Agenda of Ordinary Council meeting - Monday, February 24, 2025

Ordinary Council meeting Agenda

24 February 2025

11 Business

11.1 Te Hononga ki Te Awanui (Memorial Park to Elizabeth Recreation Connection)

File Number: A16901783

Author: Amanda Davies, Manager: Spaces and Places Project Outcomes

Authoriser: Barbara Dempsey, General Manager: Community Services

Purpose of the Report

1. To seek Council direction on whether they wish staff to complete the preliminary design for Te Hononga ki Te Awanui (Memorial Park to Elizabeth Recreation Connection) to allow staff to seek a legal determination on its feasibility.

Recommendations

That the Council:

(a) Receives the report "Te Hononga ki Te Awanui (Memorial Park to Elizabeth Recreation Connection)".

(b) Approves:

· Option i – Suspends all non-committed work on the project; or

· Option ii – Complete work required to get a legal determination on the proposed design for the full recreation connection; or

· Option iii – Deliver of node enhancement only; or

· Option iv – Delivery of node enhancement and completion of work required to get a legal determination.

(c) (If Option i or Option ii or Option iii is approved under recommendation (b),rescinds parts (b), (c), and (d) of resolution CO14/23/5 made at the council meeting of 21 August 2023 meeting)

Executive Summary

2. A coastal connection between Memorial Park and the city centre has been formally included in a variety of TCC strategy and policy documents since 2004.

3. In August 2023, a paper was presented to council around the options for progressing this work, with a resolution being made to progress Option C of the report, which included undertaking work to improve Harbour access/connectivity, and progressing the work required to test the legal position regarding property riparian rights for future development work.

4. As part of the reforecasting of budgets to deliver the current annual plan commitments, the scope of this project has been reviewed.

5. A reduced scope is proposed, that would see the work on the improvements for Harbour access/connectivity being put on hold, but the work required to undertake a legal determination regarding the property riparian rights for future development work is progressed.

6. Any legal determination would mean that the feasibility of the project could be tested bringing certainty to both TCC and Landowners around the future feasibility of the recreation connection.

7. If the outcome of the legal determination was favourable for the construction of the recreation connection, a full project costing (including completion of design, consenting and construction) could be undertaken for consideration as part of the next LTP.

Background

8. Council has formally considered providing a coastal connection between Memorial Park with the city centre several times over the last 20 years, commencing 2004. The primary benefit of this connection centres around improving the connection of people with the water/the coastal edge and providing a safer cycle route into the city centre as an alternative to Devonport Rd.

9. Further information on the project, including options and outcomes, was provided via Council report on 25 July 2022^{^[1]}and 21 August 2023^{^[2]}. In August 2023, the estimated cost of delivering the connection (from Elizabeth St to Memorial Park) was approximately $28.2m. The decisions from the 21 August 2023 meeting are below.

RESOLUTION CO14/23/5

That the Council:

(a) Receives the report "Draft Long Term Plan 2024-2034 - Memorial to Elizabeth Waterfront Recreation Connection \ Te Hononga ki Te Awanui".

(b) Approves delivery of Option C, which is limited intervention of the city fringe and escarpment link zones from 1st to 7th Avenue, which may include some beach replenishment between 6th and 7th Avenues as an achievable short/medium-term outcome, acknowledging that it does not achieve the accessible linear connection along the shoreline but does however, improve public access at the road ends to the harbour edge.

(c) Approves consultancy costs of $585,000 to progress the consenting, legal, planning and design work for short/medium-term Option C, acknowledging the construction costs of $6M, which are currently included in the Draft Long-term Plan 2024-2034.

(d) Approves consultancy costs of $1.65M to progress the consenting, legal, planning and design work for long-term Option B, including determination of the legal position regarding property right issues. Any construction costs to be considered as part of deliberations for the following long-term plan.

(e) Enters into a Memorandum of Understanding with Mana Whenua.

10. Council decided to proceed with the delivery of Option C and B above, which would create harbour ‘access’ nodes between 1^st to 7^th Avenue together with the completion of design work to obtain a determination of the legal determination regarding property riparian right issues, to assess the feasibility of the project long term.

11. Option C also minimised some of the identified risks with the provision of the recreation connection, notably those relating to riparian rights, as whilst the project concept has been well received by the wider community, private landowners along the harbour’s edge with riparian rights have largely opposed it.

12. The Tauranga Harbour Protection Society (THPS) have suggested a joint application to the High Court for a declaratory judgement (determination) to provide certainty before proceeding further with the any consent process. This would require completing a preliminary design for the proposed connection, so that the impacts, if any, of the design on harbour access and riparian rights could be accurately assessed.

13. Council resolved to making a joint application, and completing the work required for this was approved by Council at the 21 August 2023 meeting (see resolution CO14/23/5 (d) above). Note that Option B referred to above is the delivery of the full recreation connection from Memorial Park to Elizabeth Street in the city centre.

14. To date Council has completed the Draft Concept Design for Option C, and this is being progressed to Preliminary Concept Design (currently on hold). Landowners have provided feedback on the Draft Concept Design and this will be reflected in the Preliminary Concept Design. The Preliminary Concept Design can be finalised once Council has received and considered the findings of completed geotechnical surveys and resulting design elements and updated costings are completed.

15. Note that Stage 1 of Te Hononga ki Te Awanui has been completed. Stage 1 included the construction of a railway underpass next to the Harbourside Restaurant (completed) and a new section of boardwalk joining the underpass with the southern end of The Strand. This links the waterfront boardwalk from The Strand through to Tunks Reserve at the eastern end of Elizabeth Street.

16. The options discussed by this report refer to Stage 2 of Te Hononga ki Te Awanui.

17. This report presents a range of options to Council:

i. Suspend all non-committed work on this project, with no retention of budget for work in the future. This would result in delivering on current contractual commitments only.

ii. The completion of work required to get a legal determination on the proposed design for the full recreation connection (Option B) only with no implementation of Option C, and no retention of the associated $6.5m capex budget.

iii. Delivery of Option C, node enhancement, only (no legal determination is sought regarding Option B).

iv. Delivery of Option C node enhancement, and the completion of work required to get a legal determination on the proposed design for the full recreation connection.

18. The options above are discussed in more detail under the options analysis section.

Options analysis

Option i. – Suspend all non-committed work

19. Suspend all non-committed work on this project, with no retention of budget for work in the future. This would result in delivering on current contractual commitments only.

20. Cost: $964,000 ($564,000 actual expenditure in 2023/2024 and $400,000 for 2024/2025 to cover actual expenditure to date, and close out costs – all OPEX).

21. Key risks: no clarity is gained regarding the feasibility of the project, and the $964,000 spent does not deliver any outcomes.

Advantages

Disadvantages

· Council does not commit further funds to a project which is unlikely to be delivered in full at this time

· It remains unclear as to whether the project could be feasibly delivered from a legal standpoint.

· No benefit is derived from the $964,000 spent.

