Determining territorial authority base and construction rates

Introduction

This section describes the current process for determining the Territorial Authority A territorial authority within the meaning of the Local Government Act 2002. This is usually taken to refer to a city council or a district council. (TA) base rate.

It defines when the rates are updated, what data and formula is used to calculate the rates and any other information which is taken into account to adjust the rates.

This section also describes how the TA construction rates, used for improvement activities, are set.

Funding assistance rate review

A review of the Funding Assistance Rate system will be undertaken in 2012/13 and the results will be taken into consideration for development of the 2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied . This could result in changes to the FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. system once engagement with stakeholders and option analysis and selection is complete.

Determination of TA base rate

The base rate of funding assistance for a Territorial Authority A territorial authority within the meaning of the Local Government Act 2002. This is usually taken to refer to a city council or a district council. takes into account:

• the size of the territorial authority’s block allocation for road maintenance
• the financial resources available to the territorial authority.

The following conditions apply:

• all territorial authorities are considered on the same basis
• the national average TA base rate is 50 percent
• the minimum TA base rate is 43 percent.

Net equalised land value

The NZTA has adopted the net equalised rateable land value as an indication of the financial resources available to a territorial authority. This decision was made after extensive research and discussion and is considered to most fairly reflect the relativity between territorial authorities.

The NZTA recognises that rapid movement in land value can occur and, to allow for this effect, has adopted the arithmetic average of the five most recent valuations.

Formula for indicated TA base rate

The formula is :

IBR = k1 + k2 log (P/LV)

Where :

• IBR = indicated TA base rate for the following year (%)
• P  =  current year’s block road maintenance allocation for the territorial authority ($ thousands)
• LV  =  latest available five-yearly averaged net equalised rateable land value for the territorial authority ($ millions)
• k1, k2 = constants, which are established to give a national indicated funding assistance rate (FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. ) of 50 percent.

Indicated TA Base Rate

The following figure shows the Indicated TA Base Rate calculated using the above formula:

The NZTA will calculate the base rate indicator annually as at August using the current year’s block road maintenance allocation and the latest available net equalised rateable land values.

This will give territorial authorities advance notice of potential changes in their approved base rates.

Other factors in base rate determination

The NZTA stresses that the base rate indicator provides only an indication of the level of assistance for a Territorial Authority A territorial authority within the meaning of the Local Government Act 2002. This is usually taken to refer to a city council or a district council. . To this is added the NZTA’s judgement of the circumstances of each territorial authority.

The factors taken into account in deciding on the base rate are:

• base rate indicators calculated for the current and previous two years
• approved base rates for the current and previous two years
• the base rate indicator for the next year
• changes in the road operations, maintenance and renewals programme
• changes in net equalised land value
• the resultant change in local share.

Summary of TA base rate policy

The NZTA wishes to retain a degree of stability in TA base rates and therefore will avoid making minor changes to the base rates.

The TA base rate policy is described in the table below.

Approved TA base rate

The NZTA will review, and adjust as necessary, the approved base rate for all Territorial Authorities in August prior to the start of the three-year National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. (NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied ). This allows maximum notice to be given to territorial authorities before the start of the three-year period over which the new base rates will apply. Out of necessity, this means that the TA base rate for the following three years is determined by the:

• current year’s block road maintenance allocation
• latest available net equalised land values.

The approved TA base rate will remain unchanged for the duration of the three year NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied . Only in exceptional circumstances will the NZTA consider a review of TA base rates at other times.

Any additional funds approved at monthly programme reviews will be at the funding assistance rate previously set.

Determination of TA construction rate

The TA construction rate is equal to the TA base rate plus 10 percent, for TA base rates up to and including 80 percent. For TA base rates greater than 80 per cent, the TA construction rate is half-way between the TA base rate and 100 percent, rounded up to a whole percent upto a maximum of 94%. This ensures that the assistance rate calculation is consistent with the principle that those who benefit from transport investment should pay.

Note: Once the TA construction rate is set for an individual project, or phase of a project, it will remain constant until the project or phase is completed.