Overview of our performance
Our changing city and challenges for the future
To be effective as a Council, we need to understand Wellington – not just its current make-up but the changes it experiences and how these and their associated challenges will shape the city’s future.
Three years ago, Wellington’s economy was underperforming and our rating base was flat. In response, as part of developing our Long-term Plan 2015–25, we agreed to invest in a range of economic stimulus and quality of life projects. Some, like the tech hub, have now been completed. Others, like the Movie Museum and Convention Centre, are still in progress.
The situation is now different. New Zealand’s economy is much stronger, and Wellington’s economic growth – while still behind the national average – is also far healthier.
Our economy grew by 2.5 percent last year, there are more jobs in the city, student numbers have grown and more people than ever before are calling Wellington home.
The focus has turned from stimulating growth to managing its impact – things like housing affordability and traffic congestion. Higher construction costs are also a reflection of a stronger economy, and this will have an impact on our renewal and upgrade programmes in future years.
We also experienced a significant natural disaster in November with the Kaikoura earthquake, and while the city responded well, there is a need to make it more resilient to future shocks.
Despite the earthquake, Wellingtonians continue to rate their overall quality of life highly
Quality of life relies on many factors, including wellbeing, work opportunities, culture, access to health care, safety, pollution, and commute times, as well as the quality of the built and natural environments.
Despite the earthquake, Wellingtonians continue to rate their overall quality of life very highly at 93 percent.
We also consistently place among the world’s top 20 to 30 cities in international surveys that measure liveability and quality of life.
#1st Best place to live 2017
In recent years, Lonely Planet labelled Wellington as “the coolest little capital”, and in the last year Deutsche Bank ranked the city number one in the world for liveability.
We led the earthquake response and recovery phases, and continued to deliver core services to a high standard
In November 2016, Wellington experienced the 7.8 magnitude Kaikoura earthquake. The effects of the earthquake were exacerbated by significant storm events in the days following the earthquake.
Despite the severity of the event, Wellington held up well – although the port area sustained more significant damage than other parts of the city. Our underground infrastructure network (water, waste water and storm water) sustained some damage but this was repaired relatively quickly. Our buildings have also largely fared well, although the Council’s Civic Administration Building sustained damage to a point where it cannot currently be occupied. We are working through options with insurers for its future.
While overall the city responded well to the earthquake, this event further focused our attention on improving the resilience of the city’s buildings and its roading and water infrastructure. This will be an area of focus for the Long-term Plan 2018–28.
The Council led the initial response and subsequent recovery phase. It is noteworthy that we were able to redirect a significant number of staff to lead the response and recovery phases, while continuing to deliver all core services to a high standard.
Our economy has continued to grow
While the earthquake had a small impact on the economy, these were largely localised around cordon areas. The overall economic performance of the city has been strong for the last 12 months, with GDP growth of 2.5 percent. The employment rate is also up, population growth is strong, and the tourism sector is doing increasingly well, making Wellington one of the better performing regions in the country.
There are over 2000 more jobs in the city than last year
Job growth has been particularly strong. According to Infometrics, in the past 12 months an additional 2084 people in Wellington City reported they were employed – an equivalent growth rate of 1.3 percent.
Population growth has also been very strong – we expect about 2500 additional people to call Wellington home between 2016 and 2017 – and visitor numbers are recovering after the November earthquake.
While the city has performed well, the future holds more challenges
The earthquake, a growing population, a buoyant outlook, economic growth, and a strong construction market have created challenges:
- Making the city more resilient. Elements of the city’s core infrastructure and key Council buildings need to be earthquake-strengthened in the coming years. The broader programme required to make the city and its communities resilient to climate change and sea level rise is also significant.
- Transport congestion. The city gained 10,400 new residents over the last 3 years. This has resulted in more traffic. Commercial vehicle registrations have increased by 16 percent over the last 12 months on the back of stronger economic growth, and private vehicle registrations have also grown by 11 percent. Residents’ perception that peak traffic volumes are acceptable has decreased from 53 percent 5 years ago to 42 percent this year. While the Let’s Get Wellington Moving programme will provide options for a way forward for the central city, there is more work to do to improve and promote public transport services and active transport modes.
- The cost of construction. Rising construction costs have outstripped inflation in recent years, with the cost of construction increasing 10.8 percent since March 2015 in comparison with inflation at 2.6 percent. With major capital programmes in the region like Transmission Gully, rebuild and strengthening work resulting from the earthquake, and near record consent numbers to deal with a housing shortage, the cost of construction will likely continue to increase above inflation levels.
