Assumptions, Disclosure and Compliance Level of Uncertainty It has also been assumed that Council will revalue its major assets annually. Low. Level of Uncertainty Risks Low. The actual costs of recovery from a major natural disaster are higher than the forecast Risk MPL of approximately $485 million. The asset values shown in the Long Term Plan have been adjusted based on the Financial Impact BERL indices. The risk is that the results of actual revaluations may be higher or lower Should Council’s current estimate of MPL and existing arrangements prove than those disclosed in the Long Term Plan. inadequate, either an increase in debt and corresponding increase in rates or a Financial Impact slowing in the rebuild would need to occur. If asset revaluations are higher than forecast, this will increase the resulting Taxation Framework depreciation cost and rates as Council moves to provide for asset replacement. Assumption Sources of Funds for Capital Expenditure Council has assumed that existing taxation framework for the Marlborough District Page164 of the Financial Strategy identifies the expected sources of funds for Council group will continue for the period of the Long Term Plan. Council’s Capital Expenditure programme. It has been assumed that the funds identified for each of these sources will be received. Level of Uncertainty Low. Level of Uncertainty Low. Risk That the Inland Revenue Department (IRD) takes a view that Council’s Holding Risk Company structure is inconsistent with taxation legislation resulting in an increase in That the forecast funding will not be received as forecast. associated tax costs. Financial Impact Financial Impact As it is proposed to fund Capital Expenditure from a range of sources it should be Council has mitigated the potential for this to happen by obtaining independent legal possible to compensate a funding shortfall from one source with funding from another advice and a “Binding Ruling” from the IRD on the establishment of MDC Holdings Ltd. i.e. borrowing. If it is decided to increase borrowing a debt servicing cost and a Council has not deviated from the principles determined at establishment, so the risk corresponding increase in rates will arise. The alternative is to slow Capital and financial impacts should be low. Expenditure especially if the project is growth related and the funding shortfall relates to Development Contributions. Asset Ownership and Valuation In the preparation of the Long Term Plan it has been assumed that Council will retain: Climate Change Council has assumed that the climate changes in relation to rainfall, temperature and • Ownership of MDC Holdings Limited and its subsidiaries: sea level will occur as predicted. It has been further assumed that climate change will Its ownership share (88.5%) in Marlborough Regional Forestry, with Kaikoura have minimal impact over the period of the 2018-2028 Long Term Plan. This topic is • considered in greater depth in Council’s Infrastructure Strategy. This is appropriate District Council owning the remaining 11.5%. given this Strategy covers a longer 30 year period. • Ownership of all substantial assets currently owned. 2018-2028 Long Term Plan Page 234