2023-2024 financial information

The 2021-2031 Ten Year Plan was prepared in October 2020 and since this time the district has continued to experience very difficult economic conditions as a result of the long tail of the COVID-19 pandemic. The year 2023-2024 represents year three of the 2021-2031 Ten Year Plan and there have been some changes to budgets which are necessary but which were unforeseeable at the planning stage:

• Rates increase – increased by 14.2% (after allowing for growth of 3.5% in the number of rateable properties).

• Dividend income – increased by $1.7M based on latest dividend forecast in the Queenstown Airport Corporation (QAC) Statement of Intent.

• Revised ‘user pays’ fee structure – changes made to cover increased costs e. for solid waste, consents (building, engineering, and resource), sports and recreation, as well as venues, parking and animal control.

• Increased salary and wages costs – a workforce review was completed in 2022, resulting in changes to our organisational structure and resourcing levels to ensure Council has the right capacity and capability to deliver on the capital investment programme and meet community expectations around levels of service.

• Depreciation expense increases – depreciation expense is the cost of an asset that has been depreciated (lost value) for a defined period, and shows how much of the asset’s value has been used up in that year. There has been an increase in depreciation expense for both Three Waters and roading assets as a result of increases in the assets Total depreciation for 2023-2024 is estimated at $55.54M, up $9.56M compared to 2022-2023 at $45.95M. The amount of depreciation which is planned to be funded is up by $1.05M to $16.98M for 2023- 2024 which equates to 30.6% of total depreciation compared to $15.93M (34.7%) for 2022-2023. The rates impact of the increase in depreciation funded is 0.96%. The funded amount is less than the forecast in the 2021- 2031 Ten Year Plan which was $19.01M (35.5%), which was not considered appropriate for this year as it would add $2.03M to rates or a further 1.86% to the rates increase.

• Higher interest rates – due to the tightening of monetary policy from the Reserve bank; aggressive increases to the Official Cash Rate (OCR) (5.5%) over past 12 months has seen the weighted average interest rate increase from 2.64% (June 2022) to 4.84% (April 2023). The overall effect of the rise in interest rates and the increase in borrowing is a forecast increase in interest costs of $10M for the 2023-2024 year. This is the major factor in the higher than expected rates increase. This is because the increase in interest costs is funded predominantly from rates at $9.31M and accounts for 8.52% of the rates increase (this figure includes the impact of funding defective building claims).

• The settlement of large defective building claims – this has led to higher borrowing and interest costs. The annual cost of the borrowing required to fund the settlements made in the past two years is $5.3M and the increase in interest costs for 2023-24 is $4.4M which has a rates effect of 4.03% for the year. This has in turn led to the need to defer some capex projects in 2023-2024 in order to maintain an affordable capex programme.

There remains significant cost pressure for both operating and capital budgets. Increases in cost have been seen for interest, internal and external labour, contractual services, insurance and electricity. Assumptions first made in the 2021-2031 Ten Year Plan have been tested with elected members to ensure the 2023-2024 Annual Plan budget reflects current needs and the Council’s aspirations.

Revenue

Revenue budgets include revised fee structures to cover increased costs for the following activities: solid waste, building and engineering consents, sports and recreation, venues, parking and animal control.

Council has taken the approach that only essential changes have been included in the 2023-2024 budgets to maintain levels of service.

The key changes are:

• User fees – $1.9M increase from user fee increases to prevent a further rates increase of 1.77%

• Queenstown Airport dividend – $1.7M increase from the 2021-2031 Ten Year Plan forecast

• Capital expenditure grants – $19.1M additional funding primarily for Queenstown Town Centre Street Upgrades and Arterial Road (stage 1), and the Arthurs Point to Queenstown and Schools to Pool active travel routes.