This will add significant costs to the Council which looks after more than $7 billion of assets in the city, from roads and sportsgrounds to libraries and pipelines. Aside from maintenance and earthquake-strengthening initiatives, the Council also has a strong upgrade programme planned. This includes the Movie Museum and Convention Centre, the Prince of Wales/Omāroro Reservoir, a new library in Johnsonville and a raft of other projects. A tight construction market will place pressures on our budgets for these projects.
- Housing affordability and standards. A growing economy and growing population affect the housing market. Wellington City house prices have increased an average 16.2 percent over the last 12 months, and 33 percent since 2015. The Mayor’s Housing Taskforce has estimated that Wellington is short of 3590 houses currently. While consent numbers for new dwellings have doubled on previous years, and we have committed to 750 new social housing units over the next 10 years, it will take time for the market to catch up to meet demand.
- Social inequality. While the Council has taken a leadership position in this area through social housing and a broad range of social support services, homelessness and street begging appear to be on the rise. The Council has agreed to play a role in providing supported living facilities, but there is more work to do.
The Council is in a strong financial position to deal with these challenges
The Council is in good financial health to deal with these challenges. This is reflected in our AA credit rating with Standard & Poor’s. We have assets worth over $7 billion and liabilities of $676 million.
We have assets worth over $7 billion and liabilities of $676 million
Our debt position is very conservative and we work with other councils to reduce costs wherever possible. We also have far less debt than many local authorities. High-yielding investments, such as our ground lease portfolio in the central city and our shares in Wellington International Airport Limited and the Kiwi Point quarry, help offset rates requirements.
The Council also has strong fiscal management in place, highlighted by the underlying surplus, which reflects the Council’s ability to manage its operational funding requirements to meet its operational expenditure needs. The Council strives to achieve a position where operational revenue equals operational expenditure. This is called a balanced budget and is linked to the principle of intergenerational equity, where each generation of ratepayers pays their fair share for the goods and services that they use. The Council achieved an underlying surplus of $10.6 million, equal to 2.1 percent of operational expenditure.
This is an excellent result and reflects our conservative approach to spending. Our debt levels are currently less than our annual income, and we have investments that are almost equal to our debt.
Put more simply, our position is comparable to that of a household with a property value of $592,000 earning $70,000 a year, and having a mortgage of less than $56,000.
We have to be smart about how we address these issues and prioritise our spending effectively
While we are in a healthy financial position, the challenges ahead are not insubstantial and we will need to invest. As responsible stewards of the city, we also have to meet current challenges while providing sufficient financial headroom for future generations. This means we have to be smart and make choices about where to invest, focus on delivering services in more efficient ways, and manage demand more effectively than we have in the past.
We need to:
- Deliver services in smarter and more efficient ways. The way people access information and services is changing. Recent upgrades to the Council’s IT systems have put us in a better position, but there is still work to do to re-design services so they are more efficient and more customer focused. Last year, we agreed to develop a one-stop shop for building and resource consents. An active programme of work is under way and the benefit will be seen in the coming years.
- Manage demand. For every service we provide, there will be a group of residents or city stakeholders who want to see that service improved or expanded, but we can’t do everything. To meet every demand would significantly increase rates. We need to be smart and focus on delivering excellent core services and prioritise funding. We do this by making decisions about what is most beneficial to the city and its residents, and setting clear performance measures and levels of services that are monitored and reported, and reviewed every 3 years as part of our Long-term Plan process.
- Invest in the right areas and value capture. Part of managing demand is ensuring we’re investing in the right areas, at the right level, and ensuring there is a return on that investment. One practical example is swimming pools. Despite increased investment in pools over a number of years, and a growing population, visitor numbers have remained relatively static over that time. Consequently, the ratepayer subsidy per attendee has increased. We will be looking to maximise the social return on community assets through making them multi-purpose where possible (for example, the proposed Johnsonville community hub).
Similarly, we also need to do more to capture some of the value where public investment in core infrastructure results in private gain.
- Have better conversations with our communities. In our Triennium Plan, we committed to expanding our community engagement on significant projects and undertaking more community-led planning exercises. There are urgent and important discussions to be had with our communities. We need to respond to the pressures of a growing city on housing and transport while maintaining a strong focus on resilience. Prioritisation of spending is becoming increasingly important. We can’t take on every project; we have to make choices about what we do and when. We are building on co-design opportunities to further empower communities in decision-making processes. We also have to maximise the use of the assets and facilities we already have. This will all require more active engagement and more detailed discussions with our communities in the future. The Long-term Plan 2018–28 is the next significant step in putting in place a comprehensive 10-year plan and set of priorities for the city.
We need to be smart and focus on delivering excellent core services and prioritising funding