Option ii. – Complete work required to get a legal determination on the proposed design for the full recreation connection

22. The completion of work required to get a legal determination on the proposed design for the full recreation connection only, with no development of ‘nodes’ on the coastal edge at the bottom of improved Avenue links (First Avenue through to Seventh Avenue) and no retention of the $6.5m capex budget for this work. This would however, determine if the project is legally feasible for the future and provide certainty for landowners and private landowners.

23. Cost: $1,681,701 ($564,000 actual expenditure in 2023/2024 and $400,000 for 2024/2025 to cover actual expenditure to date, and FY2025/2026 additional $717,701 to undertake a legal determination - all OPEX ).

24. If the outcome of the legal determination is favourable for the construction of the recreation connection, a full project cost estimate would be undertaken for consideration as part of a future LTP process.

25. Key risks: Legal costs are estimated only, and dependent on length of process additional funding for legal fees may be required.

Advantages

Disadvantages

· Provides clarity as to whether the project is legally feasible. As this project has been considered in various forms since 2004, but the legal viability of it has been in question for this period, this would provide needed certainty for both Council and private landowners.

· Requires additional investment beyond the current financial year to complete preliminary design work and legal fees.

· Given Council’s current financial position, the project is unlikely to be delivered within the current LTP.

· Legal costs are estimated only, and dependent on length of process additional funding for legal fees may be required

Option iii. – Delivery of node enhancement only

26. The development of ‘nodes’ on the coastal edge at the bottom of improved Avenue links (First Avenue through to Seventh Avenue) only.

27. Cost: $964,000 opex ($564,000 actual expenditure in 2023/2024 and $400,000 for 2024/2025 to cover actual expenditure to date – OPEX) plus $6.5M Capex (2024/25 $41,364 actual expenditure, 2025/26 $1.5M construction costs, 2026/27 $4M construction costs, 2027/28 $1M construction costs)

28. Key risks: that the nodes are delivered but provide minimal community benefit in isolation (without delivery of the connection as a whole).

Advantages

Disadvantages

· Provides additional community amenity and connection to harbour.

· Requires additional investment beyond the current financial year.

· Will not resolve the issue of the legal status of the project, which would need to be provided if the project was to proceed in the future

Option iv. – Delivery of node enhancement and completion of work required to get a legal determination

29. Delivery of node enhancement, and the completion of work required to get a legal determination on the proposed design for the full recreation connection. This is the current status quo option, as approved via the LTP 2024-2034.

30. Cost: The cost for delivery of this options would be broken into capex and opex as follows:

(a) Delivery of node enhancement - Cost: $964,000 opex ($564,000 actual expenditure in 2023/2024 and $400,000 for 2024/2025 to cover actual expenditure to date – OPEX) plus $6.5M Capex (2024/25 $41,364 actual expenditure, 2025/26 $1.5M construction costs, 2026/27 $4M construction costs, 2027/28 $1M construction costs

(b) Legal Determination - $1,681,701 ($564,000 actual expenditure in 2023/2024 and $400,000 for 2024/2025 to cover actual expenditure to date, and FY2025/2026 additional $717,701 to undertake a legal determination -OPEX ).

31. Key risks: that the nodes are delivered but the legal review of the proposed design for the connection (as a whole) finds it not legally viable.

Advantages

Disadvantages

· Provides clarity as to whether the project is legally feasible.

· Improves access and amenity to those walking to and along the foreshore at mid – low tide

· Aligns with the wider redevelopment of Memorial Park

· Requires additional investment beyond the current financial year.

· Access to the foreshore would not be provided to all physical abilities.

· Legal costs are estimated only, and dependent on length of process additional funding for legal fees may be required

Financial considerations

32. Expenditure to date on this iteration of the project is as follows:

· 2023/2024 - $564,000 Opex

· 2024/2025 - $343,000 Opex costs at the end of November. A total Opex budget is required the current year of $400,000 is required to close out current contracts (an additional $40,000 Opex costs have been incurred at the end of November, post budget reforecast for FY 25. All project expenditure to date was spent in accordance with the council resolution CO14/23/5.

33. Any future expenditure on the project is outlined in the options above.

34. If the outcome of the legal determination was favourable for the construction of the recreation connection, a full project costing (including completion of design, consenting and construction) would be undertaken for consideration as part of the next LTP.

	Option i – Suspend Work	Option ii – Legal Determination Only	Option iii – Node enhancement Only	Option iv – Node enhancement plus Legal Determination
*OPEX*
2023/24	564,000	564,000	564,000	564,000
2024/25	400,000	400,000	400,000	400,000
2025/26		717,701		717,701
TOTAL	964,000	1,681,701	964,000	1,681,701

*CAPEX*
2023/24
2024/25	41,364	41,364	41,364	41,364
2025/26			1,500,000	1,500,000
2026/27			4,000,000	4,000,000
2027/28			1,000,000	1,000,000
TOTAL	41,364	41,364	6,541,364	6,541,364

Statutory Context

35. Council allocated funds to this project via the LTP 2024-2034. This report revisits this decision and seeks confirmation of funding for the completion of work required to get a legal determination on the proposed design for the full recreation connection.

STRATEGIC ALIGNMENT

36. This contributes to the promotion or achievement of the following strategic community outcome(s):

	Contributes
We are an inclusive city	ü
We value, protect and enhance the environment	☐
We are a well-planned city	☐
We can move around our city easily	ü
We are a city that supports business and education	☐

Legal Implications / Risks

37. Sixteen properties along the coastal connection route have riparian rights.

38. The Tauranga Harbour Protection Society (THPS) have suggested a joint application to the High Court for a declaratory judgement to provide certainty around riparian rights before proceeding further with the any consent process. This would require completing a preliminary design for the proposed connection, so that the impacts, if any, of the design on harbour access and riparian rights could be accurately assessed.

39. Council has agreed to making a joint application, and completing the work required for this was approved by Council at the 21 August 2023 meeting (see resolution CO14/23/5 (d) above). Note that Option B referred to above is the delivery of the full recreation connection from Memorial Park to Elizabeth Street in the city centre.

40. It should be noted that any legal process does carry some risk around the duration and process involved could impact project costs.

TE AO MĀORI APPROACH

41. Modification of Te Awanui is generally opposed by iwi and hapu. In this case, the project is supported because of its restorative and public access focus.

42. The coastal connection was gifted the name or ingoa “Te Hononga ki Te Awanui” by mana whenua representatives on 10 May 2022. In te reo Māori, the kupu or word Hononga holds the meaning of union, connection, relationship or bond. Te Awanui is the traditional name for the Tauranga Harbour. In gifting the name, representatives said “the essence of the journey from Taiparirua to Mareanui, the Matapihi Railway Bridge and the Waterfront is the connection with the harbour”.

43. The ingoa Te Awanui in the project name is also a reference to the Te Awanui Waka, and the mana whenua aspiration to develop a Whare Waka and relocate the Te Awanui Waka to the waterfront.

44. It is important for mana whenua to continue to be closely involved in the project as the design and consenting process proceeds. A Memorandum of Understanding has been developed to ensure that expectations are clearly understood and met.

CLIMATE IMPACT

45. Te Hononga ki Te Awanui Recreation Connection directly supports the Climate Investment and Action plan as it supports Tauranga Residents to use a variety of public transport, walking, biking, and micro-mobility transport modes.

