Assumptions, Disclosure and Compliance June 2024 2.3 2.4 2.29 operates in accordance with its Treasury Policy. However, because of Council’s June 2025 2.4 2.4 2.41 current low debt level, its ability to hedge significant amounts of its forecast debt is limited. June 2026 2.5 2.5 2.53 June 2027 2.5 2.6 2.55 Financial Impact June 2028 2.6 2.7 2.64 Increases in interest rates above 5.5% will result in higher debt servicing costs and rates funding requirements. Council only debt (internal and external) is currently Level of Uncertainty forecast to peak at approximately $225 million. As a result a 1% increase in interest rates above the 5.5% forecast would result in increased interest costs of $2.3 million. Medium to high. Population Growth NB: The forecast increases for Capital Expenditure are generally higher than operating cost increases and it is the Capital Expenditure that has historically driven Assumption rates increases. In preparing the Long Term Plan Council has assumed population growth will occur at Risk slightly above the Department of Statistics medium population growth projection. Population growth is further discussed in the Key Issues and Infrastructure Strategy There is a risk that the local inflation rates may be higher or lower than the national sections of the Long Term Plan. averages forecast by BERL. Level of Uncertainty Financial Impact Low. Should local inflation exceed the national average, this could result in either an increase in rates and debt servicing or deferral of capital projects which may impact Risks upon the level of service that can be provided. Population growth occurs at rates above or below the level forecast with corresponding Interest Rate on Council Borrowings impacts on the revenue received from rates and development contributions. Assumption Financial Impact Council has assumed a long term interest rate on internal loans of 5.5% for the entire If population growth occurs at a slower rate than forecast, then the level of 10 years covered by the Long Term Plan. External interest rates may vary depending development contributions received will be lower than expected. However, there is the on the term of the debt and prevailing market conditions. opportunity to mitigate the financial impact by slowing the Capital Expenditure programme. It is not expected that levels of service will be impacted upon significantly. Level of Uncertainty Economic Life Medium. Assumption Risk Council has made a number of assumptions about the useful lives of its assets. The As a result of the continuing impact of the Global Financial Crisis and the expectation detail for each asset category is shown in the Statement of Accounting Policies. The of increased interest rates in the future, Council has adopted a conservative position useful lives are consistent with Council’s experience with respect to its ongoing compared to current market rates to mitigate the risk associated with interest rate replacement programme. movements. Council has adopted this approach as interest rates can increase significantly within short timeframes, as has happened in the past. Council will attempt Level of Uncertainty to mitigate the impact of interest rate rises with a prudent hedging programme that Low.- above ground 2018-2028 Long Term Plan Page 232