Return on capital
10 Return on capital
This section applies for section 4(1)(g).
The amount for the return on the capital used by a local government in conducting a relevant activity must be decided using the rate at which, in the local government’s opinion, a comparable private sector business conducting the activity would be able to obtain the capital in the market.
In deciding the rate under subsection (2), the local government must have regard to the split the local government considers appropriate, for the type of business activity, between equity and loan capital and the return appropriate to each.
However, the amount for the return on the capital used in conducting a business activity for the first year in which the business activity is a relevant activity may be the amount the local government decides.
In this section—
capital used in conducting a business activity means the total value, decided using an accepted accountancy method, of the assets used for the business activity less the liabilities attributable to the activity.
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