.

4.4.3 Decrease in insurance premium costs.

4.4.4 Increases in general operating costs.

4.4.5 Increases in staffing costs.

4.4.6 Changes in various other financial charges since the adoption of the LTP.

4.4.7 Proposed Taumata Arowai and Commerce Commission levies to be introduced to enable regulatory oversight of water services.

4.5 On 27 August 2024, the first Council workshop on the Annual Plan process was held. A range of options were presented that included amending the LTP (which is a significant undertaking including an audit), an annual plan that incorporated only minor changes to the LTP necessary to keep it current along with some limited additional initiatives, or an Annual Plan that had only minor changes necessary to keep it current and not requiring consultation. The following guidance/direction was given:

4.5.1 That levels of service would be maintained.

4.5.2 There would be no amended LTP process (which at its full extent can involve amending the Financial and Infrastructure Strategies from the LTP, as well as levels of service, projects and budgets for the remaining nine-year period).

4.5.3 That the Annual Plan reflect the minor changes to the Long-term Plan as agreed on 27 June 2024.

4.5.4 That consultation on those changes would be carried out.

4.6 It was also noted at the workshop on 27 August 2024 that no budget has been set aside for a second (additional) LTP audit process to take place, particularly given the LTP 2024-34 had been adopted only some months earlier. A full audit typically costs approximately $300,000 (plus GST).

4.7 Nine subsequent Council workshops, both public and public-excluded, were held on the following dates: 24 September, 1 October, 15 October, 22 October, 29 October, 5 November, 12 November, 19 November, and 26 November 2024. These workshops are not formal meetings of Council, and no decisions were made.

4.8 At these workshops, staff received guidance from Council on topics covering:

4.8.1 Incorporation of LTP carryover actions in the Annual Plan.

4.8.2 Changes to the Capital Programme – primarily for Parks, Three Waters, and Transport.

4.8.3 The likely rates increase for 2025/26.

4.8.4 Options to reduce rate increases.

4.8.5 Updates on financial position.

4.8.6 Properties proposed for disposal, for seeking the community views and preferences as to their future use.

4.9 Additionally, the following topics came up at several times during the Workshops, but following direction from Council, have been excluded from consideration for the Annual Plan:

4.9.1 Reducing Levels of Service (LoS) - During the development of the LTP, the city-wide, What Matters Most, survey identified a clear preference from the community for Council services to be maintained. This is consistent with the strong community views received when level of service cuts have been proposed and consulted upon in previous LTPs, noting:

· This became clear guidance from a majority of councillors during an LTP workshop and was subsequently reflected and formally adopted in the LTP.

· Altering significantly levels of service for a significant activity triggers amendments to the LTP (there is a range up to fully amending the whole LTP), and Council provided clear guidance on process at its workshop of 27 August 2024 that explicitly ruled out using the Annual Plan as a mechanism for significant amendment of the LTP or triggering an audit process.

· Non-front line levels of service (around finance, procurement and related internal functions) have been heavily rationalised in several previous LTPs and Annual Plans.

· That material savings to offset the proposed rates increase are most likely to come from changes to significant Levels of Service for significant activities, which triggers an LTP amendment, and, conversely, changes to non-significant Levels of Service are unlikely to yield material savings.

· That, as a result, materially reducing Levels of Service has not been looked at as a viable cost-saving measure in the context of developing an Annual Plan that does not trigger a costly amendment of the LTP 2024-34.

4.9.2 Delaying renewal and replacement programmes (‘sweating the assets’) – a resolution at the 10 December 2024 meeting was for advice on putting a hold on all non-essential maintenance/renewals in council facilities (i.e. painting, carpet, kitchen and bathroom fit outs etc). Staff understand that when necessary repairs and maintenance are undertaken, it is an opportunity for minor cosmetic replacements to be undertaken at a marginal and minor cost and this is looked at on a case-by-case basis.

4.10 Taking all the above information into consideration, at its meeting on 10 December 2024, the Council made decisions about what to include in the framework of the Draft Annual Plan, including:

4.10.1 A rates increase of 8.93%, comprising 8.48% as per year 2 of the 2024-34 Long-Term Plan, a further 0.28% being Central Government imposed costs for water services regulators, 0.15% for increased capacity to support amendments to the District Plan and several minor changes.