Consultation / Engagement

46. Consultation on the concept of a connection between Memorial Park and the city centre has occurred a number of times over the years, since the project was first proposed in 2004.

47. As a generalisation, the project is well supported by the wider community but opposed by private landowners along the harbour’s edge.

48. Submitters to the LTP 2024-2034 noted the long-standing plans to develop a walkway between Memorial Park and the city centre. They contended that construction of this path will bring more visitors into the city centre through the provision of an off-street walking and cycling pathway. Envirohub also noted that construction of a pathway will increase access to Tauranga’s coastal and marine environment aligning with Council objectives of connecting people to nature.

49. Some submitters to the LTP 2024-2034 suggested that Council should redirect proposed funding for the stadium to enable this project.

Significance

50. The Local Government Act 2002 requires an assessment of the significance of matters, issues, proposals and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

51. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region

(b) any persons who are likely to be particularly affected by, or interested in, the decision.

52. In accordance with the considerations above, criteria and thresholds in the policy, it is considered that the decision is of medium significance.

ENGAGEMENT

53. Taking into consideration the above assessment, that the decision is of medium significance, officers are of the opinion that the following consultation/engagement is suggested/required under the Local Government Act:

(a) Continue to work with Mana Whenua in accordance with the Memorandum of Understanding that is in place

(b) Individual and group engagement continue to take place with all affected property owners

Next Steps

54. The below next steps are based on the current options contained within this report, and subject to approval of council of the relevant option.

55. Close out the existing work programme, which included undertaking work to improve Harbour access/connectivity that the from 1^st to 7^th Avenue, and progressing the work required to test the legal position regarding property riparian rights for future development work (if option i approved),

56. Progress the completion of the preliminary design and engagement for the full recreation connection required for the legal determination (if option ii approved).

57. Progress design and engagement work on the development of the node enhancements, and close out work on the full recreation connection and legal determination (if option iii approved).

58. Progress design and engagement work on the node enhancement and to progress the legal determination for the full recreation connection (if option iv approved)

Attachments

Nil

Ordinary Council meeting Agenda

24 February 2025

11.2 2025/26 User Fees and Charges: Policy Alignment and Changes

File Number: A16895674

Author: Kathryn Sharplin, Manager: Finance

Frazer Smith, Manager: Strategic Finance & Growth

Sarah Holmes, Corporate Planner

Jane Barnett, Policy Analyst

Authoriser: Paul Davidson, Chief Financial Officer

Purpose of the Report

1. This report presents the draft 2025/26 User Fees and Charges schedule for Council’s consideration and amendment prior to final approval for public consultation in March.

2. It outlines the scope of fee adjustments permitted under the Revenue and Financing Policy and highlights key changes based on inflationary adjustments, cost recovery needs, and legislative requirements.

3. The report also recommends the revocation of the Funding Depreciation and Use of Depreciation Reserves Policy 2009, as its provisions have been incorporated into the Revenue and Financing Policy 2024 and are no longer required as a standalone document.

Recommendations

That the Council:

(a) Receives the report "2025/26 User Fees and Charges: Policy Alignment and Changes".

(b) Revokes the Funding Depreciation and Use of Deprecation Reserves Policy 2009.

(c) Agrees the Draft User Fees and Charges schedule forms the basis of the schedule to be adopted at the 3 March 2025 Council meeting, subject to any updates agreed through reports to 3 March Council meeting or changes agreed by Council at this meeting.

Executive Summary

4. Each year, council reviews its user fees and charges to ensure they remain appropriate, align with cost recovery principles, and reflect changes in service delivery costs. The proposed 2025/26 User Fees and Charges Schedule has been developed based on:

· Inflationary adjustments and cost recovery considerations

· Benchmarking with other councils

· Changes required due to legislative updates or operational adjustments.

5. Additionally, this report recommends revoking the Funding Depreciation and Use of Depreciation Reserves Policy 2009, as its principles have been fully integrated into the Revenue and Financing Policy 2024. The revocation is considered an administrative update with low significance.

6. Following council’s consideration of this report, any required adjustments will be incorporated into the final draft User Fees and Charges Schedule for public consultation alongside the 2025/26 Annual Plan. The consultation period will run from 28 March – 28 April 2025, with hearings scheduled for May 2025 and final adoption in June 2025.

Background

7. Council’s user fees and charges are updated each year. Updates reflect changing circumstances, Consumer Price Index (CPI) adjustments, new or removed fee requirements, or benchmarking with other councils.

8. The draft user fees and charges reflect the outcome of this review process and provides some certainty for the public on what they can expect to be charged for our services.

Statutory Context

9. User fees and charges are set under various legislation, with different requirements for consultation and public notification.

STRATEGIC ALIGNMENT

10. User fees and charges align with all of council’s community outcomes, and the principles set out in council’s Revenue and Financing Policy.

Options Analysis

USER FEES AND CHARGES

11. A preliminary schedule of user fees and charges is included in Attachment 1, along with reason for changes outlined in Attachment 2 (the Statement of Proposal summary). This reflects the annual process undertaken to review fees and charges, applying inflation and including changes identified by the business.

12. A number of items will be considered on 3 March:

(a) Airport carparking fees and charges will be considered further at the Council meeting on 3 March.

(b) The water supply activity is funded primarily by volumetric charging with a small portion of fixed rate charging. These charges are set under the Rating Act but included for information in the fees and charges schedule. They have not yet been updated in the schedule attached. Water cost per meter and fixed charge proposals will be confirmed in the report to 3 March council meeting.

13. The intention in reviewing charges and introducing new charges where appropriate is to reflect the cost to council of provision of these services. User fees and charges are proposed to cover the costs of services where it is efficient to identify and charge those who benefit directly from a service. The analysis underlying the use of fees and charges is covered in the Funding Needs Analysis in the 2024-34 Long-term Plan.

14. Attachment 4 to this report contains an Analysis of User Fee Sufficiency by Activity. This summary shows in red those activities that are not sufficient to meet the requirements of the revenue and financing policy and include marine facilities and property management. Two other activities Animal Services and Building Services are currently in deficit, but increasing revenue over time.

15. Changes to the draft 2025/26 user fees and charges schedule as a result of this report can be incorporated into the schedule following the meeting. Confirmation of the changes can be presented as a late item at the council meeting of 3 March 2025, or approved by delegation prior to the adoption of the consultation document on 24 March 2025.

FUNDING DEPRECIATION POLICY 2009

16. During a recent policy stocktake, it was identified that council’s Funding Depreciation and Use of Deprecation Reserves Policy 2009 (Attachment 3) is no longer needed. This policy was developed as a supporting document to the Revenue and Financing Policy 2009.

17. Considering that the Revenue and Financing Policy has been through numerous reviews since then, staff consider that all matters within the 2009 policy have either been superseded by or are now included in the Revenue and Financing Policy 2024.

18. It’s recommended that the Funding Depreciation and Use of Deprecation Reserves Policy 2009 be revoked. Table 1 compares content in the 2009 policy with the current RFP.

