Decade Long Strategic Plan for 2024-2034: Delivering Key Initiatives for Sustainable Growth

Exploring a comprehensive 10-year delivery program starting in 2024 towards 2034, the ongoing activities include financial modeling workshops and decision-making processes for the Long-Term Plan. Key focus areas encompass budget allocations, community outcomes, and setting priorities for projects and funding. Challenges such as economic pressures and regulatory uncertainties are being carefully addressed to ensure a balanced and sustainable approach for the future.

• Strategic Plan
• Long-Term Program
• Financial Modeling
• Sustainable Growth
• Decision Making

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1. Long-term plan 2024 - 2034 10 year delivery programme 5 December 2023

2. Timeline so far LTP Introduction Priority areas what we are currently doing Community boards and Te Tatau o Te Arawa workshops Adoption of critical pieces, Audit Deliberations Adoption 30 June 24 Presentation of Draft 2 of financial modelling following draft 1 on 21 Nov 23 Community Outcomes development Councillors identified potential projects Consultation CD Draft created Information packs for Elected members

3. Workshop Agenda Focus of this workshop Second Draft financial modeling Opex Adjustments Capex Adjustments Forecast Debt profile

4. 2024 2034 Long Term Plan Decision Making process towards Consultation Draft LTP Priority 1 Renewals Regulatory/Legal/Health and Safety Contractual/CPI Interest Staffing Opex Rates Fees DCs Capex Debt LOS change Depreciation/renewal CPI Contractual obligations Legal/Regulatory change Decision making Renewals Contracts/agreements Legal & Regulatory Consents Growth/DC s Draft LTP and CD Capex [Balanced budget] Consider LOS Priorities and other (Baseline financial model) Priority 2 Funding policy New fees Excluded items for consultation Opex Council Priorities Changes to levels of service Council to consider Reductions in LOS to reduce baseline Priority 3 Excluded items no further consideration Capex LOS change

5. Initial financial modeling Summary at 21 November Workshop

6. Summary of Proposed LTP Rates, capital program, debt and implications (21 November workshop) Current economic and regulatory pressures driving costs into year 1, Inflation easing but still high, impacting both operating and capital expenditure Cost pressure in baseline budget, would require reductions in service levels to offset Increased investment into supporting growth ($60m to $209m) Constrained by internal debt cap, limiting future investment into priority 2 projects Sector and regulatory uncertainty Most challenging environment for all Councils to develop an LTP

7. Initial Rates Modeling Year 1 to 10 (21 November workshop) 16.00% 14.00% DUPLICATE SLIDE FROM 21 NOVEMBER WORKSHOP Year 1 increase = 14% General Rates increase = 10% Targeted Rate increase = 22% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 General Rates Increase Targeted Rates Increase

8. Initial Rates Modeling Drivers of Year 1 rates increase (21 November workshop) DUPLICATE SLIDE FROM 21 NOVEMBER WORKSHOP

9. Priority 1 Capital Works modelled ($m) $789m invested over 10 years supporting renewals, infrastructure upgrades and supporting growth (21 November workshop) 160.0 140.0 DUPLICATE SLIDE FROM 21 NOVEMBER WORKSHOP 120.0 42.4 19.1 50.4 100.0 80.0 33.7 66.1 55.4 60.0 43.7 11.4 11.2 7.6 22.8 17.2 5.2 3.7 40.0 4.4 7.0 7.7 5.2 6.9 5.0 20.0 39.5 38.4 37.7 36.9 36.6 36.1 36.1 35.1 33.2 33.2 0.0 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Renewal LOS Growth

10. Debt based on Priority 1 investment($m) Overall debt for the 10 year period is expected to increase by $159.4m butfront loaded in the first 3 years. (21 November workshop) $700,000,000 $600,000,000 $500,000,000 $400,000,000 DUPLICATE SLIDE FROM 21 NOVEMBER WORKSHOP $300,000,000 $200,000,000 $100,000,000 $0 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Debt Internal Debt Ceiling (250%) LGFA Debt Ceiling (280%)

11. Challenge set by elected members Financial framework to support delivery and investment into our services while balancing cost and regulatory pressures with affordability. Goal reduce year 1 proposed increase from 14.1% to below 10% without abnormally high increases in future years Focus on delivering essential services Provide for borrowing head room This would be done by reviewing: Current year capital works program and future borrowing commitments Review of proposed operating cost changes for years 1 to 3 Review of proposed capital works program for years 1 to 10

12. financial modeling draft 2

13. opex Updates Changes to Operational Expenditure from previous draft

14. Opex Adjustments New weighted average cost of capital profile Re-forecasting debt at year end Revised debt repayment profile to accelerate debt repayment Increased Water by Meter and Trade Waste charges to reflect cost increases Reduced the increased funding to RNZ Changed the funding of water consenting costs Deferred specific planned maintenance activities Deferred funding of some community safety costs

15. Opex Adjustments Risks Interest rates are hard to accurately predict. Pricing risk if rates continue upward. Providing a lower funding increase to RNZ may slow their destination marketing activities. Deferring maintenance may likely lead to (but may not) breakage or unnecessary wear & tear. Deferring maintenance is likely to lead to (but may not) additional costs on future ratepayers Community safety funding reducing to 2023 levels by year 2.

16. Initial Rates Modeling Drivers of Year 1 rates increase

17. Initial Rates Modeling 10.2% Year 1 to 10 12.00% 10.00% Year 1 increase = 10.2% - General Rates increase = 8% - Targeted Rate increase = 15% 8.00% 6.00% 4.00% 2.00% 0.00% 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 General Rates Increase Targeted Rates Increase

18. Rates Modeling by Activity Year 1 Rates by activity

19. Comparison of Rates Modeling Year 1 to 10

20. OpeX cost Adjustments direction Does Council support the proposed operating amendments which provide cost savings with commensurate risk?