4.10.2 The use of $6 million of subvention receipts to reduce the rates increases; and

4.10.3 The use of $6 million of the forecast current year (2024/25) operating surplus to reduce the rates increases ($3.35 million) and reduce debt ($2.65 million).

4.10.4 Acknowledgement of a breach of the balanced budget financial prudence benchmark for 2025/26 (and 2026/27, as indicated in the LTP).

4.10.5 Inclusion of additional rating of $5/10/15 million (plus inflation) over the next three years to enable the balanced budget benchmark to be met by 2027/28. While the LTP showed the 2026/27 benchmark as not met, latest modelling shows that without this increase the next four years are at risk. The additional rates will be applied to funding asset renewals in lieu of borrowing to reduce interest and debt repayment costs. It should be noted that the balanced budget benchmark is one of a number of regulatory measures that indicates financial prudence.

4.10.6 Other material variations to the LTP can be found in section 5 of the Report.

4.11 It was also decided that the following topics would be explored further/consulted upon as part of the consultation process:

4.11.1 Cathedral Targeted Rate - given the Cathedral’s reinstatement project being paused, the draft Annual Plan proposes pausing the collection of the remaining three years of the Cathedral targeted rate (a fixed charge of $6.52 per annum per separately used or inhabited property). The existing ringfenced funds will be held and continue to earn interest in the interim. As previously advised, the community should be consulted about the proposed change to the Cathedral targeted rate.

4.11.2 Postponing the completion of the Wheels to Wings cycleway in favour of implementing selected portions of the project.

5. Financial Implications Ngā Hīraunga Rauemi

Rates

5.1 The Draft Annual Plan includes a rates requirement (excl GST) to be levied of $838 million.

5.2 The proposed average rates increase to all existing ratepayers of 8.93% is slightly higher than the 8.48% forecast in the 2024-34 Long Term Plan. Details of the makeup of the rates increase is shown in Attachment O.

5.3 The increases for the average property based on capital value in the three sectors is:

· Residential 8.64%

· Business 9.88%

· Remote Rural 10.63%

5.4 The average house will have a proposed rates increase of $6.59 per week. Full details of rates, including the total rating requirement for general and targeted rates, and indicative rates for sample properties, are provided in the Funding Impact Statement (Attachment C).

5.5 Ratepayers will be able to see a forecast of the 2025/26 rates for their specific property by visiting Council's website using the "rates search" tab from 26 February 2025 (the date for opening of consultation).

5.6 The proposed Uniform Annual General Charge is $197 (incl GST). It has increased from $177 based on the average increase in general rates. The proportion of total rates revenue to be collected from fixed charges (rather than based on capital value) will decrease from 8.40% to 8.05%. Full details of rates information are shown in Attachment D.

Expenditure

5.7 Operational expenditure of $718.5 million is $23.8 million above the level forecast in the LTP principally due to:

5.7.1 An increase in staff salaries and wages costs of $8.0 million, due to pay equity, living wage and contract settlement adjustments resulting in increased payroll costs. It should be noted that (excluding pay equity and the positions requested by Council) the majority of the increases have been offset by additional revenues or budget reductions.

5.7.2 Additional inflation over that provided for in the LTP ($6.5 million).

5.7.3 Additional water services maintenance costs identified, primarily as a result of contract rates increases greater than inflation provided for, and additional capital projects being completed, which will result in consequential operational costs to maintain ($4.1 million).

5.7.4 Higher Burwood Landfill operating costs ($4.8 million) due to an extension of the consent, allowing operations to continue longer than planned in the LTP (offset by increased revenues).

5.7.5 Reduction in staff cost capitalisation of $3.7 million following a review of costs that can be capitalised, primarily relating to software development.

5.7.6 Proposed Taumata Arowai ($1.6 million) and Commerce Commission ($0.5 million) levies to be introduced to enable regulatory oversight of water services.

5.7.7 Additional digital contract and software cost increases over and above inflation ($1.1 million).

5.7.8 Additional $1.1 million of resourcing, internal staff and external commissioners, to enable district plan changes.

5.7.9 Additional service allowance costs ($0.4 million) due to a change in terms for the staff salary & wages collective agreement and an increased number of staff on the collective agreement.