19. This decision is considered to be an administrative change with low significance.

Table 1: Comparison of content – 2009 policy vs 2024 policy

Content	Funding Depreciation Policy 2009	Revenue and Financing Policy 2024
Definition of Depreciation Reserves	Definition section the accumulated funds retained by each activity from the depreciation, which is funded each financial year, less any outgoings to pay for capital renewal of assets or debt repayment. Background section Within each of Council’s activities, revenue is raised to fund the depreciation expense, and the money is transferred to a depreciation reserve for that activity. These reserves are used to fund the replacement of existing assets at the end of their useful lives. When an asset is replaced (that is, it is not a new asset), it is described as renewal capital expenditure. New capital is almost always funded by loans, but there are many instances where an asset purchase is a mixture of renewal and new capital expenditure.	Under depreciation heading the accumulated funds retained by each activity from the depreciation on all Council’s fixed assets (excluding land) Within each of Council’s activities, revenue is raised to fund the depreciation expense, and the money is transferred to a depreciation reserve for that activity. Renewals are funded through this reserve and activity debt is regularly retired based on a set % of the activity debt.
Depreciation - an operating expense	Under deprecation heading in background section Depreciation is calculated on all Council’s fixed assets excluding land. Depreciation is an operating expense recorded in Council’s financial statements	Under types of expenditure section and operating expenditure section Operating expenditure (Opex): is the money spent on the ongoing day to day activities and services of the Council. This includes contributions to the wear and tear on assets used (depreciation), interest charges on borrowing for capital projects and corporate overheads.
Balanced budget requirement	Under depreciation heading in background section Council raises revenue (from rates, user charges, or other sources) to fund its operating expenses including depreciation, as required under the Local Government Act (S.100).	Under operating expenditure section Balanced budget – In accordance with section 100 of the LGA, Council will set each year’s projected operating revenues at a sufficient level to meet the year’s projected OPEX, except in limited situations where Council considers it prudent not to do so.

Financial Considerations

20. Overall, the use of fees and charges to fund activities can reduce the reliance on rates to cover the costs of services. While some activities continue to set charges to maintain sufficient revenue to cover the costs of services, others such as Historic Village and Marine Facilities have increased reliance on rates over time. User fees are currently 17% of operating revenue while rates make up 78%.

Legal Implications / Risks

21. The proposed changes to user fees and charges must comply with the relevant statutory requirements under the Local Government Act 2002 (LGA) and other applicable legislation governing specific services (e.g., Resource Management Act 1991, Building Act 2004, and Health Act 1956).

22. Key risks associated with the proposed user fee changes include:

(a) Potential public concern regarding increased fees, which will be mitigated through public consultation alongside the 2025/26 Annual Plan.

(b) Revenue shortfalls if fees do not adequately recover costs, requiring ongoing monitoring and potential adjustments in future reviews.

(c) Legal challenges if fees are perceived as inconsistent with statutory requirements, highlighting the importance of ensuring all changes align with council’s Revenue and Financing Policy and relevant legislation.

23. The revocation of the Funding Depreciation and Use of Depreciation Reserves Policy 2009 does not introduce any legal risk, as its provisions are now fully incorporated into the Revenue and Financing Policy 2024. The revocation is considered an administrative update and does not affect council’s financial management practices.

Significance

24. The Local Government Act 2002 requires an assessment of the significance of matters, issues, proposals and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

25. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region

(b) any persons who are likely to be particularly affected by, or interested in, the issue.

26. In accordance with the considerations above, criteria and thresholds in the policy, it is considered that the issue is of medium significance. Some of the proposed changes to user fees and charges will have varying impacts certain individuals and groups, the users of our services.

27. Subsequent decisions as a result of this report may be of higher significance.

ENGAGEMENT

28. Consultation on the full user fees and charges schedule is proposed to be completed alongside the 2025/26 Annual Plan, with the public consultation period being 28 March – 28 April 2025.

Next Steps

29. Incorporation of changes to the user fees and charges as a result of council feedback and direction.

30. Council review of updated user fees and charges schedule on 3 March 2025 (if desired).

31. Adoption of draft 2025/26 user fees and charges schedule for public consultation on 24 March 2025.

32. Public consultation period – 28 March – 28 April 2025, followed by hearings in May 2025.

33. Adoption of the final 2025/26 User Fees and Charges is proposed for June, and these would come into force on 1 July 2025.

Attachments

1. Draft 2025/26 User Fees and Charges - Tracked Changes - A17468068 (Separate Attachments 1)

2. Draft 2025/26 User Fees and Charges - Statement of Proposal - A16879282 ⇩

3. Funding Depreciation and Use of Depreciation Reserves - A6029732 ⇩

4. Analysis of User Fee Revenue Sufficiency by Activity - A17520635 ⇩

Ordinary Council meeting Agenda

24 February 2025

11.3 Rating Policy Review 2025/2026 Annual Plan

File Number: A17410245

Author: Jim Taylor, Manager: Rating Policy and Revenue

Kathryn Sharplin, Manager: Finance

Authoriser: Paul Davidson, Chief Financial Officer

Purpose of the Report

1. The purpose of this report is to confirm changes to Council’s rating policy to be included in the 2025/2026 Annual Plan consultation.

Recommendations

That the Council:

(a) Receives the report "Rating Policy Review 2025/2026 Annual Plan".

(b) Changes the definition of Industrial rating category to exclude any rating unit with a land area less than 250m2, (or exclusive use area less than 250m2 for cross lease or unit titles), which will be classified in the commercial rating category.

(c) Continues with the Long-term Plan decision to move to a fixed proportion of the general rates for each rating category and change the proportions for the residential rating category to 66%, the Commercial rating category to 15% and the industrial rating category to 19% by the 2027/28 rating year.

Executive Summary

2. At the Council meeting of 5 November 2024, Council recommended reconsideration of decisions made as part of the 2024-34 Long-Term Plan (LTP), which established an industrial rating category, and the establishment of targeted proportions of rates that would be contributed to by each of residential, commercial and industrial rating categories.

3. This report considers the following:

· removing smaller operations (under 250m2) from the industrial category.

· reviewing the level of differential.

· Considering recombining commercial and industrial rating categories.

· The proportions of rates to be paid by each of the three rating categories.

4. This report recommends changes to the definition of industrial category to remove smaller operations, and making a small change to the proportions of rates to be paid by each category that maintains the current intentions regarding the existing differentials.

5. Changes that are agreed by Council will be included as part of the 2025/2026 Annual Plan.

Background

6. Through the 2024-34 Long-Term Plan (LTP), the Financial Strategy and Revenue and Financing Policy were developed, which underpinned the funding and financing of the investments and services provided and planned for the city. As part of the LTP process, the commercial rating category was further considered with respect to its impact on the costs of the city, particularly the impacts on transportation costs including safety and environmental impacts.

7. Recognising these impacts, industrial properties were separated from the commercial category and set at a higher differential of 2.6 times, an allocation of 20% of the general rates.