21. Capex Updates Changes to Capex program from previous draft

22. Capex Adjustments Renewal budgets have been rephrased to match available funding Wastewater Treatment Plant has also been rephrased across the years of the project. Infrastructure strategy has been reviewed and Wastewater/Water supply enhancement and expansion projects have been rephased

23. capex Adjustments Water supply and network renewals

24. Opex Adjustments Park structure renewals

25. Capital Adjustment Risks Council has a delivery ceiling of what it can physically complete within a year. The LTP capital works program is large and there are risks around full delivery. Renewals, Wastewater Treatment Plant, Museum and IAF projects alone account for $91m in Year 1.

26. Priority 1 Capital Works modelled ($m) $774m invested over 10 years supporting renewals, infrastructure upgrades and supporting growth vs $789m in draft 1 160.0 140.0 120.0 36.2 12.9 50.4 100.0 80.0 33.7 62.4 59.7 60.0 43.8 11.4 7.6 23.1 5.2 11.2 17.6 3.7 4.4 8.1 5.6 40.0 7.3 5.4 7.4 20.0 38.2 37.8 37.7 37.3 36.9 35.1 35.0 34.1 34.0 31.5 0.0 2,025 2,026 2,027 2,028 2,029 2,030 2,031 2,032 2,033 2,034 Renewal LOS Growth Draft 1

27. Total Capital Work ($m) Total capital expenditure of $775m (gross) with $547m supporting the Infrastructure Strategy and $228m in community amenities Of the $775m, over 30% will improve services, 46% is invested back into renewing assets and just under 24% supporting growth across the district Excluding the $547m supporting the Infrastructure Strategy the remaining $228m; $95m on Arts and Culture assets (including Museum) $66m on supporting organisational delivery $66m on open spaces

28. Capital Adjustment direction Does Council support the proposed operating amendments which provide cost savings with commensurate risk?

29. Debt Generational impact of supporting capital investment

30. Debt based on draft 1 Overall debt for the 10 year period modelled (ex capital subsides and development contributions) $700,000,000 $600,000,000 $500,000,000 $400,000,000 Pressure on Internal debt $300,000,000 $200,000,000 $100,000,000 $0 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Debt Internal Debt Ceiling (250%) LGFA Debt Ceiling (280%)

31. Capex and debt in draft 1 ($M) Drivers of Debt - Year One Wastewater Treatment Plant Upgrade IAF Stormwater Projects Stormwater Network Expansion Wastewater Treatment - Tarawera District Water Supply Enhancements District Water Supply Expansion Pensioner Housing Renewals Stormwater Network Enhancements Aquatic Centre Stage 3 Whakarewarewa Forest Enhancement $26.0 $6.2 $3.8 $2.8 $2.6 $2.1 $1.1 $0.7 $0.5 $0.5

32. Debt based on draft 2 - Policy Overall debt for the 10 year period modelled against all forecast revenues (per policy settings) $900,000,000 $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $0 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Net Debt Internal Debt Ceiling LGFA Debt Ceiling

33. Debt based on draft 2 operational revenue (Ex Dcs) Overall debt for the 10 year period modelled against operational revenues excluding one off subsidies $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $0 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Net Debt Internal Debt Ceiling LGFA Debt Ceiling

34. Whats next Consider - Transfer of Pensioner housing to a Housing Trust / Provider 540 $0.85m rate support ($6,500 per unit) Millions 520 $1.1m to $0.6m capital investment per year 500 480 Option to lease 460 440 420 400 1 2 3 4 5 6 7 8 9 10 Net Debt Without Pensioner Housing Net Debt With Pensioner Housing

35. Whats next aquatic centre Inclusion of Stage 3 ($3m Capex with $2.5m subsidy) Options to consider for inclusion: - Bundle projects totaling $3m - Hydro slides via a JV - Learn to swim with external funding support Component Revised Estimated Value Learn to Swim $9.0m Family / Leisure Pool $1.2m Spa Pools $0.8m Bombing Pool $1.2m Aqua Play $1.0m Hydro slides $7.0m Plant / Landscaping / Activation $1.5m

36. Whats next Rotoiti rotoma sewerage scheme Rotoiti Rotoma Scheme is nearing completion need to consider setting targeted rate. Final construction costs of the scheme are estimated to be $56m with further costs incurred in the preliminary stages of getting the scheme approved. Contributions from third parties totalling $34.5m have been received, leaving $20.5m to be funded by RLC. Propose to recover approximately $30,500 per property with a targeted rate over 25 years. The consultation document will include the proposed establishment of this rate from 1 July 2024.

37. Whats next Rotoiti Rotoma sewerage scheme Rotoiti Rotoma Scheme Lakes enhancement support Council sets a targeted rate for lakes enhancement as a fixed amount of $18.98 per rating unit. Council as part of the Te Arawa Lakes Steering Group, agreed to investigate a targeted rate to repay the additional $10m funding support into the scheme Council will need to increase this rate pay approximately $44 per year for 10 years to recover the $10m invested into the sewerage scheme.

38. Whats next Tarawera sewerage scheme Scheme is on track to be completed within 18 months. Estimated cost to complete is approximately $30m Contributions from third parties will total $7.25m, leaving $23m to be funded by RLC. Proposed to recover approximately $40,000 per property via a lump sum or targeted rate over 10 years. Final consultation on the proposed cost per property and targeted rate will likely be for the year started 1 July 2025.

39. Next steps Staff will take feedback from today and present a final draft LTP model for consideration on 13 December 2023 Staff will prepare a draft consultation document, financial model and supporting information to be audited in February 2024