5.7.10 Additional postage costs of $0.4 million for the 2025/26 local government elections due to price increases over and above inflation.

5.7.11 Additional noise control contract costs of $0.4 million for additional resources due to levels of service not being met with existing resourcing.

5.8 These proposed increases are partially offset by a reduction in insurance premiums of $9.2 million, following representations to insurance brokers.

5.9 Gross interest costs are $6.4 million lower than projected in the LTP due to lower interest rates and debt levels, noting $3.5 million of this decrease relates to on-lending to subsidiaries which is recovered as interest revenue.

Revenue

5.10 Total revenue (excluding rates) of $381.0 million is $30.1 million lower than that projected in the LTP. The revenue changes from the LTP are:

5.10.1 Reduced interest revenues, due to lower interest rates ($3.5 million).

5.10.2 Reduced Waka Kotahi capital subsidies ($11.2 million) due to an overstatement in the LTP.

5.10.3 Reduced Shovel Ready and MCR capital funding ($32.0 million) due to an overstatement the LTP.

5.11 The reductions in revenue have been partially offset by:

5.11.1 Additional Solid Waste revenue of $6.8 million.

5.11.2 An additional planned $6.0 million of subvention receipts.

5.11.3 An additional $1.6 million of regulatory compliance revenues, relating to resource management consents ($0.9 million), building consents & inspections ($0.3 million) and Food Safety & Health ($0.4 million).

5.11.4 An additional revenue from other activities of $2.2 million.

Surplus, operating deficits, and sustainability

5.12 The Draft Annual Plan for 2025/26 shows an accounting surplus of $227.3 million before revaluations, and includes vesting assets of $245.7 million which includes Parakiore. After adjusting for capital revenues, which fund capital expenditure and taking into account rating for renewals rather than depreciation, the Draft Annual Plan is based on a balanced funding budget, effectively ensuring cash operating costs are met from operating revenue.

5.13 The operating surplus for the current financial year (2024/25) is forecast (as at 31 December 2024) to be $19.8 greater than budget. Of this $6.0 million, primarily as a result of savings in insurance costs, has been identified as being available to be carried forward. The Draft Annual Plan proposes applying this portion of the forecast operating surplus in the following way:

5.13.1 $2.65 million used to reduce current year borrowing, thereby reducing the opening debt position and lowering future interest costs and debt repayment and therefore rates.

5.13.2 $3.35 million applied to reduce rates in the 2025/26 financial year.

5.13.3 Staff will provide advice to Council, so direction can be given, on the balance of any actual operating surplus at year end.

Capital programme expenditure

5.14 Council plans to invest $735.4 million in the capital programme in 2025/26, an increase of $29.6 million from that shown in the LTP.

5.15 The capital programme has been reviewed with a focus on deliverability, to ensure ratepayers are not levied in advance of funds being required. Key factors taken into account when considering deliverability were:

· Supply chain issues – including resources, materials and labour.

· Cost escalation/inflationary pressure.

· Human resource availability (internal and external).

5.16 The additional capital programme expenditure proposed in 2025/26 compared to the LTP mainly relates to the following:

Community Facilities

· An additional $75,000 opex for a feasibility assessment for a skate park upgrade including a potential vert ramp at Washington Skatepark or an alternative venue, so in the future Ōtautahi Christchurch may be able to host national or international skate events.

· Re-timing of $9.5 million of Jellie Park renewals to 2026/27.

Three Waters

· Additional $10.2 million of water supply mains renewals programme works.

· Re-timing of $6.0 million for the Akaroa wastewater treatment plant from 2025/26.

· Reprioritisation of the Addington Brook Filtration Devices bringing $5.0 million budget forward from 2030/31.

· Reprioritisation of the Highsted Styx Mill Reserve Wetland bringing $3.4m budget forward from 2028/29.

· Re-phasing to 2026/27 of $16.2 million for the Christchurch Wastewater Treatment Plant activated sludge plant.

· Re-phasing to 2027/29 of $8.8 million for the Christchurch Wastewater Treatment Plant biogas storage upgrade.