8. In November 2024, Report 9.2 to the Accountability, Performance & Risk Committee entitled Rating Categories and Rating Policy, discussed options for addressing Council concerns regarding the coverage of the Industrial rating category. The Committee requested a report back on the following matters which have now been redirected for Council consideration:

(a) Options regarding the industrial category including.

i. Removing smaller operations from the industrial category.

ii. Reviewing the level of differential.

iii. Recombining commercial and industrial rating categories.

(b) As part of the annual plan process, consider whether to continue to move toward general rates set at a fixed proportion of residential 65%, Commercial 15%, industrial 20% as included in the Long-Term Plan.

9. These matters are considered below.

Moving small industrial rating units to the commercial rating category

10. In November Council had considered a range of options for defining which properties would apply to the industrial and commercial categories to enable certain smaller uses of industrial premises to not necessarily be caught within that category.

11. Council’s current definition for the general rating categories is based on (a) the use to which the land is put and aligns with the land use designation in the District Valuation Roll. The Industrial Rating Category definition includes rating units with a primary land use beginning with 3- Transport, 6 – Utility services or 7 - Industrial services.

12. This existing categorisation is developed during the current rating valuation process. Using a separate local process which involved inspecting each rating unit to assess the use would be costly to implement, difficult to administer and would be likely to involve a more complex and subjective decision-making process.

13. Removing smaller businesses from the current industrial categorisation is an alternative option. This could be achieved by using the existing valuation processes and categorisation but introducing logic within Council’s own SAP system to divert qualifying smaller industrial properties to the commercial category for the purpose of applying the differential. It could apply a logical limit on land area (or exclusive use area) to properties equal to or greater than 250m2 land area for the Industrial rating category. Smaller areas would default to the commercial category for the differential application. This option would require some additional programming in the new rates module in SAP. However, it would be simple to administer and simple for ratepayers, and council staff, to understand.

Financial Impact of removing smaller rating units from Industrial Category

14. If the 682 smaller industrial use rating units (landuse grp 7), with a land area less than 250 m2 (or exclusive use area less than 250m2 for cross lease or unit titles) were included in the commercial rating category, the reduction in rates to these rating units would be $119,000 because they would be at a lower rating differential of 2.1 times rather than 2.6 times.

15. Assuming the fixed proportion of rates for industrial continuing to apply at 20%, the lower number of Industrial ratepayers means rates paid by the remaining Industrial ratepayers would increase around $450,000 (a rates increase for the median industrial ratepayer of 20.2% in 2025/26). This would equate to a differential of 2.82 times. The residential sector share would reduce by $300,000.

16. This redistribution of rating burden to the remaining industrial category was not the intended consequence of the proposal to move smaller ratepayers to the commercial ratepayer.

17. Options for mitigating the impact on the remaining industrial rating units are discussed in the section below.

Reviewing the Level of Differential

18. Allocation of the general rates is a section 101(3)(b) matter for council to decide, after considering “the overall impact of any allocation of liability for revenue needs on the current and future social, economic, environmental, and cultural well-being of the community”.

19. Tauranga City Councils commercial differential of 2.1:1 is the lowest differential in the New Zealand metro’s that we benchmark with. This is shown in table 1. below and for TCC was a Council decision arising from a review of the impacts of commercial and industrial activities.

20. As well as setting a differential, Council chose that future differentials would be based on a set proportion of the general rate to be paid by each of the rating categories.I n the 2024-2034 Long Term Plan, Council resolved to apportion the general rates at residential 65%, commercial 15% and Industrial 20% by the 2027-2028 rating year.

21. This apportionment is close to the average apportionment of metro councils for residential and commercial (including Industrial) rating categories which is 34% commercial 66% residential. The summary by Metro Council is shown in the table below.

22. Table 1: Summary of differential, portion of general rates and average rates

	Differential	General rates for commercial/ Industrial categories (%)	Total Rates in 2024/25 estimate average residential $	Uniform Annual General Charge ($)
Tauranga	2.1/2.6	33% (LTP move to 35%)	5,055	298
Auckland	2.64	31%	5,091	567
Hamilton	2.9765	34%	4,276	749
Christchurch	2.22	34%	4,394	177
Dunedin	2.47	31%	$4,159	0
Wellington	3.66	40%	6,371	0
Porirua	3.1	N/A	N/A	425
Hutt City	3.525	40%	N/A	0

23. There is no published source on comparative rates data for recent years. However, column 4 above is based on informal information shared between metro council officers in April 2024 when councils were deciding on the 2024/2025 rates (updated where final information is available). It is not published information from those councils.

The rates are for the “average” residential ratepayer. Tauranga City Council’s average residential property is around the 70% percentile zone and is different from our published median residential ratepayer where 50% of properties pay more and 50% pay less.

Reviewing the percentage allocation of general rates for each rating category

24. As discussed in paragraphs 14 and 15 above, moving the small industrial rating units into the commercial rating category has consequences for the remaining Industrial rating units, if the allocation remains at 20% they will end up paying a larger share. This can be mitigated by reducing the industrial rating category to 19% from 20%.

25. Moving the small industrial rating units to commercial increases the commercial rates collection to a 14.1% share of general rates, if the differential remains at 2.1. Under the LTP decision to move the commercial category gradually toward 15% they would have been moved to a differential of 2.23 times and a proportion of general rate of 13.8%.

26. Council could choose to set the Industrial rating category at 19% and continue to move the commercial rating category toward 15% over time. This would result in a combined Industrial /commercial allocation of 34%, which is consistent with the average metro allocation.

Recombining the commercial and industrial rating categories.

27. Council could choose to recombine the commercial and industrial categories. Given the set proportion of general rates by the combined commercial and industrial categories at 34% of general rates there would be a significant redistribution impact within these categories with industrial ratepayers paying less and commercial ratepayers paying more.

28. Recombining the commercial and industrial categories in the 2025/2026 rating year would result in a significant increase for the commercial sector. The median commercial ratepayer increase would be 28.6% or $74.01 per week.

Summary of Analysis

29. In summary Council has choices in the annual plan regarding rating structure including:

(a) whether or not to proceed toward the agreed proportions of rates paid by different categories with the following choices:

i. proceed with the resolution made by Council in the LTP to move the commercial rating category up from 13.3% to 15% by 2027/2028, or not (with the first step being a move for 2025/26 to 13.8%.

ii. maintain the level of contribution of industrial category (20%) or reduce to 19%.

(b) Recombine the Commercial and Industrial Rating Categories and set a new combined differential at an allocation of for example 34%.

30. The impact for the medium residential, medium commercial and medium industrial rating units are shown in Table 2 below based on a draft 12.5% rates increase and an indicative 10% option. Note that the budget increase below shows 12.5% inclusive of water however the table shows rates excluding water. Including water will reduce the median rates in the table.

31. If Council continues with the LTP decisions (status quo columns), continuing to move the allocation of the commercial rating category to 15% by 2027/2028 the median residential rates increase would be 11.7%, median commercial 18.0% and median industrial 14.4%. The smaller industrial rating units would continue to be categorised in the Industrial rating category. (note that while overall rates are at 12.5% this analysis excludes the water rate components which are below the other rates increases)

32. Assuming the commercial differential is not less than the current 2.1, if council redefined the Industrial rating category to exclude rating units under 250m2 and maintained the industrial category allocation at the 2024/25 level of 19%^{^[3]}, the median residential rates increase would be 12.5%, median commercial 13.6% and median industrial 15.4%. This option would mean that the eventual allocation split would be residential 66%, commercial/industrial 34% which is the average split in other metro councils.