Operating costs

Operating costs are up by $21.3M or $10.2% compared to the 2021-2031 Ten Year Plan which is largely driven by the following factors:

• Increased interest costs ($10M) – increased due to higher interest rates as a result of movement in the official cash Debt levels are also higher, with an increase in capital spend and from defective building settlements

• Increased salary and wage costs ($6.1M) – due to significant inflation and the organisational review approved in 2022-2023

• Increased professional service costs ($1.7M) – which supports the implementation of the spatial plan and is funded by the ‘Better Off’ grants from central government relating to the proposed Affordable Waters Reform

• Increased depreciation costs ($1.1M) – increases for both three waters and roading assets as a result of upward asset revaluations for the year ended 30 June 2022

• Increased legal costs ($0.9M) with $0.4M of this relating to building defects to weather tightness cases.

Capital Expenditure (CAPEX)

The capex programme for the 2023-2024 Annual Plan amounts to $201.6M, which is $33.4M more than the $168.2M original Year 3 programme included in the 2021- 2031 Ten Year Plan.

Since 1 July 2021, there has been $124.8M of year one and year two capex budgets which have been reforecast into 2023-2024. This means that the revised total for the year was $293.0M after adding in the original 2021-2031 Ten Year Plan programme of $168.2M. The total of $293.0M was the revised starting point for the 2023-2024 Annual Plan. After careful review, it has become apparent that the revised capex budget needed to be substantially reduced. Some of the key factors considered through the review of capex expenditure were:

• Ongoing disruption arising from major geo-political events and risks

• Cost escalation and quality of budget estimating to ensure projects are realistic, affordable, and aligned to current delivery timeframes

• Internal and external resource availability

• Alignment to the timetable for Affordable Waters Reform

• Existing commitments (e.g. projects underway, agreements with third parties)

• Arising business needs that aren’t presently

With the impacts of defective building settlements, a highly inflationary market environment and rising interest rates, there was a strong focus on funding, affordability and deliverability. These factors led to the proposed deferral of $106.7M worth of projects to the 2024-2025 year and beyond.

New projects of $17.8M were also added to the programme with almost half of this amount funded by central government for the Arthurs Point to Queenstown Active Travel project.

A diverse range of ‘shovel-ready’ projects will continue to be developed, enabling QLDC to move quickly if and when funding becomes available for their implementation. QLDC continues to focus on maintaining networks and services, creating capacity to improve service levels and respond to growth, and building assets that support how communities want to live, work and play.

The capital funding analysis for the revised programme shows a $124M increase in debt funding, bringing the year end total debt balance to $627M. Debt repayments are slightly reduced from $29.6M as a result of the capex deferrals to future years. This brings the net debt to total revenue percentage to 264.8% (Long Term Plan 248.9%), which is well within the limit of 290.0%.

• Wānaka Water Treatment Plant: $16,980,481 – Defer to 2027 to 2028 and 2028 to 2029

• Two Mile Water Treatment Plant: $8,240,721 – Defer to 2025 to 2026 and 2026 to 2027

• Queenstown Pressure Zone Management: $7,964 – Defer to 2028 to 2029

• Quail Rise Reservoir: $10,632,060 – Defer to 2029 to 2030

• Shotover Country Borefield & Pump Station Upgrades: $6,772 – Defer to 2027 to 2028

• Fernhill Reservoir Access: $205,118 – Defer to 2030 to 2031

• Demand Management, Queenstown: $92,816 – Defer to 2031 to 2032

• BP Roundabout, Kawarau Bridge Reticulation Extension: $2,880,066 – Defer to 2028 to 2029 and 2029 to 2030

• Demand Management, Arrowtown: $1,612,365 – Defer to 2028 to 2029, 2029 to 2030, 2030 to 2031 and 2031 to 2032

• Arrowtown Water Storage: $63,710 – Defer to 2027 to 2028

• Glenorchy Bore Upgrades: $102,416 – Defer to 2025 to 2026

• Glenorchy Water Treatment Plant: $1,005,229 – Defer to 2025 to 2026

• Demand Management, Glenorchy: $13,845 – Defer to 2028 to 2029 and 2029 to 2030

• Demand Management, Lake Hayes, Lake Hayes Estate and Shotover Country: $44,100 – Defer to 2028 to 2029

