For the full set of financial statements, please refer to the Supporting Financial Information document

How we plan to fund the 2023/24 work programme

This section outlines Council’s Financial Strategy for the 2023/24 year.

Under the Local Government Act 2002 Council must manage its assets, expenses, revenues, investments, liabilities and general financial dealings prudently. It must manage these in a manner that sustainably promotes the community’s current and future interests.

Managing our rating and debt limits set out in our financial strategy

A key priority for Council is to manage the level of rating and debt, whilst balancing the financial impacts and challenges Council faces. The following table summarises the proposed Annual Plan 2023/24 values against the limits agreed in the Long Term Plan. An explanation of the benchmarks can be found in the supporting information.





Rates affordability benchmark – increases




Debt affordability benchmark




Balanced budget benchmark




Essential services benchmark




Debt servicing benchmark




Council will not meet the rates affordability benchmark, as the planned increase of 7.2% is above the quantified limit of 6.8% set in the Long Term Plan (Local Government Cost Index plus 2.5%).

The overall net debt for 2023/24 will increase to $199.6 million by June 2024 (from $111.6 million in June 2022) which will impact Council’s interest costs. The $199.6 million of net debt equates to 119% of revenue, which is well within our debt affordability benchmark of 175%, as set in the Long Term Plan.

Council will not meet the balanced budget benchmark. This flows out of the Long Term Plan’s Financial Strategy, where it was acknowledged that COVID-19 has had a significant impact on Council’s finances. Council resolved to have an unbalanced budget (projected operating expenditure exceeding projected operating income) for years one, two and three of the Long Term Plan, to maintain services and the integrity of assets. This shortfall will be funded using Council’s balance sheet (debt).

Total operating expenditure is forecast to be $169.3 million, which is $19.9 million higher than budgeted in the Long Term Plan. The significant contributors to Long Term Plan variances are:

  • Finance costs – $3.1 million driven by higher than expected interest rates and a higher debt level
  • Depreciation – $6.6 million driven by the June 2022 revaluation of Infrastructure assets
  • August 2022 severe weather event recovery operating costs of $4.8 million which is funded firstly by insurance and National Emergency Management Agency claims, as well as Waka Kotahi contributions for transport costs, and secondly by debt which is being repaid over ten years
  • Operating expenditure projects funded by the Three Waters Reform package of $1.3 million
  • Operating costs for Transport Choices projects externally funded for $1 million.

Total revenue for the Council is forecast to be $175.2 million, which is $19.1 million higher than budgeted in the Long Term Plan. The significant contributors to Long Term Plan variances are:

  • Additional subsidies and grants of $19.3 million ($12.8 million being capital income) which is made up by August 2022 severe weather event recovery income of $5.6 million, Infrastructure Acceleration Fund funding of $1.9 million, the Three Waters Reform package of $2.3 million, Transport Choices funding of $5 million and other additional funding of $4.5 million
  • Rates revenue of $1.8 million more than forecast for year three of the Long Term Plan, which represents a 7.2% increase from 2022/23’

Financial levers used to minimise the rating increase for 2023/24 are:

  • Instead of fully funding the additional depreciation caused by the June 2022 infrastructure asset revaluation, we are suggesting that we phase the funding of that in over 10 years
  • Instead of paying off the August 2022 severe weather event recovery debt evenly over 10 years, we are suggesting that the repayments for the first year are phased in
  • We have restructured some of our interest rate swaps to leverage a lower effective net interest rate in 2023/24
  • There are numerous other operating reductions being suggested, including maintaining certain budgets and funding for community groups at the 2022/23 cost level and funding some events from reserves built up over recent years due to disruption caused by COVID-19.

Capital expenditure is proposed to be $59.2 million in 2023/24 (excluding vested assets, staff costs, Nelson Regional Sewerage Business Unit and Nelson Tasman Regional Landfill Business Unit), which is very similar to the Long Term Plan budget of $59.5 million. The programme takes advantage of government subsidies and not-withstanding challenging inflation levels the debt impact has been mitigated. The main changes to capital projects are the inclusion of the August 2022 severe weather event recovery work and Infrastructure Acceleration Fund projects while delaying the spend on the Central city library redevelopment, aside from this, changes consist largely of movements of funds within the next few years to allow for efficient work programmes. Further details of the changes can be view in prior sections of this document.

Uniform annual general charge (UAGC)
Over the past few years, Council has progressively reduced the UAGC from 15% to 11% of total rates (excluding the water annual charge and water volumetric charge) in 2022/23, as its focused investment in three waters infrastructure has increased the overall fixed charges, and therefore the impact on lower value properties. In response to the 2023/24 increase in three waters fixed charges, Council proposes to lower the UAGC to $320 (8.7% of total rates) for 2023/24.

Commercial differential
The commercial differential recognises the additional services that businesses receive, such as extra rubbish collection, street sweeping and events to attract visitors. The percentage collected has been decreased by 0.5% per annum for the last five years to reduce the burden on the commercial sector. The Long Term Plan outlined that Council would, subject to an annual review, continue to reduce the proportion of rates collected from commercial properties by 0.5% per year for the first three years.

Council has assessed the relative rating contributions to find a suitable balance between commercial and residential properties in the context of the cost of living increases and impact on residential ratepayers. Council proposes that in 2023/24 the commercial differential is maintained at the same level as 2022/23, where 22.6% of total rates are collected from commercial rates. If Council were to continue to reduce the commercial differential by 0.5% this would result in 22.1% of total rates being collected from commercial rates. Council’s proposal will spread the rates rise more evenly and result in less variation in the percentage increase for commercial and residential properties.

* Excludes vested assets, staff costs, Nelson Regional Sewerage Business Unit and Nelson Tasman Regional Landfill Business Unit.

What will the new rates be?
Council proposes that the overall increase in rates required for 2023/24 will be 7.2% plus an allowance for growth.

Following the community consultation period, Council will make decisions about the annual plan for 2023/24. Any decisions resulting from consultation may affect the final rates and charges. Further changes on how Council has calculated the proposed rates is available in the draft Funding Impact Statement and financial information section on Council’s website

Average annual rates bill
Total rates on each property in Nelson include payment for local authority (city council) and regional council services. Council is a unitary authority combining both of these functions. The final figure is made up of a combination of whichever of the following apply to your rating unit(s):

  • General rate, which includes the uniform annual general charge (UAGC).
  • Stormwater and flood protection charge.
  • Wastewater charge or commercial wastewater charge for sewage disposal.
  • Water annual charge.
  • Water volumetric rate.

If part of the relevant scheme:

  • Postponement application charge.
  • Postponement interest.