Transport

· Proposing to stage the delivery of the Papanui ki Waiwhetū Wheels to Wings major cycle route which includes:

- linking the Te Ara O-Rakipaoa Nor'West Arc and Puari ki Pū-harakeke-nui Northern Line major cycle routes, and installing a signalised pedestrian crossing on Harewood Road, between Matsons Avenue and Chapel Street ($4.2M);

- Installing traffic lights at the Harewood Road, Gardiners Road and Breens Road intersection, and installing a signalised pedestrian crossing on Harewood Road at Harewood School ($5.5M); and

- Noting that the remaining construction programme is yet to be finalised and will be confirmed through future Annual Plans or Long-Term Plan processes.

· Proposing to defer the Lincoln Road Public Transport project while working on a business case for NTZA funding from 2026 – 28 to 2029 - 30.

· An additional $2.5 million has been added in to 2025/26 and $1 million into 2026/27 to enable us to complete the Te Aratai Cycle Connection project.

· An additional $1.5 M has been allocated across 2025/26 and 2026/27 to enable us to complete the Simeon Street Cycle Connection Project.

Capital programme funding

5.17 The capital programme is funded by; subsidies and grants for capital expenditure, development contributions, proceeds from sales of surplus land, rates and debt. In 2025/26 Council will rate for $221 million of renewals which is consistent with the Financial Strategy.

Borrowing

5.18 Council’s borrowing at 1 July 2025 is forecast to be $119 million lower than forecast in the LTP. The Draft Annual Plan proposes to include new borrowing in 2025/26 of $442.7 million, an increase of $66.3 million on the LTP, largely reflecting lower capital revenues.

5.19 Debt repayment at $82.1 million is $1.8 million lower than the LTP due to lower capital programme borrowing in 2024/25. The reduction in borrowing arose primarily from receipt of the insurance settlement for the Christchurch Wastewater Treatment Plant.

5.20 Gross debt as 30 June 2026 is expected to be $3.17 billion, $52 million lower than planned in the LTP as a result of the opening position and movements noted above.

5.21 In accordance with Council’s financial strategy, the Draft Annual Plan ensures prudent and sustainable financial management of Council’s operations including that it will not borrow beyond its ability to service and repay that borrowing.

6. Significant Assumptions

6.1 Significant assumptions used to develop and inform the LTP were reviewed to ensure they remained current and applicable. There are no significant changes to assumptions used in developing the LTP. The level of uncertainty on a number of assumptions is lower than the LTP due to the one-year focus of the Annual Plan.

7. Financial Risk Management Strategy

7.1 The Council’s financial strategy and related policies applied in this Draft Annual Plan establish the framework for decision making to manage financial risks, including liquidity and funding, interest rate exposure and counterparty credit risk. They remain unchanged from the financial strategy and policies developed and approved as part of the LTP.

7.2 An important element in assessing the value of the Council’s risk management strategy are its five key financial ratios (two net debt, two interest and one liquidity). All key financial ratios are expected to be met in 2025/26. These are included within the Financial Prudence Benchmarks (Attachment E).

7.3 There are two Financial Prudence benchmarks not expected to be met in 2025/26; the Balanced Budget benchmark and the Debt Servicing benchmark.

7.4 The Balanced Budget benchmark measures if revenue is equal to or greater than operating expenses. It is forecast to now not be met in 2025/26 due to significantly lower capital revenues than were planned in the LTP. The underlying reason for the benchmark not being met is that rates do not fully fund asset renewals until 2032, noting that the Council’s financial strategy forecasts that rates will not fully fund renewals until near the end of the LTP period.

7.5 The Debt Servicing benchmark (borrowing costs as a percentage of revenue being less than 10%) is forecast to not be met for 2025/26. It is forecast to be 11.8%. This benchmark includes interest costs relating to debt that is on-lent to subsidiaries and funded by them. This accounts for 23% of Council’s interest costs. If an adjustment is made that reverses out the effect of the back-to-back loans with subsidiaries (primarily Christchurch City Holdings Ltd), Council’s ratio would by 9.4%. This is within the 10% benchmark. There is no concern around the ability of any of the subsidiaries to service the debt.

7.6 Staff note that Council remains comfortably within the parameters of its financial strategy and the Draft Annual Plan does not depart in any significant way from what was forecast for Year 2 of the LTP.

