All of the challenges outlined we face require additional investment to address them. Not all of these costs fall on the council but many of them do.
Delivering this new investment while maintaining services such as parks, libraries and waste collection presents a significant financial challenge - balancing the need for investment with:
- acceptable costs to the community
- careful management of debt
- sustainable financial management.
We are forecasting about $26 billion of capital investment over the next 10 years and operating costs of around $4-5.6 billion each year.
We fund our expenditure from different sources depending on the nature of the cost.
Our best known source of funding is general rates, charged to homes and businesses. However, more than half of our operating revenue comes from other sources such as water charges, public transport fares, consenting fees, central government subsidies and contributions from developers.
We also borrow, when appropriate, for much of our investment in infrastructure, including roads, footpaths, pipes, libraries, etc. These are long life assets and by borrowing, we spread the cost over the generations that use them.
The sustainable management of debt presents a major challenge. Our approach to manage this challenge is to maintain an AA credit rating from Standard and Poor's (or similar rating from an independent rating agency). To ensure that debt levels continue to remain sustainable, we have set a prudential limit of group debt being less than 270 per cent of group revenue. Increasing this ratio is likely to increase our interest costs.
We believe there is no public appetite for major rate increases and if we want to make progress with some of these big challenges that face us we need to find other ways of raising funds.