Our Finance at Work
Councils fund services and asset development (i.e. infrastructure) in a number of ways. Councils raise much of their funding through revenue from rates and user fees and charges. Councils can also use debt to raise funds for asset development. The funding levels for councils are set during the Long Term Plan (10-year plan) and Annual Plan process.
• More than 34,300 resident population and approximately 22,000 rateable properties
• An estimated 42% of our ratepayers live outside the District
• Council has $165m in debt as at 30 June 2012
• Council has $85m in investments as at 30 June 2012
Council debt and assets
Council’s debt is projected to peak at $180m in 2013-14 and then reduce to $160m by 2022. Council’s investments include $53m (as of 30 June 2012) in the Taupo Electricity Ltd and Taupo Generation Ltd (TEL) Fund (Council’s investment fund).
The returns on the TEL fund are used to subsidise rates annually. Since the TEL fund has been earning a higher interest rate than the interest rate Council pays on the debt, Council determined that it makes financial sense to continue to earn the interest on the TEL fund rather than use it to pay off the debt. This is a strategic financial decision that Council has made for the long term benefit of the community.
The majority of the debt owed by Council is due to wise investments into community infrastructure. They include items such as the East Taupo Arterial (ETA), Water Treatment Plant upgrades and the Wastewater Treatment Plant. These are the core services that keep a community functioning.
For councils, incurring debt to fund projects is the fairest way to ensure inter-generational equity. This means ratepayers today don’t have to pay all at once for infrastructure (e.g. roads) that will also benefit future generations. What debt funding does is spread the costs across multiple generations all of whom benefit.
The government requires councils to meet legislated requirements. One such requirement is the upgrade to all water supplies to meet the Drinking-water Standards for New Zealand (revised 2008). Those legislative requirements for infrastructure such as Water Treatment Plants (WTP) upgrades are expensive. Council upgraded the Turangi and Mangakino schemes at a cost to ratepayers. Since water is paid for by targeted rates, each community is paying for its own upgrades.
Recent investment in infrastructure (some mandated by Central Government):
• The East Taupo Arterial (ETA)
• Water Treatment Plant upgrades
• Waste water treatment
Taupo District Council participates as a shareholder in the recently established New Zealand Local Government Funding Agency (NZLGFA). The NZLGFA has a current credit rating from Standard & Poor’s (S&P) of AA+.
Council’s participation enables it to borrow funds at a cheaper rate, which can only be done if Council has an International Credit Rating. There are also wider benefits to Council obtaining a credit rating which include access to a wider investor base improving liquidity options, the net effect being cheaper funding and savings for the ratepayer.
Council credit rating
Council achieved an excellent credit rating of AA- from the international credit rating agency Standard & Poor’s (S&P). Our Council is the only district council in New Zealand (in 2012) to have a rating in the AA category placing it among larger councils. All other similarly ranked Councils (AA- and above) are either city or regional councils.
S&P rates organisations on a scale of AAA to D. A strong credit rating is an indicator of a council’s financial strength, gives wholesale investors confidence in the organisation and provides Council a financial advantage including access to more diversified funding and the ability to borrow money at cheaper interest rates.
S&P is one of the big three international credit rating agencies, which also includes Moody’s Investor Service and Fitch Rating. S&P issues credit ratings for the debt of public and private corporations.
Council rating system
Taupo District Council uses a capital value rating system for the General Rate from the 2012-13 rating year. The Council’s capital value rating system includes two differentials and has a transition plan to phase in the change (from the land value rating system) over three years which started in June 2012. In 2012-13, the average total rates increase, per ratepayer, is 7.35%.
How our rates work
Rates are a blend of “tax” and service charges. Councils levy rates to fund services and facilities that the community has asked for and to fund services the Government requires councils to provide. Learn more on our property and rates page: properties-and-rates.
Service charges are costs that can be measured and charged directly to those who benefit from them. These include services such as water and sewage. Most other rates, either targeted or general, are essentially a “tax” and therefore need to be set in an equitable way. There is also a user pays component for some services.
How rates are calculated
Rates are made up of:
• A Uniform Annual General Charge (UAGC)
• A general rate (based on a property’s capital value)
• Targeted rates (if applicable)
Uniform Annual General Charge
A Uniform Annual General Charge (UAGC) is a fixed charge applied to each separately used or inhabited part of a property, such as a property with multiple homes or a shop that has a flat above it. The UAGC is used to pay for general council services. A UAGC is applied to ensure every ratepayer pays a minimum contribution for council services.