33. If Council decided to maintain the 2024/2025 general rates differentials (without changing the definition of the Industrial rating category) the median residential rates increase would be 12.6%, median commercial 13.7% and median industrial 13.8%.

34. If council recombined the commercial and industrial rating categories the median residential rates increase would be 11.4%, median commercial 28.6% and median industrial 9.0%.

35. Recombining the commercial and industrial categories in the 2025/2026 rating year would result in a significant increase for the commercial sector. The median commercial ratepayer increase would be 28.6% or $74.01 per week. Alternatively, this option could be reconsidered as part of the next LTP, after the commercial differential is fully phased in so that the impacts on commercial and industrial would be less pronounced.

36. If Council decides to reduce the kerbside waste by $20 as part of rates reduction options to be considered on 3 March this would reduce the median residential rates by approximately 0.2%.

37. Council can also choose to remove any activity or part of activity, including Transportation, into a targeted rate calculated on capital value and set the proportions of the general rates plus the new targeted rate to be the same as the options above. Setting a targeted rates instead of a general rate provides increased transparency to some extent while somewhat restricting benchmarking and the flexibility to make choices with those funds. These options have not been modelled as part of this report.

Statutory Context

38. The decisions in this paper on rating policy will become part of the 2025-2026 Annual Plan.

STRATEGIC ALIGNMENT

39. This contributes to the promotion or achievement of the following strategic community outcome(s):

	Contributes
We are an inclusive city	ü
We value, protect and enhance the environment	ü
We are a well-planned city	ü
We can move around our city easily	ü
We are a city that supports business and education	ü

40. Fair and equitable funding of council’s investment in services and infrastructure through a proportional allocation of rates liability on the whole community will contribute to all of the above outcomes.

Options Analysis

Options (MOVING SMALL INDUSTRIAL RATING UNITS TO THE COMMERCIAL RATING CATEGORY)

Option 1 - Council does not change the definition of Industrial, aligns with the land use code in the District Valuation Roll. (Status Quo)

Option 2 - Council changes the definition of Industrial to exclude any rating unit with a land area less than 250m2 (or exclusive use are for cross lease and unit titles), which will be classified as commercial rating category.

Options Analysis (MOVING SMALL INDUSTRIAL RATING UNITS TO THE COMMERCIAL RATING CATEGORY)

Option 1 - Council does not changes the definition of Industrial, aligns with the land use code in the District Valuation Roll. (Status Quo)

Advantages	Disadvantages
· Provides clarity to the rating treatment and is consistent with council’s valuation service provider designation of use in the District Valuation Roll (DVR). · Simple to administer. Council’s new SAP will automatically assign, reducing human error and creating efficiencies.	· Does not respond to council’s concerns around small to medium Industrial units, including private storage, and those ratepayers will be charged the higher industrial rating category general rate.
Key risks
Recommended?	No (Section 101(3)(b) decision)

Option 2 – Council changes the definition of Industrial to exclude any rating unit with a land area less than 250m2 (or exclusive use are for cross lease and unit titles), which will be classified as commercial rating category.

Advantages	Disadvantages
· Reduces rates liability for smaller industrial rating units, including those used for private storage, which would have a lower general rate differential. · Addresses Council’s concerns that the new Industrial rating category should not include smaller industrial rating units.	· Changes to inclusion within industrial category could put higher apportionment on remaining industrial users. · Other industrial rating units, for example vacant industrial land waiting for infrastructure delivery, may feel that they should also be recategorized.
Key risks
Recommended?	Yes (Section 101(3)(b) decision)

Options (ALLOCATION OF GENERAL RATES)

Option 1 –Council to continue with the Long-term Plan decision to move to a fixed proportion of the general rates for each rating category and change the proportions for the residential rating category to 65%, the Commercial rating category to 15% and the industrial rating category to 20% by the 2027/28 rating year (Status Quo).

Option 2 – Council to continue with the Long-term Plan decision to move to a fixed proportion of the general rates for each rating category and change the proportions for the residential rating category to 66%, the Commercial rating category to 15% and the industrial rating category to 19% by the 2027/28 rating year.

Option 3 – Council proposes to set the differential for each rating category, consulted with the community in the 2025/2026 Annual Plan.

Option 4 – Council proposes to recombine the commercial and industrial rating units into a single rating category, consulted with the community in the 2025/2026 Annual Plan.

Options Analysis (ALLOCATION OF GENERAL RATES)

Option 1 - Council to continue with the Long-term Plan decision to move to a fixed proportion of the general rates for each rating category and change the proportions for the residential rating category to 65%, the Commercial rating category to 15% and the industrial rating category to 20% by the 2027/28 rating year (Status Quo).

Advantages	Disadvantages
· Recognises the increasing volumes of heavy vehicle to Industrial related businesses in the city from journeys originating or finishing outside the city’s boundary. · Recognises the social and environmental impacts such as congestion, safety, and pollution on the city of heavy vehicles and industrial activity. · Provides certainty and mitigates future valuation swings between sectors and rating categories. · Does not require annual reviews.	· Industrial rating units may think that they are paying more than is equitable and fair. · Increases for the commercial sector phased in over three years. · Local hospitality sector and Tauranga CDB retail struggling due to construction and economic downturn (partly mitigated by reduced rating valuations in those areas for some commercial properties).
Key risks
Recommended?	No (Section 101(3)(b) decision)

Option 2 - Council to continue with the Long-term Plan decision to move to a fixed proportion of the general rates for each rating category and change the proportions for the residential rating category to 66%, the Commercial rating category to 15% and the industrial rating category to 19% by the 2027/28 rating year.

Advantages	Disadvantages
· Recognises the increasing volumes of heavy vehicle to Industrial related businesses in the city from journeys originating or finishing outside the city’s boundary. · Recognises the social and environmental impacts such as congestion, safety, and pollution on the city of heavy vehicles and industrial activity. · Provides certainty and mitigates future valuation swings between sectors and rating categories. · Does not require annual reviews. · Moderates a redefined (reduced) Industrial Rating Category and brings TCC general rate allocation into line with other NZ metros (34% commercial/ Industrial)	· Industrial rating units may think that they are paying more than is equitable and fair. · Increases for the commercial sector phased in over three years. · Local hospitality sector and Tauranga CDB retail struggling due to construction and economic downturn (partly mitigated by reduced rating valuations in those areas for some commercial properties, and by an increased number of rating units in the commercial rating category).
Key risks
Recommended?	Yes (Section 101(3)(b) decision)

Option 3 - Council proposes to set the differential for each rating category, consulted with the community in the 2025/2026 Annual Plan.