• Demand Management, Arthurs Point: $14,358 – Defer to 2028 to 2029

• Demand Management, Wānaka: $93,842 – Defer to 2028 to 2029

• Lakeside Road Fire Flows Water Supply: $3,185 – Defer to 2028 to 2029

• Demand Management, Hāwea: $756,072 – Defer to 2024 to 2025

• Capell Avenue Watermain Extension: $736,700 – Defer to 2024 to 2025

• Luggate Water Supply Scheme: $4,482,171 – Defer to 2027 to 2028

• Demand Management, Luggate: $84,349 – Defer to 2028 to 2029

• CBD to Frankton Conveyance: $9,044,199 – Defer to 2025 to 2026

• Remarkables Park & Kawarau Place Pump Station: $1,171,631 – Defer to 2026 to 2027

• Frankton Beach to Shotover Conveyance: $98,877 – Defer to 2028 to 2029

• Marine Parade Pump Station Electrical Upgrade: $3,611,642 – Defer to 2028 to 2029

• Hanleys Farm Pump Station Upgrade: $1,095,553 – Defer to 2024 to 2025

• Pump Station Emergency Storage, Queenstown: $8,893 – Defer to 2029 to 2030

• Wānaka – Luggate Highway Pump Station Upgrade: $7,390 – Defer to 2027 to 2028

• Septage Disposal Site, Wānaka Wastewater: $15,927 – Defer to 2029 to 2030

• Pump Station Emergency Storage, Wānaka: $14,759 – Defer to 2031 to 2032

• Upper Clutha Conveyance Scheme: $7,095,033 – Defer to 2025 to 2026

• Project Shotover Plant Upgrade: $1,971,350 – Defer to 2024 to 2025

• Aubrey Road Recreation Reserve Storm Water detention pond: $4,810,494 – Defer to 2027 to 2028

• Thompson Street Pump Station Conveyance: $908,233 – Defer to 3031 to 2032

• SH6 – Glenda Drive Extension: $6,321,232 – Defer to 2027 to 2028, 2028 to 2029, and 2029 to 2030

• Ladies Mile Housing Infrastructure Fund Enabling Infrastructure: $503,305 – Defer to 2027 to 2028

• Whakatipu Improvements: $48,419 – Defer to 2026 to 2027

• Stone Street Upgrades: $6,028,834 – Defer to 2029 to 2030

• Wānaka Improvements: $2,383,291 – Defer to 2026 to 2027

• Quail Rise to Hawthorne Stage 1 Transport Housing Infrastructure Fund: $5,091,607 – Defer to 2029 to 2030

• Whakatipu Park & Ride Facility: $102,977 – Defer to 2029 to 2030

• Wānaka Additional Street Lighting: $154,465 – Defer to 2028 to 2029

• Digital Masterplan: $262,112 – Defer to 2025 to 2026

• Resilient Infrastructure Networks: $245,446 – Defer to 2028 to 2029

• Queenstown Priority Growth Corridors: $2,599,070 – Defer to 2024 to 2025 and 2025 to 2026

• New Whakatipu Waste Facilities: $3,086,655 – Defer to 2026 to 2027

• Lakeview Development Market Square to Plaza: $1,974,388 – Deferred from year 3 to 4 to years 5 to 6

Waste management

$1M decrease – mainly as a result of the timing of new Whakatipu waste facilities being rephased over a longer period to assist with funding constraints.

Venues and facilities

$0.6M increase – main movements include $0.9M increase (due to 2021- 2022 and 2022-2023 deferrals) in Queenstown Events Centre master planning and new indoor courts design, offset by $0.4M reduction for Ballantyne Road remediation to part fund the new Wānaka Community Centre.