8. Fees and Charges

8.1 A schedule of proposed Fees and Charges is included (refer Attachment H). In recommending the proposed fees, staff have been conscious of the financial pressure on residents and ratepayers and have attempted to avoid increases that would create a barrier to the community’s utilisation of Council’s services.

8.2 As a result of the above, limitations imposed by the market, and the varying inflationary impacts on costs and limits on cost recovery, fee increases proposed for 2025/26 vary but generally align to expected Council inflation of 4.1%.

8.3 Proposed Trade Waste charges contain a change in methodology that is being consulted on.

9. Changes to Levels of Service

9.1 There are proposed minor changes to five Measures of Success and targets (levels of service) accompanied by rationale (refer Attachment G).

9.2 In summary the changes are;

9.2.1 Water Supply (1): to reflect that Taumata Arowai now receives and reviews the Water Safety Plans, not the Ministry of Health.

9.2.2 Water Supply (2): Measures of Success previously focussed on installation of testable devices into high hazard and medium hazard properties. Focus will now be on annual testing of the backflow prevention devices, and the maintenance of a register to record the location of all point of supply testable backflow prevention devices, device types, assessed risk levels and the results of testing.

9.2.3 Digital (2): to reflect a change in the method of survey for measuring internal customer satisfaction, and discontinuation of a Measure of Success monitoring internal business value perceptions.

9.3 The minor changes are for administrative purposes and do not require consultation with the community.

10. Changes to Revenue, Financing and Rating Policies

10.1 There are no policy changes proposed to the Revenue, Financing and Rating Policies as part of the Draft Annual Plan.

11. Potential Disposal of Council Owned Properties

11.1 The Council owns many types of properties of varying configurations and sizes. Owning property comes at a cost, and it is good financial practice to frequently review the portfolio to ensure it remains fit for purpose. If a property is no longer fit for purpose, then Council should decide whether to keep it or release its value for community benefit.

11.2 Since 2021 the Council has when appropriate included in its draft LTPs and Annual Plans a small portfolio of properties to be considered for disposal. The properties have been put forward for consideration on the basis they were no longer delivering the original activity or service for which they were purchased.

11.3 It is intended to replicate the process in this Annual Plan for a small number of properties which have been identified as no longer used for the purpose for which they were originally acquired. These have been assessed against and are considered to meet the following criteria adopted by the Council at its meeting of 10 December 2021:

11.3.1 Is the full property still required for the purpose for which it was originally acquired?

11.3.2 Does the property have special cultural, heritage or environmental values that can only be protected through public ownership?

11.3.3 Is there an immediate identified alternative public use / work / activity in a policy, plan or strategy?

11.3.4 Are there any strategic, non-service delivery needs that the property meets and that can only be met through public ownership?

11.3.5 Are there any identified unmet needs, which the Council might normally address, that the property could be used to solve? And is there a reasonable pathway to funding the unmet need?

11.4 A list of those properties considered suitable to be put forward for incorporation in this draft Annual Plan for consultation purposes can be seen at Attachment M.

12. Funding of Asset Renewals (Rating for Renewals)

12.1 At its meeting on 10 December 2024 Council resolved to consider increasing the amount rated for renewals as part of the consultation for this draft Annual Plan.

12.2 The purpose of this resolution is to consider how much of the renewals work is funded by rates, which has a direct impact on the rates increase, and how much is funded by long-term debt, which spreads the cost over many years. For completeness, one point to note, is that increasing the rates collected for renewals does not increase the level of renewals. The discussion on rating for renewals is essentially a funding issue that addresses the proportion of the renewal work that is funded by either rates or debt.

12.3 Council currently borrows some of the cost of its annual asset renewal programme, approximately $125 million. Since 2015 Council has been on a trajectory to fully fund its renewals from rates by 2031. The rationale for fully funding renewals is that current ratepayers will be meeting the full cost of renewing or replacing existing assets and are not passing that cost on to future generations.

12.4 To reduce the rates increase in last year’s LTP, Council reduced the level of rating for asset renewals in the first two years of the LTP. That meant Council would now not reach its target of fully funding renewals from rates until 2032, a year later than originally planned.