Advantages	Disadvantages
· Council can consider localised factors in the short term and set the differentials at each annual plan or long-term plan.	· Changing the proportions frequently creates uncertainty over the long term, particularly at each triennial revaluation. · May increase the rates liability on one of more sectors and rating categories. · Would not mitigate future valuation swings for rating categories. · Residential ratepayers may pay more as a proportion than other similar growth New Zealand metros who set the allocation at a fixed percent.
Key risks
Recommended?	No (Section 101(3)(b) decision)

Option 4 - Council proposes to recombine the commercial and industrial rating units into a single rating category, consulted with the community in the 2025/2026 Annual Plan.

Advantages	Disadvantages
· Is simple to administer and understand. · Easier to benchmark with other NZ metropolitan cities.	· Large increase the rates liability on the commercial rating category (can be mitigated by phasing in over a period of years) · Does not recognise the relative impact on each sector or rating category on council’s activities and services.
Key risks
Recommended?	No – potential to review at next LTP (Section 101(3)(b) decision)

Financial Considerations

41. Changing the definition of rating category or allocation of the general rates will not impact council’s finances directly as they change the allocation of rates liability over the whole community. If some ratepayers pay less others would pay a greater share of the total rates requirement set by Council.

Legal Implications / Risks

42. Council should follow due process, particularly the chronological order in section 101 Financial management of the Local Government Act (2002), when setting rating policy.

TE AO MĀORI APPROACH

43. Fair and equitable allocation of rates ensures that the Industrial sector and other heavy vehicle users contribute to the costs of a safe transportation network. This aligns to the concept of Manaakitanga which is best practice and a strong duty of care and safety for our people.

CLIMATE IMPACT

44. While Transportation Activity, in particular road traffic, is a key contributor to negative environmental impacts, the rating policy changes are unlikely to change any behaviour of heavy vehicle traffic to, or from, Industrial rating units. The Port of Tauranga is New Zealand’s only deep water port and is unlikely to move from the centre of Tauranga.

Consultation / Engagement

45. Changes to rating Policy or the Revenue and Financing Policy will be consulted with the whole community as part of the 2025-2026 Annual Plan.

Significance

46. The Local Government Act 2002 requires an assessment of the significance of matters, issues, proposals, and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal, or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

47. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region

(b) any persons who are likely to be particularly affected by, or interested in, the decision.

48. In accordance with the considerations above, criteria and thresholds in the policy, it is considered that the decision is of high significance.

ENGAGEMENT

49. Taking into consideration the above assessment, that the decision is of high significance, officers are of the opinion that the following consultation/engagement is suggested/required under the Local Government Act 2002.

50. Any proposed changes to rating category definitions or general rate allocations will be consulted with the community as part of the 2025/2026 Annual Plan.

Next Steps

51. Decisions will be included in the 2025-2026 Annual Plan consultation and/or supporting documents. In the 10 March report on the draft Annual Plan, with final adjustments, the calculation will be based on rates budget movements across all general and targeted rates

Attachments

1. Funding Impact on rates for rating categories under different rating policy options - A17515906 ⇩

Ordinary Council meeting Agenda

24 February 2025

11.4 Draft Annual Plan 2025/26 - Decision Making

File Number: A17099631

Author: Josh Logan, Team Leader: Corporate Planning

Kathryn Sharplin, Manager: Finance

Tracey Hughes, Financial Insights & Reporting Manager

Susan Braid, Finance Lead Projects Assurance

Authoriser: Paul Davidson, Chief Financial Officer

Purpose of the Report

1. To seek direction/approval of the Annual Plan 2025/26 draft baseline budget and provide an update on the development of the annual plan.

Recommendations

That the Council:

(a) Receives the report "Draft Annual Plan 2025/26 - Decision Making".

(b) Confirms the 2025/26 capital programme as agreed in December with the following adjustments which reduce the total programme to $506m as detailed in Attachment 1:

(i) Deferral of $6.8m of expenditure on Turret Road to later year

(ii) Bring forward $1.5m of Taurikura Drive upgrade

(iii) Other minor timing adjustments

(c) Approves an additional operational grant of $338k to Bay Venues Limited to continue operation of Memorial Park Indoor Sports Centre in 2025/26, noting this has been included in the baseline budget.

(d) Approves the baseline budget that achieves a maximum rates increase after growth of 12.5%, based on activity budgets as set out in Attachment 2 with further budget adjustments to be considered by Council on 3 March 2025.

(e) Notes the revised net debt at year end June 2026 is $1.65b, which is consistent with the Long Term Plan.

Executive Summary

2. In accordance with the Local Government Act 2002, Council is required to produce and adopt an annual plan by 30 June 2025.

3. This report provides the draft high-level financials for the 2025/26 Annual Plan following updates since the Long-Term Plan (LTP) and organisational reset adjustments to sit at 12.5% rates increase overall after growth. Further initiatives are proposed to be considered by Council at its 3 March meeting to bring the overall rates increase below 12.5%.

4. Council currently has a financial strategy rates limit of 12%. The removal of the Infrastructure Funding and Financing (IFF) levy impacted this strategy limit as previously this was outside the limit. Hence 12.5% whilst outside the limit remains less than the total amount of rates plus levy which as in the Long Term Plan. Any amount exceeding the rating limit will need to be noted in the final Annual Plan.

5. The capital programme draft budgets were agreed by Council on December 10, 2024, and there have been minor adjustments to the draft programme outlined in this report which bring the draft capital programme to $506m. A comparison of project budgets for 2026 and total project costs in LTP is provided as Attachment 1.

6. The Whole of Council budget, broken down by activity is presented in Attachment 2 along with commentary on key deliverables, and activity issues and outlook.

Background

7. Following the reforecasting of capital budgets for 2024/25 by Council on 29 October 2024, a further report was presented to Council on 12 November 2024 outlining an approach and suggested capital project categorisation for the 2025/26 Annual Plan. Subsequently a Council workshop has been held on 4 December to consider the prioritised capital programme, key financials and borrowing covenants.

8. On 9 December, staff presented a paper titled “2025/26 Annual Plan Key Financial Update, Draft Capital Programme and LGFA Bespoke Borrowing Covenant Option” for Council’s consideration. Council resolved that it:

(a) Receives the report "Annual Plan Key Financial Update, Draft Capital Programme and LGFA Bespoke Borrowing Covenant Option".

(b) Directs staff to develop the draft 2025/26 Annual Plan for consideration in February 2025 with options to ensure that:

(i) The total rates increase does not overall exceed 12.5% net of growth.

(ii) The total rates increase does not overall exceed 10% net of growth

(iii) Depreciation is fully funded except for roading depreciation, where the funded depreciation should reflect only the TCC share of renewals.

(iv) Operational costs proposed to be loan funded are separately reported for specific council approval.

(v) The capital programme as prioritised in Attachment 1 forms the basis for the draft budget subject to any changes to projects or levels of service agreed by Council prior to adoption for consultation in March 2025.

(c) Agrees that Council should apply to Local Government Funding Agency for a bespoke covenant up to a limit of 350% debt to revenue ratio from June 2025, with a draft application to be considered by Council at its meeting on 10 February 2025.

Events since December 2024

Changes to capital expenditure budgets

9. The draft capital budget for the annual plan was agreed by Council on 10 December 2024. There have been changes to timing of projects that have reduced the draft capital budget from $515m to $506m, including:

· Deferral of $6.8m from draft FY26 budget related to Turret Road, Welcome Bay, Fifteenth Avenue programme due to delays in NZTA business case review.