General rates: Everyone pays. This is the only part of your rates bill that is affected by land value or capital value rating system.
Targeted rates: Funds a specific council activity or group of activities, rather than general council services.
|Water supply rate
||Only charged to those who are able to use the service (paid for by residents of each scheme)|
|Sewage disposal rate
||Only charged to those who are able to use the service|
|Refuse disposal rate
||Everyone pays, but the amount varies|
|Lake Taupo Protection rate
||Everyone pays, depending on where you live (*if you live outside the catchment you may pay a lower amount of this rate)|
|Uniform Annual General Charge
||Everyone pays the same|
One rating area
• Under the previous rating system, Taupo district had two different rating areas; Taupo-Kaingaroa/Mangakino-Pouakani (TKMP) and Turangi-Tongariro (TT).
• Council has moved to a One Rating Area in 201/12 and are applying one General Rate across the entire District.
• Although there is currently little difference in the charges levied on each area, there will be savings made by reducing the duplication and administration costs previously involved in having two rating areas.
The council can choose to apply a rating differential to groups of ratepayers. Rate differentials apply to the general rate and are used to change the proportion of rates the council collects from each group of ratepayers. Council may choose to apply a higher rating differential for groups that place greater demands on council services. Conversely, the council may apply a lower rating differential to groups who have less access to council services than other ratepayers. The differential groups and the factors that are applied are:
What is a SUIP?
|Utility Assets and Networks
SUIP stands for separately used or inhabited part of a property. Most people live in a single dwelling or SUIP, such as a house. There are many properties in our district which have multiple units or dwellings on the same land title.
Examples of properties with more than one SUIP would be a self contained flat or a block of flats, commercial units or even large retirement villages.
Previously, these owners paid one UAGC regardless of the number of houses, flats or businesses on their land. They shared the costs between the multiple dwellings.
Today everyone in Taupo District is rated on each dwelling, or each separately used or inhabited part of their property so that everyone more fairly shares the cost of services that we all use or benefit from.
SUIPs is a well established method of levying the UAGC in New Zealand and Taupo has followed suit by adopting this.What is a transition remission?
The transitional remission policy is a 3-year transitional rates remission policy for the rating years 2012/13, 2013/14 and 2014/15. The policy expires on 30 June 2015.
The policy was developed to smooth the effects of a change to the valuation basis for calculating general rates and to provide some rates relief for rating unit owners because of the change. The policy was developed in response to concerns expressed by submitters in consultation on the Long Term Plan 2012-22. The policy has two mechanisms:
• A primary transition mechanism that will apply to all rating units which meet the criteria and
• A secondary transition mechanism for a small group of rating units that would still be severely affected after the primary transition mechanism has been applied.
Rates rebate -- do I qualify?
The Rates Rebate Scheme was established in 1973 to provide a subsidy to low-income homeowners on the cost of their rates (see The Rates Rebate Act 1973 for more information). For 2006 the Government revised the scheme and increased the rates rebate thresholds significantly, making more people than ever eligible for the rebate. These changes came into effect on 1 July of that year. For more details check our properties and rates page.
All accommodation establishments for the travelling public, including motels, hotels, timeshares, camping grounds and backpacker lodges.
All rating units used to generate electricity for commercial purposes.
The sum of the valuation-based general rate plus the Uniform Annual General Charge (UAGC).
All rating units used for commercial, industrial or retail purposes. Administrative and operational rating units of central and local government, including State Owned Enterprises are also categorised Industrial/Commercial.
All rating units where there are more than two portions capable of separate occupation, including institutions for the elderly.
All other rating units not defined within the other differential categories.
All residential rating units (excluding multi residential).
All rating units that are not classified as rural lifestyle that are used predominantly for farming or horticulture.
| Rural lifestyle
||Land, generally in a rural area, where the predominant use is for a residence and, if vacant, there is a right to build a dwelling. The land can be of variable size but must be larger than an ordinary residential allotment. The principal use of the land is non-economic in the traditional farming sense, and the value exceeds the value of comparable farmland. (As defined in the Rating Valuation Rules, 2008, version October 2010). |
|Utility assets and utility networks
||All utility service units.|