12.5 While extending the time frame for fully funding renewals from rates has the effect of reducing rates in the current year, there are also longer term effects. Any amount not rated for renewals is funded by borrowings. Over the remaining period of the LTP net borrowings will increase by $93 million through to 2031, which results in an additional $19 million in interest costs during that period. It also contributes to Council having an unbalanced budget for the next four years when combined with the reduction in capital revenues which were overstated in the LTP.

12.6 To reduce the unbalanced budget period to two years, additional rating for renewals into proposed plans over the next three years (approx. $5, 10, 15 million inflated) has been budgeted. The recommended Draft Annual Plan 2025/26 includes the $5 million. This is forecast to enable a balanced budget from 2027/28. If the increased rating for renewal is then flatlined to 2031 the additional borrowing is effectively eliminated. Additional interest costs are reduced to approximately $6 million and are due to extending the period to fully funding renewal from 2031 to 2032. While this causes slightly higher rates increases through to 2027/28, staff advice is that this is consistent with the financial strategy.

12.7 In the alternative, if Council is considering additional rating for renewals, $1 million of additional rating will reduce borrowing by $1 million and have the following financial impact between 2026 and 2031:

Change in Rates

$ Impact over 2026 - 2031

$1 million increase in each of the 6 years to 2031

Rates impact 0.13% in 2025/26

Interest saved

Debt repayment avoided

Overall rates saving

0.81 million

0.5 million

1.31 million

$1 million increase 2025/26 only

Rates impact 0.13% in 2025/26 reversed in 2026/27

Interest saved

Debt repayment avoided

Overall rates saving

0.25 million

0.16 million

0.41 million

13. Considerations Ngā Whai Whakaaro

Risks and Mitigations Ngā Mōrearea me ngā Whakamātautau

13.1 Key risks for the deliverability of the finalised Annual Plan are as follows:

13.1.1 Significant amendments or modifications of the Annual Plan at a late stage, preventing timely advice on proposed amendments being provided and all reasonable options being considered, and a risk that any significant changes will require an amendment to the LTP.

13.1.2 Deliverability of the capital programme.

· The LTP process generated debate on the capital programme ‘bow wave’ in local government and the deliverability of the core (non-Te Kaha) capital programme. This was finalised in the LTP at a core capital programme of $610 million for 2025/26.

· In the months since the LTP was adopted, carry-forwards (capital works not done in 2023/24) have been added ($36 million) and a variety of capital works have been ‘brought back’ from outer years. Actions carried over from the LTP added $4.5 million, boosting the current 2025/26 Annual Plan proposal by approximately $40 million.

· The graph below shows the actual capital delivery trend line (in green) with delivery of capital works at year end 2024/25 forecast to be $510 million, an historic high.

· It also shows the currently proposed Annual Plan core capital programme budget for 2025/26 at $646 million (in blue).

· The Project Management Office (PMO) forecasts also currently show a projected carry-forward of potentially $20 million into 2025/26 (ie a further net increase in the capital programme of approximately $20 million).

· Figure 1 Impact on LTP 24/34 Capital Programme of additions, carryovers and carryforwards in Annual Plan 25/26
The assumption that delivery can lift by at least $136 million over the course of a single year carries risk, especially if further capital works are added via the Annual Plan.

13.2 The Project Management Office (PMO) is currently leading a body of work on capital programme deliverability. This is in response to questions from the Finance & Performance Committee on the issue of deliverability of the capital programme. The purpose of the work is to provide clear evidence on deliverability for Council.

13.3 The above risks have been identified by the Project Team and are being managed through the general checklists and sign-offs by management, including significant forecasting assumptions, reviewed by the Audit and Risk Management Committee.

Legal Considerations Ngā Hīraunga ā-Ture

13.4 Statutory and/or delegated authority to undertake proposals in the report:

13.4.1 The Council must, at all times, have an LTP / Annual Plan in place (sections 93 and 95 of the LGA). The Annual Plan is required to be adopted prior to the year to which it relates (section 95(3) of the LGA).

13.5 Other Legal Implications:

13.5.1 The Council has a legal duty to ensure that each years projected operating expenses are set to achieve a balanced budget (section 100(1) of the Local Government Act 2002 (LGA)). Council can approve an unbalanced budget (in final Annual Plan adoption of June 2025) provided it resolves that it is financially prudent to do so, having regard to the relevant criteria set out in section 100(2) of the LGA.