· Bring forward of $1.5m from FY26 to FY25 to progress construction of the Taurikura Drive upgrade (to coordinate with the opening of the next phase of Tauranga Crossing).

· Other minor timing adjustments such as Mount Maunganui Holiday Park Master Plan and Awaiti Place Stormwater Upgrade.

10. Attachment 1 provides detail of the revised capital programme for the 2025/26 Annual Plan. Because inflation is applied to future years’ budgets, when a project is deferred the total cost of the project will be increased by that inflation impact. Attachment 1 shows the revised annual project budgets for multi-year projects that have been rephased to later years compared to the project budget in the LTP and therefore have slightly higher total project budgets.

Proposed Changes to Operational Expenditure

11. The baseline operational budget results in an overall rate increase of 12.5%. This level equates to the increase in year 2 of the LTP after adding back the proposed new Infrastructure Funding and Financing levy (IFF) which had been proposed for that year and is now funded within TCC directly through rates.

12. To remain within the maximum 12.5% rate increase, Council has had to offset significant cost increases from the LTP budget for 2026, of $29m that have occurred post LTP including:

(a) Council’s direction to fund (through rates) all depreciation other than the portion of transport renewals covered by NZTA $15.6m increase in rates.

(b) Additional rates funded depreciation from Transportation assets and spaces and places activity assets $10m.

(d) The reduction in growth assumption from 1.5% to 0.25% noting the whole of council rates increase is shown after growth.

13. Activity managers have updated their budgets along with reset savings targets required to maintain the baseline budget within a 12.5% increase. The increase in city operations to cover more external contracts shows as an increase in employee costs offset by a reduction in other operating costs.

14. Savings have been achieved to reduce budgets to the 12.5% level through organisational changes and efficiencies without impacting on levels of service.

15. An area of additional level of service has been identified for which Council approval is sought, which is grant funding for Bay Venues associated with opening the new Cameron Road courts facility (Haumaru). In the draft numbers presented in December 2024, Bay Venues were intending to utilise their existing operational budget from QEYC/Memorial Hall to fund the running costs of the new Cameron Road courts. As the timeline delivery of the Memorial Park Aquatic Centre will be pushed out and options are now being revisited, QEYC/Memorial Hall is able to remain open until at least June 2026). If both venues remain in operation an additional operational grant of $338k is sought by Bay Venues to cover these costs.

16. There are further opportunities to reduce costs which may take some time to implement or have an impact on the level of service provided to the community or on other councils and community groups. These will be considered on 3 March 2025 before finalising the draft budget annual plan.

17. The whole of council and by activity budget is compared against year 2 LTP budgets and 2025 budgets in the attachments.

18. The revised debt level at year end June 2026 is $1.65b, which is consistent with the LTP.

FInancial Summary

19. The draft Whole of Council Operating Budget is summarised in Table 1 below:

Statutory Context

20. In accordance with the Local Government Act 2002 (LGA), Council is required to produce and adopt an annual plan, by 30 June 2025. The purpose is to identify variations from the financial statements of the second year of the current Long-term Plan.

21. Council must consult on changes that are significantly or materially different from the adopted LTP. The Rates increase limit in the LTP is 12 percent per annum and the limit on borrowing is the LGFA current borrowing limit (calculated including Bay Venues revenue) of 280%.

STRATEGIC ALIGNMENT

22. This contributes to the promotion or achievement of the following strategic community outcomes:

	Contributes
We are an inclusive city	ü
We value, protect and enhance the environment	ü
We are a well-planned city	ü
We can move around our city easily	ü
We are a city that supports business and education	ü

The draft annual plan budget provides the resourcing to address each of the outcomes listed above.

wOptions Analysis

23. Council has the option to accept the proposed budget and implications for rates and debt or to request further work to be undertaken on the draft budgets.

24. The extent of further work may affect timeframes for adoption and consultation of the draft annual plan.

Financial Considerations

25. The draft budgets are consistent with the Long-term Plan. The levels of capital expenditure along with the operational budgets proposed are financially sustainable and continue to deliver on agreed levels of service. The rating structure decided in an earlier report of council along with decisions on user fees will affect how the budgets are paid for and by which ratepayers and users of council services.

Legal Implications / Risks

26. In accordance with the Local Government Act 2002, council must consult with the community if the annual plan includes significant or material differences from the content of the Long-term Plan for the financial year to which the proposed annual plan relates.

Consultation / Engagement

27. Under the proposed approach, consultation on the annual plan will occur from 28 March to 28 April 2025 alongside consultation on the options for Local Waters Done Well, the Draft Development Contributions Policy (DC Policy) and draft Schedule of User Fees and Charges.

28. The DC Policy and Schedule User Fees and Charges form part of the annual plan. The draft documents have been presented as separate reports on this agenda.

Significance

29. The Local Government Act 2002 requires an assessment of the significance of matters, issues, proposals and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

30. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region

(b) any persons who are likely to be particularly affected by, or interested in, the proposal.

31. In accordance with the considerations above, criteria and thresholds in the policy, it is considered that the proposal is of high significance.

ENGAGEMENT

32. Taking into consideration the above assessment, that the proposal is of high significance, officers are of the opinion that the following consultation/engagement is suggested/required under the Local Government Act 2002.

Next Steps

33. Following Council’s decisions relating to this report, staff will prepare the following documentation for approval and adoption by Council on 24 March 2025:

a) Draft Annual Plan including the financial supporting information.

b) Consultation document for the Annual Plan.

c) Statement of proposal for the User Fees and Charges.

d) Statement of proposal for the Development Contributions policy.

Attachments

1. Attachment 1 - Capital Budget Information for Draft 26 Annual Plan (as at February 2025) (A17517754) - A17519951 ⇩

2. Attachment 2a Whole of Council Annual Plan Operating Budgets Feb 2025 - A17519935 ⇩

3. Attachment 2b Feb 2025 Annual Plan Draft Activity Budgets - A17519919 ⇩

[3] Noting originally was 20% but the decision to move smaller rating units back to commercial category would move it to 19%.


AGENDA Ordinary Council meeting Monday, 24 February 2025
I hereby give notice that an Ordinary meeting of Council will be held on:
Date:	Monday, 24 February 2025
Time:	9.30am
Location:	Bay of Plenty Regional Council Chambers Regional House 1 Elizabeth Street Tauranga
Please note that this meeting will be livestreamed and the recording will be publicly available on Tauranga City Council's website: www.tauranga.govt.nz.
Marty Grenfell Chief Executive

Chairperson	Mayor Mahé Drysdale
Deputy Chairperson	Deputy Mayor Jen Scoular
Members	Cr Hautapu Baker Cr Glen Crowther Cr Rick Curach Cr Steve Morris Cr Marten Rozeboom Cr Kevin Schuler Cr Rod Taylor
Quorum	Half of the members present, where the number of members (including vacancies) is even; and a majority of the members present, where the number of members (including vacancies) is odd.
Meeting frequency	Three weekly or as required