Wellington City Council weighs tough choices to tackle underinsurance risks

Wellington City Council is moving to address financial risks, including underinsurance, as it revises its 2024-2034 Long-term Plan (LTP) and prepares the draft 2025/26 Annual Plan budget.

The council’s Finance and Performance Committee discussed the proposed amendments on Dec. 17, responding to rising costs and pressures to maintain infrastructure while managing insurance liabilities.

Wellington City Council’s annual plan

The draft Annual Plan currently forecasts a 15.9% rate increase for the 2025/26 financial year, a figure exceeding the 12.8% projected in the existing LTP.

Council officers have been directed to explore options to keep the rates rise below the original forecast, with a revised proposal expected in February.

A key focus of the LTP amendment process is addressing underinsurance risks and improving financial resilience.

The council identified two mechanisms:

• maintaining sufficient debt headroom (borrowing capacity that remains under its allowable limits)
• creating a diversified disaster resilience fund by selling selected assets

How will Wellington City Council manage underinsurance?

Three options for managing underinsurance will be put forward for public consultation in March 2025: 

• Option 1: The council’s preferred approach involves using maximum debt headroom to fund self-insurance while reducing the capital programme. A small investment fund would be created through the sale of ground leases, excluding the sale of Wellington Airport shares.
• Option 2: A mixed approach using both debt headroom and a medium-sized investment fund. This would involve minor cuts to capital projects, with funding generated by the partial sale of Wellington Airport shares alongside ground leases.
• Option 3: Maintain the current strategy, funding self-insurance with a large investment fund generated from selling the council’s full minority stake in Wellington Airport, in addition to ground leases. This option does not require capital programme reductions and reflects the status quo under the existing LTP.

Mayor Tory Whanau said the amended plan is necessary to align investment priorities with the city’s infrastructure and financial needs.

“The Long-term Plan outlines the strategic investments needed to deliver the services and infrastructure that will meet our city’s growing needs. It allows us to make informed decisions and align our budget with our priorities,” he said.

The council will seek public input on the proposed options through formal consultation in March and April 2025. Final decisions will follow after community feedback, with the amended LTP and Annual Plan expected to be adopted in June 2025.