13.5.2 As the current Christ Church Cathedral Targeted Rate (Targeted Rate) has been signalled in the funding impact statement and collected for a specific purpose ceasing to levy for the Targeted Rate is a valid approach subject to the appropriate consultation with the community.

13.5.3 There is no additional legal context, issue or implication relevant to this decision.

Strategy and Policy Considerations Te Whai Kaupapa here

13.6 The required decision aligns with the Strategic Framework adopted with the Long-Term Plan 2024-34.

13.7 This report supports the Council's Long Term Plan (2024 - 2034):

13.8 Internal Activities

13.8.1 Activity: Performance, Finance, and Procurement

· Level of Service: 13.1.1 Implement the Long-Term Plan and Annual Plan programme plan - Critical path milestone due dates in programme plans are met

Community Impacts and Views Ngā Mariu ā-Hāpori

13.9 This decision affects all residents and ratepayers of Christchurch, and has implications for current and future residents, ratepayers.

13.10 The decision affects all wards/Community Board areas. Pre-engagement with the Annual Plan process has occurred across all Community Boards.

13.11 Consultation on the Draft Annual Plan will commence on 26 February 2025.

Impact on Mana Whenua Ngā Whai Take Mana Whenua

13.12 The LTP 2024–34 saw consultation and engagement with Ngā Papatipu Rūnanga, which resulted in a wide range of initiatives being undertaken in the LTP. Those undertakings remain intact and are not proposed to be affected by the Annual Plan.

13.13 The decision will not impact on Council’s agreed partnership priorities with Ngā Papatipu Rūnanga.

Climate Change Impact Considerations Ngā Whai Whakaaro mā te Āhuarangi

13.14 The decisions in this report do not affect climate impact considerations made as part of the Long Term Plan 2024-34.

13.14.1 Climate change and environmental initiatives were proposed and consulted on as part of developing the LTP 2024-34. Responding to feedback from submitters Council decided on several initiatives which are all being implemented.

13.14.2 Those undertakings remain intact and are not proposed to be affected by the Annual Plan.

14. Next Steps Ngā Mahinga ā-muri

14.1 After the draft adoption, consultation with the community will commence, on the basis of the Consultation Document (Attachment N), beginning on 26 February 2025 and running until 11:59 pm on 28 March 2025.

14.2 At the completion of consultation, hearings will follow and are planned to be held in April 2025.

14.3 Following the Hearings, the results of the consultation feedback and hearings will be collated to inform Council Information Sessions/Workshops in May/June 2025.

14.4 Adjustments and changes resulting from consultation, hearings and workshops will be incorporated into the Annual Plan to be presented to Council for its adoptions, which is proposed to be at a meeting of the Christchurch City Council on 26 June 2025.

14.5 If there are delays, for any reason, to the timetable this is likely to put at significant risk the Annual Plan’s adoption before the end of June. The effect of this is to prevent striking the proposed rates for the 2025/26 financial year. This would result in a significant revenue gap, loss of revenue and risks reputational damage until the new Annual Plan can be adopted.

Attachments Ngā Tāpirihanga

No.	Title	Reference	Page
a	Audit and Risk Management Committee Recommendations - 10 February 2025 (Under Separate Cover)
b ⇩	Financial Overview, including financial changes to that contained in the Long-Term Plan 2024-2034	24/1355975	21
c ⇩	Funding Impact Statement	24/1355999	32
d ⇩	Rating Information	25/31519	36
e ⇩	Financial Prudence Benchmarks	24/1365417	53
f ⇩	Proposed Capital Programme, including changes	25/181876	55
g ⇩	Proposed Minor Changes to Levels of Service	24/2320443	96
h ⇩	Prospective Financial Statements incl Accounting Policies and Significant Assumptions	25/177999	103
i ⇩	Proposed Fees and Charges, including changes	25/128877	142
j ⇩	Reserves and Trust Funds	24/1365598	211
k ⇩	Capital Endowment Fund	24/1365679	214
l ⇩	Grants Summary	24/1365736	215
m ⇩	List of properties for consultation seeking the community views and preferences as to their future use	25/95038	217
n	Draft AP 2025/26 Consultation Document (Under Separate Cover)
o ⇩	Rates Increase Breakdown for Draft Annual Plan 2025/26	25/83705	222