Buildings

$1.5M increase – mainly due to Lakeview demolition carry forward of $1.0M for asbestos removal works from 2021-2022

Parks and Reserves

$1.1M increase – main movements include $1.7M Lakeview Plaza deferral and a reduction of $0.5M for Coronet Forest due to timing. $0.5M increase due to timing of parks roading renewals deferred from 2022-2023, and a $2.2M increase in budget for the Wānaka Lakefront Development plan as bringing forward stage 5, with just over a third of this increase externally funded. New project $0.2M added for Wānaka wildfire sensors for Mt Iron. $0.6M increase for two new street sweepers required for Whakatipu (roading contract curb sweeper replaced due to Queenstown Town Centre Street Upgrades plus renewal of existing sweeper).

Transport

$30.6M increase – main movements include new project $7.3M added for Arthurs Point to Queenstown Active Travel route (expected 97% funded by Government Transport Choices package). Increase of $25.7M for Queenstown Town Centre Arterials Stage 1 ($4.1M was carried forward from 2021-2022 with the budget increased through the October 2021- 2031 Ten Year Plan reforecast to secure and execute the Arterials stage

Wastewater

$19.2M increase – main movements include increases of $13.4M for Project Shotover Wastewater Treatment Plant, $9.3M for Kingston Housing Infrastructure Fund (HIF) new scheme and $7.8M for North Wānaka Conveyance (based on latest independent cost estimates and timing of delivery). New funding $6.1M for Project Pure aeration grid renewal (required to replace failing grids with new high-efficiency panel diffusers enabling greater treatment throughput). Offset with decreases of $12.3M for CBD to Frankton conveyance and $13.3M for Upper Clutha conveyance scheme (to align the timing of construction budgets with the most recent project delivery forecasts).

Stormwater

$2M increase – Kingston Housing Infrastructure Fund new scheme $5.1M increase to align with latest independent cost estimate, offset with ($2.9M) decrease for district-wide improvements.

Water Supply

$20.7M decrease - timing of delivery of ($30.7M) Wānaka water treatment and ($20.2M) Two Mile water treatment plant deferred to later years to manage funding constraints. Offset with increase of $7.9M for Kingston Housing Infrastructure Fund new scheme (due to timing and to align with latest independent cost estimate), and addition of $14.5M for Cardrona water supply new scheme (supports implementation of a developer led water supply scheme in Cardrona, as consulted on in 2022). Additionally, funding for water treatment and capacity upgrades across the Arrowtown, Glenorchy, Luggate, and Shotover Country schemes has been rephased through future years of the Long Term Plan.

Of note, the Glenorchy scheme is now expected to be compliant with drinking water standards in 2025-2026, and Luggate scheme improvements to achieve compliance and service near-term growth are forecast for completion in 2028-2029. As with other deferrals, work will continue on these projects to ensure construction can be accelerated if funding becomes available. In addition to a range of deferrals, QLDC has also taken a critical look at the remaining capital expenditure to alleviate balance sheet pressure.

The key change is a 30% reduction to annual three waters renewals budgets between 2023 to 2024–2030 to 2031. Reducing the renewals budget means assets will be utilised beyond their planned replacement timeframes, increasing the risk of potential failure and corresponding need for reactive repairs. Impacts of this reduction are partly mitigated by the proactive renewals work recently completed with the Three Waters Reform stimulus grant funding, predominantly within the wastewater network.

A robust programme of capital works projects will proceed as planned in the short-term. The community can look forward to significant capacity and performance upgrades across wastewater and water supply networks, new schemes for Kingston and Cardrona, more high-quality active travel connections and the major infrastructure upgrades underway with Ka Huanui a Tāhuna.

We have also kept funding for the comprehensive planning programme intact. A focus on developing well-informed and responsive plans for investment in the networks will ensure we are best placed to prioritise expenditure, inform future development, and pursue alternative funding opportunities as they arise.

Defined as projects with over $500,000 budget.

