Rates freeze set to lift debt levels
The Nelson City Council will need to borrow nearly $4 million to cover the cost of its proposed rates freeze.
Councillors discussed the budget strategy at a meeting on Wednesday, as part of the deliberations on the Annual Plan Consultation Document.
At the meeting, group manager of corporate services Nikki Harrison explained the plan to achieve a zero per cent rates rise.
So far, the effects of Covid-19 have resulted in a loss of projected revenue for the council of $3.9m, with reduced income across sources such as dividends from council organisations, rental income, consent fees and public transport.
While the council has been able to identify $3.4m of savings, mainly through cuts to staff costs, travel and training, a $500,000 shortfall would remain in the budget.
In addition, the work proposed in the draft annual plan required funding of $2.9m, which would have been accounted for by the projected 3.7 per cent pre-Covid rates rise.
The $3.4m needed to balance the budget was proposed to come from the Disaster Recovery Fund.
However, with the fund overdrawn by more than $500,000 due to recent disasters in the region, all the money would have to be obtained through borrowing.
Harrison said the borrowing would be well within council’s debt-to-revenue ratio limit.
The current ratio sat at about 90 per cent. She said while the proposed borrowing would increase that to 101 per cent, it would still fall well short of the 150 per cent limit set by council.
On Wednesday, mayor Rachel Reese assessed councillors’ support for the proposal, as they pushed forward to discuss public submissions for the annual plan.
The measures were broadly
‘‘Borrowing year-onyear is called bankruptcy eventually.’’ Councillor Tim Skinner
backed by councillors, although some raised concerns about the level of borrowing.
Reese said it was her preference to stick with the rates freeze.
‘‘The vast majority of people [in Nelson] are under enormous financial pressure, this is a signal we’re listening.
‘‘We have the tools available to use, and all the economists I listen to . . . their message is this is when you use your balance sheet.’’
The majority of councillors echoed Reese’s comments, given the extraordinary nature of the situation and the need for continued council spending.
However, councillor Tim Skinner said while he had always pushed for a zero per cent increase, he was concerned that continued borrowing would be unsustainable.
‘‘We’re taking it year by year at the moment, we’re not sure how Covid will impact the economy long-term.
‘‘Borrowing year-on-year is called bankruptcy eventually.’’
Councillor Gaile Noonan said if the rates freeze was to be followed through on, it was important to try to keep the debt as low as possible.
Councillors Rohan O’NeillStevens and Rachel Sanson warned against austerity.
Councillor Pete Rainey said he would like to see a midway option, reducing borrowing by allowing for a rates increase of between 1.5 and 1.9 per cent.
In the public consultation, 41 people submitted on the proposal, with the majority in support of the rates freeze.