• Building: Lakeview Development – $1,114,058

• Building: Value of Projects less than $500,000 – $992,445

• Knowledge Management: Value of Projects less than $500,000 – $1,314,605

• Library: Value of Projects less than $500,000 – $456,118

• Other: Queenstown Priority Growth Corridors – $1,227,907

• Other: Value of Projects less than $500,000 – $436,269

• Parks and Reserves: Coronet Forest Revegetation – $2,280,400

• Parks and Reserves: Wānaka Lakefront Development Plan – $2,181,623

• Parks and Reserves: Parks Roading Renewals Whakatipu – $629,445

• Parks and Reserves: Value of Projects less than $500,000 – $3,588,973

• Waste Management: Wānaka Waste Facilities – $3,579,318

• Waste Management: New Whakatipu Waste Facilities – $1,364,416

• Waste Management: Existing Whakatipu Waste Facilities – $512,796

• Waste Management: Value of Projects less than $500,000 – $1,583,387

• Storm Water: Kingston Housing Infrastructure Fund New Scheme – $6,509,620

• Storm Water: Stormwater Renewals Whakatipu – $653,983

• Storm Water: Rockabilly Gully Erosion Protection – $615,898

• Storm Water: Value of Projects less than $500,000 – $1,234,302

• Transport: Arterial, Stage One Crown Infrastructure Partners – $31,590,512

• Transport: Arthurs Point to CBD Active Travel – $7,250,000

• Transport: Wānaka Pool to School Active Travel – $4,662,267

• Transport: Whakatipu Road to Zero Minor Improvement Programme to Low Cost Low Risk – $4,451,725

• Transport: Wānaka Road to Zero Minor Improvement Programme to Low Cost Low Risk – $4,012,338

• Transport: Queenstown Street Upgrades Crown Infrastructure Partners – $2,691,231

• Transport: Lakeview Ancil Thompson Street Arterial Standard – $1,620,087

• Transport: Lakeview Development – Road & Public Realm – $1,488,725

• Transport: Whakatipu Sealed Road Pavement Rehab – $1,420,489

• Transport: Whakatipu Sealed Road Resurfacing – $1,308,517

• Transport: Whakatipu Public Transport Low Cost Low Risk – $1,000,000

• Transport: Whakatipu Unsealed Road Metalling – $825,737

• Transport: Wānaka Sealed Road Resurfacing – $813,559

• Transport: Wānaka Unsealed Road Metalling – $580,029

• Transport: Value of Projects less than $500,000 – $5,572,774

• Transport: Whakatipu Active Travel Low Cost Low Risk – $526,152

• Venues and Facilities: Value of Projects less than $500,000 – $880,116

• Waste Water: Project Shotover Plant Upgrade – $14,565,342

• Waste Water: Kingston Housing Infrastructure Fund New Scheme – $14,166,695

• Waste Water: North Wānaka Conveyance – $7,785,287

• Waste Water: Project Pure Aeration Grid Renewal – $6,127,101

• Waste Water: Fryer Street Recreation Ground Pump Station Retic Upgrade – $4,343,384

• Waste Water: Project Pure Upgrade – $3,132,802

• Waste Water: CBD to Frankton Conveyance – $2,569,345

• Waste Water: Upper Clutha Conveyance Scheme – $2,120,516

• Waste Water: Wastewater Renewals Queenstown – $1,579,779

• Waste Water: Wastewater Renewals Wānaka – $622,506

• Waste Water: Albert Town Pump Station 1 Capacity – $586,128

• Waste Water: Value of Projects less than $500,000 – $1,299,907

• Water Supply: Beacon Point New Reservoir – $3,205,343

• Water Supply: Cardrona Water Supply Scheme Pipeline – $2,646,388

• Water Supply: Hanley's Farm new Reservoir – $1,538,389

• Water Supply: Wānaka Water Treatment – $1,115,123

• Water Supply: Glenorchy Reservoir upgrade – $1,075,511

• Water Supply: Two Mile Water Treatment Plant – $1,025,592

• Water Supply: Western Wānaka Level of Service – $908,449

• Water Supply: Hanley's Farm Pump Station & Rising to Falling mains – $666,635

• Water Supply: Quail Rise Reservoir – $632,379

• Water Supply: Value of Projects less than $500,000 – $2,018,211